Robber barons - Business in United States of America

Definition: Derogatory, late nineteenth century term for extremely successful American business leaders who seized control of entire industries
Significance: The robber barons transformed American business after the U.S. Civil War, helping found the modern, industrialized economy of the twentieth century. They developed techniques of organization and administration that led to the creation of expansive new industrial and financial enterprises. They revolutionized industrial production by pioneering a host of technological innovations, increasing output and lowering prices.
The term “robber baron” is synonymous with the highly successful U.S. business leaders of the later part of the nineteenth century. It is meant to conjure images of the predatory, feudal barons of the medieval period and was first used to describe the entrepreneurs, such as Jay Gould, who revolutionized the railroad industry through the ruthless takeover of smaller lines to create large, integrated track networks. Such men were viewed as villains or pirates who manipulated stock markets for their own financial gain.
As other avenues of American business grew to unprecedented proportions, the term was used to describe the captains of all types of American industry. These men amassed tremendous personal fortunes by developing huge business organizations through which they could control all aspects of their industries. The foremost examples of such robber barons are John D. Rockefeller and Andrew Carnegie. Rockefeller created the Standard Oil monolith by taking advantage of a lack of antitrust legislation. By 1880, Standard Oil was the largest and most powerful corporation in the nation. In 1884, it owned 77 percent of the refining capacity of the United States and marketed 85 percent of the country’s petroleum products. Vertically integrated monopoly, the company eventually controlled oil products from the well to the consumer.
Carnegie Steel was also vertically integrated. Carnegie quickly discovered that immense profits could be made if he could control every stage of steel production. Ultimately, Carnegie Steel controlled all aspects of manufacturing from the mining of the ore to the sale of finished steel rails. Carnegie combined this level of control with harsh financial practices, such as paying very low employee wages, in order to slash consumer prices.
These men, along with others such as Philip Armour, Edward H. Harriman, J. P. Morgan, Gustavus Swift, and Cornelius Vanderbilt, with their colossal personal fortunes, became leaders of the new ruling class in American society. As such, they were often characterized as villainous scoundrels whose manipulations and ruthless business practices were responsible for the vast economic and social changes that industrialization brought the United States. These men were members of the last generation of American businessmen to operate in a relatively open and fluid environment that allowed unscrupulous practices and rewarded them with immense personal profit. The robber barons played this competitive game so well that they destroyed the system that created them, and American business leadership after them would be dominated by managers, corporate bureaucrats, and restrictive legislation.