1865 to the Present L6

1865 to the Present L6

The Social Philosophy of American Businessmen

In the years leading up to and immediately after the turn of the century, corporations and the businessmen who were their recognizable heads came under increasing attack. "Laissez-faire," once synonymous with individual freedom, now signified corporations, trusts, and an unprecedented loss of individual freedom. American businessmen found themselves resorting to new ideologies and "scientific" terminology to defend themselves from angry Americans who felt the trusts were destroying their way of life.

"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness..." (Declaration of Independence, 1776)

When Thomas Jefferson substituted "Pursuit of Happiness" for the original term "Property," he may have foreseen the controversy over the meaning of freedom that would come to dominate Gilded Age politics. Two contrasting ideals of freedom clashed during this period. A heavyweight boxing match ensued, with the ideal of "Pursuit of Happiness," represented by a great number of Americans, fighting the ideal of "Pursuit of Property," represented by men like Andrew Carnegie and John D. Rockefeller. Both sides had logical justifications for their positions; however, the leading intellectual currents of the late 19th century eventually provided the "Pursuit of Property" heavyweights with knockout punches like "Social Darwinism" and "Laissez-faire."

Pursuit of Happiness

Why did so many Americans view the new corporations and trusts as evil entities that destroyed the American dream of the "Pursuit of Happiness?" Though many answers can be given to such a question, there are three important points that can help us understand the logic of those who despised the corporations:

1. There was no analogy in the past

2. Corporations were an artificial creation

3. Corporations threatened free competition

There was no analogy in the past

Thomas Jefferson assumed America would become a land of independent yeoman farmers when he wrote the Declaration of Independence. Hard work and a simple life would keep the nation as well as the individual strong. This individualist ethic has permeated the American social climate since the days of the Pilgrims. One conspicuous symbol of the American attachment to romantic individualism is the "American Cowboy" and the images of the "Wild West." (See lecture 3) Before the corporation revolution, the American economy was founded upon individual achievement and a Protestant work ethic. After the corporation revolution, many Americans had difficulties adjusting to the concept of a new form of economic organization that seemed to de-emphasize the human element.

Corporations were an artificial creation

Corporations were essentially nothing more than an agreement between legislators and businessmen; they were represented by no physical product other than a flimsy piece of paper. As we can see in our own era, Americans generally mistrust lawyers, legislators, and contracts. Thus it is not surprising that many Americans disapproved of a legislative process that allowed a group of investors to create a money-making device that could, in theory, never actually exist in any physical sense of the word.

Corporations threatened to destroy competition

Perhaps the most convincing argument advanced against the corporations and trusts was that they threatened to destroy the age-old concept of free trade and healthy competition. Capitalism as an economic model certainly has its faults, but one of its great advantages is that healthy competition can often benefit consumers and producers alike. As trusts and corporations grew larger and more monopolistic during the Gilded Age, people rightfully feared that free competition would soon be stamped out.

Some Americans, of course, believed that the "Pursuit of Happiness" and the "Pursuit of Property" could easily go hand in hand. For instance, Abram S. Hewitt, a well-respected businessman, philanthropist, public official, and political leader, maintained that corporations were merely a more efficient means of producing the age-old "American Dream:"

"It is curious that the mass of the people of this country should fail to recognize that their best friends are the corporations, because corporations have been the only barrier between the despotisms of ignorance and the invasion of the rights of property. Doubtless they abuse their privileges at times but they alone have the ability and the courage to resist attack, and they are doing the work which was done by Jefferson and Madison in the early days of the Republic." --Abram S. Hewitt

Abram S. Hewitt was an honest man with a good public record, and even though he rationalized the actions of corporations, he nevertheless worked under the assumption that the "Pursuit of Happiness" was the ultimate goal of the American people. Others, however, tended to believe that "Pursuit of Property" was in fact the only justification needed for the corporation revolution.

Pursuit of Property

Attempts to reconcile the "Pursuit of Happiness" with the "Pursuit of Property" were unpersuasive to most Americans. Though men like Hewitt could claim that corporations were in fact beneficial to individual happiness, Americans could plainly see that this was not the case. Thus, businessmen had to resort to another tactic to persuade Americans that corporations were natural and the most effective method of doing business. Three main themes of late 19th-century thought provided American businessmen with a set of terms and ideologies to justify their activities as "Robber Barons:"

1. Social Darwinism

2. Self-adjusting economy

3. Profit incentive as only human motive

Social Darwinism

Charles Darwin

A humble, mild-mannered Englishman changed the intellectual climate of the world forever in 1859 when he introduced his book On the Origin of Species. Although theories of evolution had existed for centuries in European thought, Darwin's introduction of the idea of "natural selection" was a legitimate scientific hypothesis that demanded attention. Darwin had no intention of interpreting his work as a means of constructing society; in fact, Darwin purposely avoided discussing humans or human society in the context of "natural selection." Later intellectuals, however, treated Darwin's ideas as the basis of a far-reaching social theory that came to be known as "Social Darwinism."

Herbert Spencer

Spencer, also an Englishman, took Darwin's theories out of the realm of biology and reworked them into a social theory. Spencer, not Darwin, coined the phrase "survival of the fittest." To Spencer, human society should ideally be modeled upon "Nature." As such, humans should never intentionally interfere with the processes of "Nature" which select only the fittest human beings for survival into the next generation. Handouts to the poor, state schooling, and systematized health care were considered dangerous by Spencer; they could only interfere with "Nature" by helping weak humans survive, thereby damaging the "purity" of the rest of the human race. Of course, Spencer was never able to clearly define what he meant by "Nature," nor was he able to clearly explain just which human actions could be considered "natural" and which were not. However, Spencer's publications sold over 400,000 copies in the United States alone, and he was one of the most influential thinkers of the late 19th century.

William Graham Sumner

Sumner was Spencer's American counterpart. "In his economic and social outlook, Sumner was a Social Darwinist, holding that distinctions of wealth and status among men were the direct result of inherently different capacities, that this stratifying tendency worked to the good of society by eliminating weaker and encouraging stronger strains (as natural selection does among animals and plants), and that this tendency should not be interfered with by sentimental, unintelligent attempts to hedge the free play of economic forces and personal abilities. Sumner thus championed laissez-faire as the only true principle of both economics and government; in lectures and written works with such titles as "The Absurd Attempt to Make the World Over" and What Social Classes Owe Each Other (1883), he decried any and all movements that pointed to a welfare state..." (Source: Webster's American Biographies, G. &C. Merriam, 1975).

American businessmen were all too happy to adopt the ideology of Social Darwinism in order to defend their business practices. James J. Hill, a leading "Robber Baron" of the railroad-building era, saw the chance to justify his actions with "scientific" terminology:

"The fortunes of railroad companies are determined by the law of the survival of the fittest." --James J. Hill

There were, of course, influential Americans who did not feel that Darwin's theories could be applied to social matters. One such individual was the historian Henry Adams, who said,

"The progress of evolution from President Washington to President Grant is alone evidence enough to upset Darwin." --Henry Adams

Self-Adjusting Economy

The idea of the self-adjusting economy that was so vigorously supported by 19th-century businessmen traces its origin to the notion of the "invisible hand" promoted by Adam Smith.

"The ideas of laissez-faire applied to economics appealed greatly to Scottish economist Adam Smith. Using these ideas, Smith began another kind of revolution during the period in which the American colonists were fighting their revolutionary war.

In 1776, the year that Jefferson wrote the Declaration of Independence, Smith published one of the most important books in the history of economics. The book's full title is An Inquiry Into the Nature and Causes of Wealth of Nations. Most people simply call it The Wealth of Nations. Smith wrote the book after discussing laissez-faire beliefs with some of the physiocrats. Smith's book is an argument in favor of allowing people to engage in trade, manufacturing or other economic activity without unnecessary control or interference from government.

The main argument in The Wealth of Nations might be stated rather simply: People are naturally selfish. When they engage in manufacturing or trade, they do so in order to gain wealth and/or power. This process should not be interfered with because, despite the self-interest of these individuals, their activity is good for all of society. The more goods they make or trade, the more goods people will have. The more people who manufacture and trade, the greater the competition. Competition among manufacturers and merchants helps all people by providing even more goods and probably lower prices. This activity creates jobs and spreads wealth."

This document was provided by the UNITED STATES INFORMATION AGENCY in the About the United States series, which can be found at:

Following Adam Smith's lead, 19th-century American economists generally agreed on four principle points of political economy:

1. Political economy is ruled by unchanging, everlasting laws, which can be equated with laws of Nature or God

2. Self-interest as the only motive for human action is not only natural but also beneficial

3. Free competition is a permanent and necessary law of economics

4. Government is an inefficient agency and should not be involved in economic matters

American businessmen were entirely grateful to hear economists and influential thinkers like William Graham Sumner justifying the actions of the corporations and trusts. With the backing of the "science" of economics, late 19th-century businessmen could feel as if their immoral actions were actually beneficial to the nation as a whole.

Profit motive was only reliable incentive for action

Finally, businessmen relied on the widespread belief that profit motive rules the life of man. Businessmen, politicians, and economists widely agreed that if humans were explicitly asked to do good things for society, they never would. Only by creating wealth for themselves would businessmen be able to help others by creating jobs and encouraging investment in the nation's industrial centers. Andrew Carnegie, one of the least selfish of the early industrialists, claimed that even the most ridiculous spending habits of the wealthy were beneficial to the rest of the nation:

"Millionaires are the bees that make the most honey and contribute most to the hive even after they have gorged themselves full."--Andrew Carnegie

Businessmen of the late 19th century often used and abused ideologies in an attempt to rationalize their illicit practices. Granted, this period was filled with economic and social turmoil, and even honest businessmen often found themselves experiencing early versions of work-related stress. The "boom-and-bust" cycle of depressions and recoveries from 1873 to the turn of the century made investing precarious and competition fierce as companies struggled to survive.

However, for all the difficulties that company directors faced in this period, the common workers underneath them often faced situations much worse. As business leaders became wealthier and more powerful, the men and women (and even children) who formed America's industrial backbone began to demand their piece of the American industrial pie.

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