THE SEVEN MEN

MASTERS OF CAPITAL IN AMERICA

THE SEVEN MEN
BY

JO.HN MOODY AND GEORGE KIBBE TURNER

S
EVEN men in Wall Street now con- John D. and William Rockefeller, James Still-
trol a great share of the fundamental man, head of the National City Bank, and
industries and resources of the Jacob H. SchifF, of the private banking firm of
I United States. Every year they and Kuhn, Loeb & Co. — to the so-called Standard-
their successors will control more. Oil-City-Bank group.
They dominate, with their allies and dependents, Not one of these seven men ever invented a
the national machinery for the making and hold- mechanical operation or created a great indus-
ing of great corporate monopolies, into which a try. They are one thing, and one only — mak-
greater and greater part of the capital and busi- ers ana traders in monopoly; the oldest and
ness of the country must inevitably be drawn. most reliable makers of monopoly in America.
Three of these seven men — J. Pierpont Mor- They began work in widely separated fields,
gan, James J. Hill, and George F. Baker, head of when the movement toward monopoly began
the First National Bank of New York — belong to shape itself, shortly before 1880; came to-
to the so-called Morgan group; four of them — gether ten or fifteen years ago in the two famous
418

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groups of monopoly-makers in Wall Street; and over ninety years to count and stack it at the
since 1907 have been drawn closer and closer rate of a dollar a second. The control of so many
into one central group by the irresistible move- billions of dollars in railroad property by so few
ment toward concentration in our industries. men is probably the most sensational develop-
It is interesting to see just how large a share ment of modern industry. It seems by itself
of the wealth and industries of the country almost incredible; as a matter of history it
have already been drawn into the hands of these came about by a simple and almost invariable
seven men, and just how they hold them. formula: The progressive bankruptcy of Amer-
ican railroads, under fierce competition, threw
A Do^^en Billions in Railroads them into the hands of security merchants in
New York; these men wiped out competition
The largest mechanical enterprise of the Ipetween them, tied them up into monopolies,
country is the steam railroad. It contains and, with their allies and dependents, held
property valued at over fourteen billion dol- those monopolies under their own control.
lars — about an eighth of the total wealth of The control of the insolvent systems is usually
the United States. Over a million and a half held by the device of the voting trust. By this
men are eniployed directly by it, and hundreds the holders of the practically valueless stock give
of thousands rpore indirectly in the making of their voting power to the security merchants
its tools. The only larger industry in the coun- who bring the road new money, and leave this
try is farming, with property of some twenty-five power with them until the road comes out of
billions, all told. There are some seven million bankruptcy. J. P. JVLorgan has demanded this
farms in the United States; their owners must voting trust control for thirty years. By means
number over five million. About eighty-five per of it he holds to-day over a billion of the fifteen
cent of the railroads are under the ownership billion dollars of the country's railroad capitali-
or permanent control of the central Wall Street zation.'
group — the seven men and their close allies. As railroads worked out of bankruptcy and
According to the figures in Poor's Manual became solvent, the security merchants devised
of Railroads for 191 o, the securities of railroad a practical method of controlling them. They
companies actually in the hands of investors had the management to start with; and they
amount to nearly fifteen billion dollars. The found that the ownership of from eighteen to
market value of these, calculated on the prices thirty per cent of a solvent railroad's stock in
of January, 19.11, was about fourteen and a half the hands of the management gave them just
billion. About sixty per cent of the railroads as absolute control as if they owned fifty-one
represented by these securities was under the per cent. They could always count on. enough
direct and permanent control of the seven men votes from other stockholders to secure a ma-
and their nearest allies. About twenty-five per jority of the stocks voted.
cent more is under a partial but still sufficient Now, these men, having charge of the rail-
control. The remaining fifteen per cent of the roads' management, knew what roads would
railroads is made up of a few weak systems and be prosperous. As long as roads were bank-
small unrelated scraps of road. A detailed rupt, they held them under voting trusts. As
statement of this control follows: various roads rose out of bankruptcy, the
security merchants and their business allies
CONTROL O F S T E A M RAILROADS
bought about a quarter of their stock, at about
Per- Market Per-
Capital (Poor's Mmmal) cent- Value, cent- a quarter of its par value. The stock, which in
age Jan., 1911 age
America has the only voting power, makes less
Central group $9,080,853,307 61 $9,562,523,976 66
Central group alliances .3,782,304,488 25 3,695,343,016 25 than half the road's capitalization, bonds hav-
Other Wall Street groups 1.013,540,000 7 839,810,000 6 ing no voting power here. So a cash outlay of a
Outside interests 1,013,299,465 7 360,000,000 3
quarter of a quarter of a half — that is, a
Total ^14,889,797,260 100 $14,457,676,992 100
thirty-second part of the capitalization of a
Central group — Union Pacific, Southern Pacific, Illinois Central,
Hill roads, St. Paul, New York Central, New Haven, Erie, Read- railroad — was all that was necessary to control
ing, Southern, Rock Island, Atlantic Coast Line, etc. it. And two thirds of this thirty-second could
Alliances — Pennsylvania, Baltimore & Ohio, Atchison, Gould
lines. be borrowed from banks. Then, as occasion
Other Wall Street groups — Hawley roads, Yoakurn-Hawley roads.
offered, the railroad itself would buy fractional
control of the roads'. In this way control of
How to Take and Hold ^Billion-Dollar railroads could be extended in rapid geometrical
Railways progression, starting with a comparatively small
sum of money and ending in billions.
A billion dollars is a great sum of money. It By variations of this plan the railroads were
would take a man working eight hours a day first concentrated into the hands of various

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Wall Street security merchants, and came from by Henry Walters, one of Morgan's closest
these into the hands of the seven men and their allies, and i? tied closely by inter-ownership of
allies. The situation now is this:, necessary terminals te the Southern Railway;
the Union Pacific Railway holds the Illinois Cen-
The Ownership of Trans-{Mississippi tral by stock ownership; the Illinois Central, the
Roads Georgia Central; and Henry M. Flagler, of the
Standard Oil Company, the Florida East Coast
West of the Mississippi, Hill, Morgan, and Railroad. The only railway system of conse-
Baker, with a little group of multimillionaire quence not directly under control by the seven
fortunes, hold ownership of twenty or twenty- men is the Seaboard Air Line.
five per cent of the commanding stocks in the bil-
lion and a quarter dollar " Hill system." William The ^Monopoly in the Central "District
Rockefeller, Stillman, and Schiff — with a very
few associates — own nearly a third of the com- Railroad monopoly in the great central railroad
manding stock in the billion and three quarters territory of the United States, between Chicago
Union Pacific system. William Rockefeller and and St. Louis and the Atlantic seaboard, was
another group of multimillionaires own a smaller established by tying bankrupt roads to the two
but practically controlling interest in the half commanding systems — the Pennsylvania and
billion St. Paul system; and John D. Rockefel- the New York Central. Morgan brought this
ler is the financial backer of the whole billion- about very largely, with the assistance, later, of
dollar Gould system. It is now tending out of George F. Baker. The other men in the group
the Gould hands into Rockefeller's exclusive of seven entered the control of this monopoly
control. The eastern link, which bound the still later. Together the seven men and their
system to the Atlantic seaboard, has already allies now control all the prosperous roads in the
fallen definitely into Rockefeller's ownership. section. Only one line, controlled outside the
The western end narrowly escaped going into group, passes through the territory — the sys-
Rockefeller's and Schiff's hands last spring. tem that Edwin Hawley is now trying to piece
The Rock Island system is controlled by the together out of minor and discarded railroads
Moores, one of the closest subsidiary groups of the from Chicago to Newport News, Virginia.
Baker-Morgan banking interests in Wall Street. The dual railroad monopoly created by the
The Atchison had from fifteen to twenty per New York Central and the Pennsylvania rail-
cent of its stock in the ownership of the Union roads in the central territory of the country is the
Pacific and its directors until a few years ago, mosf important in the United States. It is in
when fear of suits for monopoly by the govern- the control of the seven men. The New York
ment caused the sale of the railroad's holdings. Central is controlled by a stock ownership of
But the Atchison still remains closely allied to over twenty per cent. The Union Pacific and
the central group by members of its directorate, the Vanderbilt family—Morgan's oldest alliance
and undoubtedly by considerable stock-holdings. — each hold about eight per cent; the rest is
In this trans-Mississippi territory there is only held by members of the Standard Oil and Mor-
one railroad system not directly controlled by gan groups.
the seven men or closely allied to them; that The Pennsylvania Railroad is always dis-
is, the new system which Edwin Hawley and played as the one great independent railway
B. F. Yoakum — two outside Wall Street men system in the country. Theoretically this may
—• are working to build out of minor roads from be so. Actually it is tied up with the New York
Chicago to the Southwest. Central and Union Pacific in the common own-
This three fifths of the United States west of ership of the large competing railroads of the
the Mississippi — collapsing financially in the district into practically one concern. And the
'go's and ever since growing in resources faster seven men and their allies not only own a stock
than any other section — created more wealth control of the Union Pacific and the New York
for railroads than any other part. A great share Central, but they own or vote nearly all of the
of the power of four of the seven men — of Hill largest blocks of stock in the Pennsylvania it-
and SchiflP and Stillman and William Rocke- self. Out of the control of this dual rnonopoly
feller—came from the money accumulated here, they have advanced to take control of the New
and its use inside or outside of the district in England States.
extending their control.
The control in other districts, although along How New England is Sealed Up
different lines, is not less complete. In the
South, Morgan holds the Southern Railway by a New England is sealed up in an almost abso-
voting trust; the Atlantic Coast Line is owned lute transportation monopoly held by the New

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York Central and the New Haven Railroad. ties of this form is that the board of managers
The New Haven is held by a stock ownership in hold office and elect their own successors con-
the hands of the Pennsylvania, the New York tinuously — unless the shareholders demand
Central, and three institutions under the abso- a special election and depose them. In practice
lute control of the Morgan-Baker group of the the board of managers is immortal.
seven men — the Adams and the American Ex- The American Express Company is tied to
press companies, and the Mutual Life Insurance the central group through ownership of its
Company of New York. These hold nearly shares. A sixth of these are held by the New
fifteen per cent of the New Haven's stock, and York Central Railroad; individuals have other
holdings of some half dozen individuals bring the large blocks of stock. The American absolutely
group's ownership up to nearly twenty per cent. owns the National Express Company, and holds
The New Haven and the New York Central own stock control of the Wells, Fargo Company —
every steam railroad in New England, except the third largest in the United States — by the
two spurs from Canadian systems to minor ownership of one fifth of its stock.
seaports, and a small Maine road which gets The Adams Express Company has, as the two
most of its income from handling lumber. The most influential members of its board of manage-
New Haven Railroad also owns all the larger ment, Charles Steele, a partner of J. P. Morgan,
trolley lines in Connecticut, Rhode Island, and and George F. Baker. These managers could
western Massachusetts, and all the important be changed only by a two-thirds vote of the
coastwise steamers between New England and stockholders, taken at a special meeting. No
New York. such meeting has been held in the fifty years of
The seven men and their allies or dependents the concern's history.
now have, by the various devices just described, The Adams Express Company — with one old
a firm hold on the railroads of the United States. alliance, the Plant fortune — owns the South-
At first sight it might seem that this control over ern Express Company. With the American,
so many billion dollars' worth of property would it owned a stock control of the United States.
be temporary and artificial. It is far from it. Because of fear of government prosecution on
The progress of thirty years has been steady and account of monopoly, this was sold, in 1909, to
uninterrupted. It has gone continually from individual ownership in the central group —
destructive competition to growing and profit- where it is now held. This holding completes
able monopoly; ownership has slipped continu- the control of all the express companies of con-
ously out of weaker hands into stronger. The sequence in the United States by the seven men
men who have created the monopoly in the and their allies.
railroads have naturally taken charge of it. This express business has been very profitable;
And they and their successors will continue but its greatest interest is in the ingenious use
to do so. that is now being made of it by the central
group in maintaining monopoly control. For
Curious Tools of Monopoly some time, and especially in the last ten years,
these express companies have put a large part
The control of railroads over other industries of their great profits into investments in sound
— especially in a country of wide area like the securities. A large amount of this investment
United States — is familiar. Two enterprises is in stock, and in the last few years — especially
most obviously controlled are the express and since the great insurance companies have been
sleeping-car concerns, which are dependent for compelled to stop stock investments — the cen-
their existence upon their contracts with the rail- tral group has used them to hold the various
roads. In some cases they are owned directly railroad stocks they needed for control. Among
by the railroads; in all the rest they are con- the stocks held in large blocks have been the
trolled within the group of seven men. New York Central, Pennsylvania, and Norfolk
It was only about-eight or ten years ago that and Western roads. At present the express
the peculiar possibilities of the express com- companies are especially useful in holding the
panies began to be understood by the central central control of the New Haven.
Wall Street group. In that time they have The Pullman Company has a complete mo-
made them into the most ingenious and interest- nopoly of the sleeping-car business in the
ing tools for creating monopoly in the country. United States, outside of three lines which oper-
The greatest of the express companies — the ate their own cars. Since 1900, when it ab-
Adams and the American — are in form curious sorbed the Wagner Palace Car Company by the
survivals of the time, fifty years ago, when they exchange of stock, it has been under the dom-
were created. They are not corporations, but ination of J. P. Morgan and the Vanderbilts,
joint-stock associations. One of the peculiari- who together control the Wagner Company.

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The Anthracite Coal (Monopoly ened collapse from competition — and was made
into a monopoly.
These subsidiary railway corporations, out- The United States Steel Corporation — the
side of the value of the express companies as greatest industrial corporation in the world —
stock-holding concerns, are small affairs. Their was formed by J. P. Morgan to avoid the im-
total capitalization is not over $259,000,000, mediate danger of ruinous competition. He
with a market value of under 1350,000,000. has held the management of the concern from
The anthracite coal monopoly created by Mor- the first; and the operators of the company are
gan and Baker through the railroads is of more his choice, and a good share of the directors are
consequence. either members of his firm or his direct business
About $160,000,000 worth of anthracite coal associates. Nothing short of financial revolu-
is produced annually in the United States. All tion could take it from him. George F. Baker
of this comes from a small area of Pennsylvania. is now a director of the concern; John D. Rocke-
The railroads have been for forty years buying feller was at one time its largest stockholder.
control of these anthracite coal lands. The The Steel Corporation has always held to its
first important work of Morgan as a maker of announced program never to control moje than
monopoly was the eliminating of competition by sixty per cent of the steel output of the coun-
buying control of a competing railroad line for try. A much greater control of the industry,
the New York Central. The second was an however, is held in the hands of the seven men
attempt to create an anthracite coal monopoly and their allies. The Colorado. Fuel and Iron
through railroad combination. He worked at Company is directly under this control. The
this for twenty years; George F. Baker nearly as Pennsylvania and Cambria Steel companies are
long; and ten years ago the monopoly was owned by the Pennsylvania Railroad. Together
formed. The roads that hold it are now all in with the United States Steel Corporation, they
the control of the seven men. These roads now had about eighty-seven per cent of the capital-
own lands containing about ninety-five per cent ization of the steel business of the country, as
of the anthracite coal in the United States. They given by Poor's Manual for 1910; and they had
produce only eighty-two per cent. It is their nearly eighty per cent of the output. But any
policy to let the independent operators work out statement of the present hold of the seven men
their deposits. This will give them in the future and their allies upon the steel situation is inade-
a still greater control of this mineral. quate. Itis the futurein which they arestrongest.
It has been difficult to create any monopoly
of the bituminous coal of the country — it cov- The Ultimate Supply of Ore
ers so great an area. But this, like anthracite, is
naturally controlled by the railroads, which take Elbert H. Gary, the operating head of the
it to the consumer; and there are many effec- United States Steel Corporation, appearing
tive local monopolies. Morgan has been very before the Ways and Means Committee of Con-
active in creating these in connection with gress in the winter of 1909, made this state-
Eastern roads. West of the Mississippi a ment concerning his company's ore supply:
great share of the usable coal is controlled Question: You practically do control the ore. sup-
either by the Union Pacific, the Gould system, ply of the country?
or the Hill lines. . Mr. Gary: No, not now; not for the immediate
future.
• • 87 per Cent of Steel Industry Question: Well, the ultimate supply,
Mr. Gary: Yes, 1 think so; that is, pretty nearly.
The steel industry has been dortiinated by Mr. Gary's meaning was this: There is an
or closely connected with the railroad from its indefinite amount of low-grade ore in this coun-
beginning in America. To-day one third of its try. The Steel Corporation has never owned any
business is supplied directly by railway com- great percentage of this whole. It does own a
panies, and still more indirectly. On the other great proportion of the richer ores of the coun-
hand, the rates that railroads give the steel busi- try. Mr. Gary estimates that it now holds about
ness on its heavy low-grade materials and prod- three quarters of the richest ore in the country
ucts can make or unmake its profits. The seven (that containing from fifty-five to sixty per cent
men in control of railroads would very naturally of iron) and nearly the same per cent of all
hold a strong influence in its affairs. But they the known ore of the country that is profitably
have, in fact, taken a much more direct part in workable under present prices. Its competitors
its affairs. It came into their hands in very are working out their richest ores much faster
much the same way that the railroads and other than it is doing; ultimately it will have a great
industries have done—through actual or threat- share of all of this highest type of ore that re-

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mains in this country. In the meanwhile, its industries which are bound to it by physical
corps of trained engineers are continually search- necessity. Two of these are now apparent.
ing the Western Hemisphere for new ore bodies.
Gas and Cement, By-Produds of Steel
Concentration by Bankruptcy
The first is the lighting of great cities. Until
The Steel Corporation was brought into Mor- the last few years the gas produced in steel-mak-
gan's hands by a threat of ruinous business ing was thrown away — millions of dollars' worth
competition. AH of the best of these ore bodies every year. In the Steel Corporation's new
dropped into the hands of the Steel Company, plants this gas will now be carefully saved. In
either directly or through members of the cen- the great new plant at Gary enough gas will be
tral group in Wall Street — to whom they generated, not only for its own use, but to light
gravitated, as the railroads had done, through the whole city of Chicago as well. This gas is
bankruptcy. a by-product; it is lost entirely by the Steel Cor-
John D. Rockefeller secured the best of the poration's competitors. 11 can be piped twenty-
wonderful Lake Superior ore -deposits in the five miles to Chicago and sold at a price that is
panic of 1893 by the foreclosure of a mortgage but a fraction of the cost of specially manufac-
of a few million dollars on a small ore railroad. tured gas. Sooner or later Chicago will be
He invested a few million dollars more in im- lighted by this gas, and sooner or later the other
provements iind transportation; and trans- steel plants of the country will supply the cities
ferred the entire thing to the Steel Corporation about them with illuminating gas.
at its foundation for $77,500,000 in securities. The use of a second by-product is at the
James J. Hill also secured his Lake Superior present time putting the Steel Corporation and
ore deposits — second only to Mr. Rockefeller's Morgan in command of another new industry,
— by the failure of a small railroad in the panic the most remarkable growth of the past ten years
of 1893. He took it in the interest of the Great •—• the manufacture of cement. The output of
Northern Railroad, and, after spending a few this industry is now valued at some |6o,ooo,ooo
million dollars in the purchase of more lands, a year. In the last ten years it has quadrupled;
leased the mines to the Steel Corporation, and in the next year it will certainly double.
distributed certificates representing them to his The Steel Corporation, at its beginning, in-
Great Northern shareholders. At present prices herited from the Federal Steel Company, one
these certificates are worth nearly ?i00,000,000. of its underlying corporations, a method of using
The third great ore body, the Tennessee the waste of its furnaces for making cement.
Coal & Iron Company's, was taken by the A considerable part of its material, in this way,
Steel Corporation direct, with the advice and costs it nothing; and it has built up a cement
assistance of Mr. Morgan, in the panic of 1907. business of its own with enormous rapidity.
The holders of the Tennessee company's controll- In the past five years there has been murder-
ing stock were over-extended by the panic, and ous competition in the general cement business,'
the Steel Corporation simply took over the stock in spite of the rapid growth in demand. It
of the company in exchange for an issue of bonds. culminated about a year ago. At that time
One after another — always through the same J. Rogers Maxwell, a close associate of George F.
route to actual or threatened business ruin —• Baker, who controlled the Atlas Company,— the
the iron resources of the country passed from largest producer in the country,— found that he
the weaker hands to the stronger monopoly. had over-extended, and was forced to drop his
And, as in the railroads, it was the hands of the controlling interest. 11 was taken up by Morgan
chief monopoly-makers of the country who and his close associates. With this company and
took them up and placed them there. Every the Steel Corporation plant, Morgan now con-
year the Steel Corporation grows stronger. It trols about a third of the cement business of the
holds the future not only by its raw materials, country. Both of these corporations have great
but by the strategy of its position. With its extensions underway; in a year or two half of
plants in Pittsburg, Chicago, Alabama, and the cement of the country will probably be pro-
now on the Pacific coast, it has so covered the duced by corporations controlled by Morgan.
country that there are great areas where it can
make profits over its competitors by its saving 7he Tightening Hold on Oil and
of freight charges alone. Natural Gas
The future of the steel business belongs to the
great corporation. But more than that is com- The greatest chain of monopoly control in the
ing to it. Like the railroads, the steel industry country started from the railroad; but the
is now extending into a control of other great second and scarcely less important one has grown

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out from the petroleum trade — the oldest of their allies in the past. But other enterprises,
successful monopolies in the United States. For especially in the last few years, have been com-
thirty-five years this monopoly has never been ing into their control with equal rapidity. They
broken. It was never stronger than it is to-day come direct, seeking the aid of the only group
— after the order for its dissolution from the in the United States that now has the appa-
United States Supreme Court. ratus to create successful monopolies of the size
The Standard "Oil monopoly, like all others,that present conditions demand.
is built upon the principle of progressive The monopoly of the lead output of the
bankruptcy in its trade. Never was that prin- United States centers about the American Smelt-
ciple in more active operation than now. In ing and Refining Company. This handles
the past five years there has been a tremendous eighty per cent of the lead produced from ores
gush of petroleum. The Standard Oil, with requiring smelting, and sixty per cent of the
its tens of millions of available money, has total lead of the country. By controlling the
bought it at half price, stored it, and extendedNational Lead Company — the big consumer of
its pipe system for carrying petroleum, so that lead for p a i n t s — i t holds a strong domination
it delivers oil to the entire country at a mini-over the lead business of the country.
mum cost. Its system of distributing oil is Men closely allied to the Standard Oil group
now almost perfect. were instrumental in starting this American
This sarne gush of oil has started a trade war
Smelting and Refining Company. Soon after-
ward it passed into the hands 'of a Hebrew
in petroleum which is covering the entire world.
As a result of it, competitors in the United family,— the Guggenheims,— who came into
States are being either wiped out or brought smelting from the lace business.
into working alliance with the Standard Oil. The Guggenheims have been very ambitious,
At the present time concerns in these alliances and have extended out of the smelting business
handle some eighty-five per cent of the petro- into the general production of metals — into
leum of the United States; the Standard Oil lead and silver and gold, and especially copper.
concern itself handles all of two thirds. No They have become a nucleus for the centraliza-
situation could be better for the Standard Oil tion of the metal business. • As they have ex-
Company than the present condition in the oil tended they have sought the assistance and
trade. It is an exaggerated form of the very alliance of Morgan.
business conditions that created it. Alaska, the new mineral field of the United
Meanwhile, in the past two years the Stan- States, was opened up at just about the right
dard Oil concern has been acquiring greater and time to come into the hands of the Guggenheim
greater control of another field — the lighting family. In developing it they joined themselves
of cities by natural gas.. For years the Stan- with Morgan in the Alaskan syndicate. -This
dard has been in this business — in competition now controls most of the steamers entering the
with other companies. It is now bringing the district; all of the railroads of any consequence;
advantages and savings of monopoly to this by and from time to time acquires the best of the
' a readjustment and division of the field. In themineral resources. Its general control of the
one territory of the United States where naturaldistrict is assured by its control of railroad
gas supplies are near a great market — in Ohio transportation.
and West Virginia and western Pennsylvania — This association of the chief metal interest of
the Standard has established a practical workingthe country with J. P. Morgan will undoubtedly
be further cemented within a comparatively
monopoly, in which it controls, itself, alarge share
short time in some form of consolidation in the
of the production of the gas, and sells much of it
production of the copper of the country.
direct to the consumer. The profits of this busi-
ness, under its readjustment, will be immense. The monopoly of copper was first attempted
So, between the Standard Oil Company and by the Standard-Oil-City-Bank group of mo-
the Steel Company and the Consolidated Gas nopoly-makers in the late '90's, through the
Company of New York (controlled by the formation of the Amalgamated Copper Com-
central Wall Street group), a great new busi- pany. This was unsuccessful. Since then the
ness is entering directly into the hands of the Guggenheims have taken the central position in
seven men — the lighting of the cities of the the copper business by the development of
United States by gas. great low-grade copper deposits which can be
worked very cheaply. These two interests, be-
Lead, Alaska, and Copper tween them, control about sixty per cent of the
copper production of the country.
The railroad and petroleum enterprises have In the meanwhile the copper business has gone
brought in the chief assets of the seven men and from bad to worse through over-competition.

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The usual conditions preceding combination distance lines are practically all in their hands,
exist, and for some time a general consolidation and all or most of the profitable business in the
of copper companies has been under considera- .various larger cities of the country.
tion by the Morgan house. In view of the During just about the same time that the
recent suits by the government against large control of the telephone business was coming
corporations as monopolies, this new combi- into the hands of the central Wall Street group,
nation has not been attempted. It is now the smaller business of electrical manufacturing
generally expected. Its formation would bring came under their control to a greater degree
three quarters of the production of copper in than ever before. Morgan has been the financier
the country under the control of Morgan and and a large stockholder in the General Electric
the central Wall Street group. Company from the first; his firm is represented
in its directorate. In the panic of 1907 the
Taking Hold of Electricity Westinghouse Electric and Manufacturing Com-
pany was thrown into the hands of its creditors,
Together with their plans for building the and New York banking interests, in which
metal business into a working monopoly, the Schiff is a leader, now manage the concern for
central group is now performing the same ser- them. These two concerns have now between
vice for the electrical business. The largest them from seventy to ninety per cent of the
consolidation now going on is the tying up of different larger branches of the electrical
the telephone and telegraph systems. manufacturing business.
The American Telephone and Telegraph Com-
pany is the largest electrical corporation'in the ^n Estimate of the Central Group's
country, with a total capital of nearly a billion Control
dollars. In 1906 it had been growing so rapidly
that it could no longer get enough money out- It is impossible to express in exact terms the
side of New York. It then made an arrange- ownership or control of the seven men and their
ment with Morgan and Schiff to finance it. allies in American industry. But a rough ex-
It had not long been financed in New York pression of the percentage of their control of the
when the Western Union Telegraph service was various greatest operations and resources of the
joined to it. For thirty years control of this country follows. The percentages, where not
had been in the hands of the Gould family. In otherwise indicated, are calculated from the
1909 George Gould sold it to the telephone com- figures of capitalization appearing in Poor's and
pany. The combination of the two concerns Moody's Manuals:
was a logical arrangement which had been
under consideration for twenty-five years. It PERCENTAGE OF INDUSTRIES AND RESOURCES
will make for economy and better service. CONTROLLED

Almost at the same time the American Tele- Central

Group Alliances Outside
phone Company began to absorb independent Railroads 61 25 14
telephone concerns. In the preceding six or Express and Pullman 93I/2 •• ^Vi
eight years these had developed very rapidly; Anthracite Coal (sup-
the formation of a national system was being ply owned) 88J^ 6V2 5
worked out. The usual over-extension followed. Steel 82 5 13
In 1909 financial collapse came, and the largest Cement (output).. . . 'i^Vi .. 66%
Petroleum (output
and most ambitious of the independent concerns handled) 67 18 15
were ready to pass through the usual route to Lead (output) 60 40
consolidation. Copper (output) 60 40
They were at first sold directly to the Telephone 74 .. 26
American Telephone and Telegraph Company. This table gives a general idea of the control
State laws forbade this. Then Morgan took that the seven men and their allies have gained
them over himself. The loss of these telephone in certain specified industries. But it is, at best,
concerns, located in the central and most im- only a rough and only a partial statement. The
portant section of the country, greatly weakened control of these men has gone everywhere that
the other independent telephone systems of the it is possible to create a practical working mo-
country. Since then the larger of these other nopoly of any kind. Steamship lines, cracker-
independent telephone concerns have been baking, the manufacture of farm machinery —•
negotiating with Morgan for absorption into the these and many other industries as widely varied
central concern. The American Company and have been combined into the so-called "trusts "
Morgan.now hold at least three quarters of the controlled by them. And the list is always
telephone business of the country. The long- extending.

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426 MASTERS OF CAPITAL IN AMERICA

The New {Monopoly Power nates the management of the Mutual. And in
the firms of Morgan and Schiff and the banks of
Monopoly, as has been very clearly shown Baker and Stillman centers the great apparatus
in connection with the recent decision of the of making and distributing corporate invest-
United States Supreme Court, is a somewhat ments to the public.
hazy and difficult thing to define. Local mo-
nopolies may be practically absolute; but there <tA Tiillion oj Corporate Cash
are no absolute general monopolies in any great
product in the United States. The corporation With the creation of successful monopolies,
form, which has been the subject of govern- another source of capital came into the hands of
ment prosecution, rarely, if ever, has secured the group — the savings and profits of corpora-
control of more than two thirds of any great tions. How funds of this kind have aggregated
industry. The new monopoly power, formed in New York is well shown by the following state-
by the seven men and their allies, is a miich ment of the cash holdings of railroads and large
more perfect and efficient thing. industries controlled in New York, taken from
By the growing custom of personal under- the figures given in Poor's Manual:
standing or alliance between the individual
CASH HOLDINGS OF RAILROADS AND INDUSTRIALS
holders of corporations, the control of great UNDER NEW YORK C O N T R O L *
industries has been increased from two thirds to Railroads Large Industrials Totals
three quarters and four fifths. This is the ar- 1880 111,281,626 111,281,626
rangement which holds up prices and secures 1890 51,872,152 117,468,090 69,340,242
the various advantages of monopoly to-day. 1900. ...... 160,561,81 I 46,536,909 207,098,720
1909-10. . .640,545,178 267,337,175 907,882,353
But the power of the seven men and their
allies is not given to them by this control over The larger part of this money lies in the
any one industry alone. It is formed just as control of the seven men whose great monop-
much by their power over industry as a whole — olies have grown to overshadow ^all the rest.
by the power of the railroad over the steel trade, Together with it, they hold in absolute owner-
and the steel trade over the manufacture of ce- ship individual fortunes of their own, running
ment. 11 is also made certain by the centralizing from fifty to four hundred million dollars, and
of the money power — that is, of the cumula- the alliance with the fortunes and resources of
tive control of investable capital in their hands. the many lesser men —• their associates and de-
pendents. This money power completes their
The Savings of the Individual control over the corporate capital of the country
— invested and uninvested. They own, to-
Capital can come from only two sources —• gether or apart, a controlling stock interest in
the savings of individuals or the savings of the dominating industries of the country; they
enterprises; practically speaking, that is, of hold control, through these and other means, of
individuals Or of corporations. It is perfectly industry as a whole; and, finally, they hold
natural that the reliable security-makers of New control of the capital which is yet to be spent
York should come to control the investment of for the use of the great corporate enterprises of
individual savings. They created with their the United States.
railroad monopolies the best type of corporate Now, holding this money power, they dis-
security known in America. And the more the tribute the profits of industry between the
power ofmonopoly perfected and concentrated various sources of capital. It is not a division
itself in the hands of the seven men and their of their making, but one as old as corporate
allies, the more the investor's confidence in them investments in America. It has become
grew. practically automatic.
For this reason the seven men were drawn The securities of corporations are divided,
into the boards of various institutions for the roughly speaking, into two classes — bonds and
investment of the public's funds as the most- preferred stocks, and common stocks. The
expert advisers on the subject in America. former, between them, represent the actual
They advanced to the head of the greatest in- money put into a corporation; they are en-
stitutions of New York. The Equitable Life titled to a fixed rate of interest. The common
Assurance Society and the Mutual Life Insur- stock, in the creation of American corporations,
ance Company, with their billion and a quarter has largely r£presented hope. It gets all the
of assets, are very clearly under the control of remaining profits after the other two securities
Morgan and Baker—essentially for this reason. get their interest. It takes virtually all the
Morgan — as is well known — owns a majority increment of the future.
of the stock of the Equitable, and Baker domi- * Standard Oil holdings not given.

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 JOHN MOODY AND GEORGE KIBBE TURNER 427
The individual investor, the great general centration is in the hands of Morgan. He and
public, wants one thing in its investments — Baker and Schiff and Stillman control the ma-
security. It buys bonds and preferred stocks. chinery for the distribution of securities to the
But, more than that, large classes of the popu- public. But Morgan himself by temperament
lation have all their corporate investments is the one aggressive constructor of monopolies.
practically limited by law to these. Since Harriman's death he has had no com-
petitor. He is naturally the leader.
TJoe Share of the Public John D. Rockefeller is not directly a maker of
monopoly to-day; neither is William Rockefeller.
The laboring man is not in a position to buy But both are great factors in holding the present
stocks; his savings are not large enough. They monopoly control. The hundreds of millions in
are invested in corporation securities only their fortunes turn out tens of millions every
through the savings bank. The savings bank, year for investment in the great corporations;
practically everywhere, is forbidden by law to and these investments play a constantly growing
invest in corporate stocks. part in the control of corporate industry. Hill
The greatest collector of the savings of men is engaged, wherever possible, in sealing up his
of moderate means'is the insurance company. particular monopoly in the Northwest.
The insurance company is now forbidden by The individuals in the group are old men —•
law to invest in corporate stocks. all over sixty, all but two over seventy. They
The surplus money of the merchants of the will soon be dead. But others will take their
country lies in the national bank. The national places. The group is the thing — the central
bank is forbidden by law to invest in corporate machine for the control of corporate capital.
stocks. When these men are gone, others will im-
A great body of money in estates is left to ad- mediately arise to take control of it, and to
ministrators under the provision of the general enlarge and very likely centralize its power
trust fund laws. These laws quite uniformly still more.
forbid the .investment of money in corporate
stocks. 7he Central Monopoly and, the 'Future
The money of the institutions that hold the
savings of the general investor goes by law into This central group is a perfectly natural evo-
bonds. The money of the individual invested lution — the final product of thirty and forty
in securities goes into practically the same form years of unchecked movement toward monopoly.
— bonds or preferred stock. It has not been created by any man's or men's
The savings of the general public pay for the arbitrary acts or theories. It has risen day after
great enterprises of the country. They secure a day and year after year upon the progressive
fixed return for their money from their bonds bankruptcy of general itidustry under com-
and preferred stock, and no more. There petition. The old economic axiom has been
remains the common stock, which represents reversed in the past twenty-five years. Compe-
the future development of industry and the tition has not been the life of trade; it has been
country. This goes, and always has gone, to the death of industry in the United States.
the maker or remaker of corporations. They Monopoly has been built up on its ruins, and it
take the common stock for little or nothing, is built to stay.- The last and most perfect form
. manage the corporation by it, and when at of monopoly is this central financial machine,
last successful monopoly conditions are cre- now focussing in the seven men.
ated, the increment of the future goes largely It is a splendid machine — never stronger
to them and their allies. Into the hands of than it is to-day. Through its various feeders,
the central monopoly-making group of the the enterprises and resources of the country are
United States a great part of the unearned brought into it. The Northwest is constantly
increment of the value of the United States patrolled and watched by Hill. No new de-
is now pouring. • velopment escapes him. Through the West
The seven men are simply the nucleus of this and South\vest the Union Pacific gathers its
new central monopoly power. In some cases detailed reports from every little station. The
they have no direct personal relations. They Standard Oil Company, with its own private
were brought together as a result of a general telegraphic system from the North Atlantic to
economic movement, not according to any pre- Mexico, watches the credit and activities of its
concerted plan. Their relations and the parts trade, and of business at large. The Cfty Bank,
they play are merely what circumstances have with almost two thousand corresponding banks,
dictated. watches the credit of the enterprises of the
The active leadership in the movement of con- continent.

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 DIE WANDERLUST

Through all these channels and hundreds to the investor, stable securities, sure of pay-
more, the central machine of capital extends ing interest; to the makers of monopoly and
its control over the United States. It is not their allies, the increment of wealth of the
definitely organized in any way. But common continent, and with it the gathering control
interest makes it one great unit—the "System," of all mechanical industry. It is a cumulative
so called. power inconceivable half a century ago. The
It sits in Wall Street, a central power, di- apprehension and hostility of the whole popu-
recting the inevitable drift of great industry lation of the United States is directed against
toward monopoly. And as the industries of it. But its absorption of the machinery and
the country one after another come into it for resources of the country go on. The process
control, it divides the wealth created by them. is not only economically logical: it is now
To the producer, steady conditions of labor; practically automatic.

Die h^nderlust
by Fritz Krog
Illustrations by WladyslanvT^Benda

I
N Missouri, about sixty miles west of St. " 11 is wonderful, this America "— old man El-
Louis, there is a creek — in New England finger always began this way. "Wonderful! So
it would be called a river; no matter: it is young, so strong, so short the span of years
not the stream that counts, but old man from its youth to its strong manhood; so great
Elfinger; and it was only due to my love will it be. There are many of us around here in
for fishing in the creek that I won his confidence. these hills who can still remember the time when
He was a German, big, rugged, sentimental, the naked Osage begged for a scrap of bread or
nearly a hundred years old — not like the im- a bit of red cloth, when we used bear fat for
possible "Dutchmen" of the vaudeville stage tallow, when we went hungry if the crops failed;
who say "iss it," and "vunce," and all that; but and that was ten years after Missouri became a
an intellectual German, with that wonderful State, and thirty years before the Great Re-
poise of his kind; a German who could talk Eng- bellion. St. Louis was a village then, and, though
lish, real English, straight from the shoulder, as it was only sixty miles away, it was as distant
he could likewise talk French and Italian and as Europe is now.
Spanish. He made our language sound like " I came here in 1834, pushed overseas as you
something; he made it boom and hum; and when have seen a mill-pond push a stick through a
he said the wind roared, I could hear it roar, and broken dam, as the wind drives a seed. If I had
when he said the wolves howled, 1 could hear not been the son of the Baron von Elfinger,
them howl. . He used his own words and phrases, with the young red blood and the stiff.neck,
and he had his soul in them. perhaps I would never have seen the Mississippi
He did not tell this story to every one. He Valley.
liked me, and he told it to me every spring for " M y father's forester had a daughter — now
five years, and that's why I know it so well. you see? Her name was Elsa, and she had been
Whenever the fish refused to bite, I would permitted to play with me when we were chil-
go to his house, and he would give me Maiwein dren. But when I returned from Bonn — ah,
and tell rrie this story. . . . then playing with Elsa was another matter; yet

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