Reconstruction, Expansion, and the Triumph of Industrial Capitalism 23Railroad executives began these moves toward oligopoly, centralization and
control, by establishing cartels to divide traffic and set rates as a way to end
cutthroat competition–not embrace it. However, financiers like Jay Gould and
Jim Fiske, who were not railroad men, gained control over many railways [like
many corporations and speculators today take over control of companies that
operate in wholly different areas, such as General Electric owning media out-
lets] and started rate wars to lower the price of railroad stocks and bonds, and
then they bought up the weaker rail companies at bargain prices. In the pro-
cess, smaller lines were driven out of business and an oligopoly emerged and
grew.
One of Jay Gould’s fellow “swindlers,” a man who had worked with him
in cheating smaller lines out of their money, called Gould “the worst man on
earth since the beginning of the Christian era.” Those few big companies that
thrived would buy more equipment, lay more rail, and get more government
land. Smaller rail lines that tried to survive could not compete with the big-
ger investors and were out of business by the 1890s. Many other manufactur-
ers followed this model, establishing cartels—associations of firms in the same
business—so they could work together to limit production and keep prices
high, until rogue operators broke the agreements and cut prices, leading to
FIGuRE 1-5 Financier Jay Gould