Reconstruction, Expansion, and the Triumph of Industrial Capitalism 27explained tariffs would protect workers in the U.S. from the competition of
lowly-paid foreign workers and would rescue labor “from the servitude of
poverty.” Workers in tariff-protected areas like iron and textiles were paid
better, and that helped offset the higher prices for goods, but they amounted
to only about five percent of the whole work force. Despite the focus on
working people, it was clear that the tariff was a government-business plan to
enrich Industrialists.
Businesses, especially the biggest ones, also gained power at the expense of
smaller companies by finding ways around laws that were barely enforced
anyway. Contrary to the “theory” of capitalism that tells us that competition
is good because it makes factories produce better products at lower prices, the
corporate elite did all it could to overrun other firms. Because competition
was fierce in the period after the Civil War, those with the biggest holdings
devised strategies to eliminate the threat posed by other companies. Many
devised new forms of business organization, such as secret agreements in
which they offered secret private rates to key customers below published
prices; created pools, or cartels [as in oil or drugs today] to divide business
traffic among operators in a particular industry; or consolidated their busi-
nesses by purchasing, leasing, or merging with competitive firms.
The establishment of trusts was another vital element in the growth and
expansion of capital and power. Earlier in the 19th Century businessmen
formed corporations in order to have access to more capital and greater mar-
kets, and now even those corporations were in some cases not adequate for
the staggering levels of economic growth [and corporations could not own
stock in another company]. So, many corporations joined together and
formed trusts. A trust was a combination of various companies, some taken
over and some merged, who sold themselves to a group of trustees, men
selected by the corporations to oversee all their businesses [similar to a mod-
ern-day arrangement like the National Football League, where each team is
individually owned and run, but is part of a larger group, the NFL, which
makes television deals, sets rules, and negotiates with the players’ union]. In
return, the companies would get shares in, and profits from, that new trust
[like each NFL team gets money from national television contracts]. In that
way, a single group of directors controlled the operations of several enter-
prises. As John D. Rockefeller, the oil billionaire [more below] saw it, “the
day of combination is here to stay. Individualism has gone, never to return.”