466 Chapter 17 An Industrial Giant Emerges
discrimination speeded the concentration of industry
in large corporations located in major centers. The
instability of rates even troubled interests like the mid-
western flour millers who benefited from the competi-
tive situation, for it hampered planning. Nor could
manufacturers who received rebates be entirely happy,
since few could be sure that some other producer was
not getting a larger reduction.
Probably the worst sufferers were the railroads
themselves. The loss of revenue resulting from rate
cutting, combined with inflated debts, put most of
them in grave difficulty when faced with a downturn
in the business cycle. In 1876 two-fifths of all railroad
bonds were in default; three years later sixty-five lines
were bankrupt. Wits called Samuel J. Tilden, the
1876 Democratic presidential candidate, “the Great
Forecloser” because of his work reorganizing bank-
rupt railroads at this time.
Since the public would not countenance bank-
rupt railroads going out of business, these companies
were placed in the hands of court-appointed
receivers. The receivers, however, seldom provided
efficient management and had no funds at their dis-
posal for new equipment.
During the 1880s the major railroads responded
to these pressures by building or buying lines in
order to create interregional systems. These were the
first giant corporations, capitalized in the hundreds
of millions of dollars. Their enormous cost led to
another wave of bankruptcies when a true depression
struck in the 1890s.
The consequent reorganizations brought most of
the big systems under the control of financiers, notably
J. Pierpont Morgan and such other private bankers
as Kuhn, Loeb of New York and Lee, Higginson
of Boston.
Critics called the reorganizations “Morganizations.”
Representatives of the bankers sat on the board of
every line they saved and their influence was predomi-
nant. They consistently opposed rate wars, rebating,
and other competitive practices. In effect, control of
the railroad network became centralized, even though
the companies maintained their separate existences
and operated in a seemingly independent manner.
When Morgan died in 1913, “Morgan men” domi-
nated the boards of the New York Central; the Erie;
the New York, New Haven, and Hartford; the
Southern; the Pere Marquette; the Atchison, Topeka,
and Santa Fe; and many other lines.Competition and Monopoly: Steel
The iron and steel industry was also intensely com-
petitive. Despite the trend toward higher production,
demand varied erratically from year to year, even from
month to month. In good times producers built newThis early 1900 photograph shows how steel mills spread along the riverfront of Pittsburgh, Pennsylvania.