The Legacy of J.p. Morgan: Robber Baron Or Captain of Industry?

1. Introduction

When most people hear the name J.P. Morgan, the securities firm J.P. Morgan and Chase may come to mind. Morgan was a multifaceted individual and business leader of the late 19th and early 20th centuries. Contemporary views of this industrial giant vary, with some labeling him a robber baron and others a capitalist hero. His financial ingenuity helped transform the U.S. economy, leading to an increase in industrial output unprecedented in U.S. history. However, for all of his financial genius, Morgan was not above operating outside the realm of accepted business practice to ensure the success of his numerous enterprises.

Morgan was not merely a banker; he was one of the primary industrialists of his era. Today, we would call the focus of his business operations an investment bank, and it was through that endeavor that Morgan seared himself into the political and financial history of the United States. In his role as crisis preventer, Morgan became the baron who wielded corporate control from New York, suppressing what he saw as anarchy while creating corporate harmony. Populists saw this activity as Morgan’s pursuit of unparalleled economic power granted to a virtual political cabal. What was special about the public’s reaction was that for an unprecedented period of time, the U.S. Congress did not succumb to pressures to regulate the growing centralization of economic might mounted by U.S. corporations. As structures like J.P. Morgan Chase mounted, the revenue from U.S. industrial activity concentrated itself among a few of the nation’s power elite.

2. The Rise of J.P. Morgan

John Pierpont Morgan was born into a privileged world of commercialism in Hartford, Connecticut, on April 17, 1837. Young Morgan was also exposed to European culture; his father sent him to Germany for schooling in 1854. Five years later, he returned to New York to pursue a career in the financial industry. His familial influences coupled with having access to elite universities and the right connections allowed his business career to take off. He first got a job in a Manhattan bank before joining Charles Dabney & Company in London. However, his tenure abroad would end in tragedy when he had to return home to be by his mother’s bedside, who was gravely ill. After she passed in 1866, he re-entered the New York banking scene, this time with his own line of credit courtesy of his father (G. Lamb, 2009).

Morgan’s banking expertise became paramount during the financial panic of 1873, as numerous railroads went bankrupt. Morgan was instrumental in resurrecting the profitable ones and restructuring them into powerful conglomerates: first the Philadelphia & Reading and then the Baltimore & Ohio (B&O). By 1880, he not only survived the panic, but he was also at the helm of one of the largest railroads in America. In 1884, he recruited industrialists such as Alexander Cassatt and Charles Lang Freer to the B&O board—a strategic move designed to put a halt to the West Coast’s encroachment upon the railroad’s influence over the nation’s midsection. In 1885, Morgan frustrated this competitive advance by purchasing the importance of the Kansas Pacific, first controlling it through a subsidiary and then outright, forcing West to resign from B&O.

Railroad construction soon came to a halt whereupon Morgan turned his attention to the burgeoning steel industry. Starting in 1880, he aided in the collapse of Pennsylvania’s hegemony over steel rail production by enticing Henry Clay Frick and his powerful Carnegie Works to sell their steel rails to the B&O, thus establishing the world’s most powerful railroad. Later that same year, Morgan arranged for Carnegie to become a B&O director, representing steel’s interests in the railroad, perhaps with the intention of pulling iron and coal into the same web that controlled transportation. Instead, B&O’s acquisition of the Lake Shore & Michigan Southern; subsequently consolidated iron ore transportation, inducing an iron panic that led to an investigation into B&O, and ultimately – in 1888 – Carnegie’s resignation. Morgan would no longer take a back seat to the railroads; now, he’d set his ambitions elsewhere, even if it meant undermining an erstwhile partnership.

3. Business Practices and Impact

The significant and lasting impact J.P. Morgan had on American industry and banking is still felt today. He employed many innovative methods to consolidate businesses and stabilize them during turbulent market times. Morgan saw an industry going down in flames and thought it wise to buy it up piece by piece, extinguishing the fires and putting the thing back in order. Although operating in a controversial realm, it was natural for him to be driven toward many railroad acquisitions. For over a decade, prior to Morgan taking control of it, the Philadelphia & Reading Railroad was rife with turmoil. After another disastrous year of warring factions, fleeced brokers, shuttered shops, and retained lawyers, J.P. Morgan was petitioned to take the reins. There was a widespread belief among many that Morgan would be able to right the ship. Morgan’s strategy was simple—sever the rover’s head and then tender it a new neck. Much like the trackless reins of a maniac, Morgan found the Reading’s interests had strayed well beyond what was sensible, stretching deep into competing roads. He immediately set about undoes these disastrous acquisitions (G. Lamb, 2009).

Morgan’s methods for bringing struggling industries back to life consisted mainly of mergers, acquisitions and financial restructuring. He made bold changes, resulting in large gains for the fixed stockholder, and he was anything if not aggressive; more than once had Jersey Central executives found a new position at Morgan’s beck and call. Parenthetically, the Jersey Central’s demise was but the first conducted by Morgan’s hand. While still at Drexel, Morgan wilfully engaged in another railroad massacre and not one far removed from Jersey Central’s fate. The forcible acquisition of the Erie Railroad turned into one of the ugliest sordid tales of the age. Once the fastest growing railroad in the country, shares were nearly worthless by the time Morgan became involved (A. Laughlin, 2012).

Similar to any great and successful financier, the ethics of Morgan’s business practices are complex and widely debated. He clearly took advantage of several competitors and often charged exorbitant rates to customers once those customers were rendered helpless under Morgan’s control. On the other hand, he rounded up failing companies and at great personal expense to himself righted many industries. By the turn of the century, Morgan-controlled industries constituted a majority of both New Jersey’s and Pennsylvania’s freight tonnage. Arguments can be made for both sides of the debate, but perhaps the question should be recast—what was the net effect of Morgan’s actions on competitors and consumers and how did that affect the overall economy?

4. Philanthropy and Public Perception

Despite his historical portrayal as a ruthless business mogul, J.P. Morgan donated large sums of money to charitable causes, having a profound impact on American culture. The symphonic works of composer Edward Elgar would not be as well-known in the United States without Morgan’s patronage. Many libraries, schools, cathedrals, and institutions owe their existence to his generosity. In 1903, Morgan famously said, “I think it is a good thing to give to foundations rather than to give to individuals. Foundations should take care of the thousands and individuals the hundreds.” This philanthropic belief, shared by Andrew Carnegie and John Rockefeller, was a significant part of Morgan’s legacy (G. Lamb, 2009). Although Morgan advised charitable contributions, he only allocated a small portion of his wealth to philanthropy. Even during his lifetime, critics decried his donations as superficial public relations efforts. Morgan struggled with the public perception of his character throughout his life. Philanthropy softened his ruthless image, but it could not eliminate the public’s contempt for concentrated wealth. Morgan was not unique in his desire to improve his public image. Indeed, as wealthy individuals attempt to influence government policy, the question of the social responsibility of the rich arises: "To what degree does wealth beget responsibility?". Many so-called “robber barons” at the turn of the century donated large sums to cultural, educational, and social causes. Some noble societies were created to counteract critiques of greed. Enormous donations were made to foundations, which often allowed for tax avoidance. Morgan’s key contributions were to the arts and education, but his donations went beyond banking.

In 1890, Morgan co-founded the Metropolitan Museum of Art’s American Wing, donating paintings by John Singer Sargent and American artists like Thomas Cole. By 1905, he became a Trustee of New York’s Pierpont Morgan Library, which showcased his manuscripts and rare books, known for its stunning architecture. He also financed St. John the Divine Church and several cathedrals in Europe. A dedicated art collector, he acquired the Paganini and Leduc violins after the deaths of their original owners and owned rare works, including early editions of Chaucer and Shakespeare. His philanthropic contributions established the New York Public Library’s Department of Manuscripts and supported the library at Harvard. Morgan was instrumental in founding the Metropolitan Opera and the New York Academy of Music, with his donations benefiting institutions like the American Museum of Natural History and Vassar College. While Morgan engaged in private philanthropy, questions about wealth accumulation and social responsibility arise. Over time, he is seen as both greedy and selfless; once revered, his philanthropic legacy appears significantly darker today.

5. Conclusion

In summation, J.P. Morgan’s legacy is that of both a robber baron and a captain of industry. It is clear that some of the actions he took were self-serving and harmful to the general public, as with the U.S. Steel transactions. However, the majority of his life was spent improving and maintaining the industrial progress of the nation. While many see the consolidation of the railroads as monopolistic greed, there is strong evidence that without Morgan’s intervention, the railroads would have collapsed and dragged the nation and its economy down with them. One can only hope that as time passes, the historical context of Morgan’s actions will be taken into greater consideration in understanding his contributions to American life. Morgan exemplifies the duality of robber baron and captain of industry, and as with many complex individuals, judgment may differ depending on the time and place (G. Lamb, 2009).

Morgan failing to see how some of his actions could be construed as greedy or monopolistic seems to be a running theme. This inability is not unlike extremely wealthy men today, and it is important to consider how the morality of wealth changes over time and the responsibilities that it seems to bring with it. Morgan, at his peak, was the wealthiest and most powerful man in the world, and as such, it was natural that so much energy was focused on him. In his own time, he was seen as both a savior and a scourge, to be praised and vilified, often within the same breadth. That focus has only intensified in the aftershock of his death. It is important to consider how he is viewed institutionally versus how he is viewed socially and individually. At the time of his death, he was viewed as a man whose genius and philanthropy had made the nation great, but the man on the street saw something different. How, then, will he be viewed in another hundred years? How, if at all, will the questions posed by his legacy be answered? Will the narratives surrounding how wealth is accumulated and the ‘social obligation’ that is said to accompany it find resolution? Or will the unsettling questions simply linger? These questions beckon further thought and consideration, and should be kept in mind as the relevance of Morgan’s actions, both good and ill, is seen in modern finance and society.

References:

• G. Lamb, C. "Clockwork of an American mind : uncovering the psychological development of J.P. Morgan : an honors thesis (HONRS 499)." 2009.
• A. Laughlin, E. "The Rise of American Industrial and Financial Corporations." 2012.