The History Channel’s miniseries on the entrepreneurs who built America in the second half of the 19th century portrays J.P. Morgan as a greedy robber baron. For those unfamiliar with that term, a robber baron was (according to my dictionary) “an unscrupulous plutocrat, esp. an American capitalist who acquired a fortune in the late nineteenth century by ruthless means.” In this post I’d like to introduce you to Morgan and his work. In my next post I’ll provide an assessment of how we should view Morgan.
John Pierpont Morgan, unlike Vanderbilt and Rockefeller, was born into a financially well-off family. His father grew in power to direct J.S. Morgan & Company (formerly Peabody & Company), which had international offices in London and Paris. According to Jonathan Hughes and Louis P. Cain, authors of “American Economic History,” J.S. Morgan & Company was “a leading European merchant banking house” which financed “a $50-million loan to the French in 1870 at the time of the Franco-Prussian War.”
When Pierpont (as he was called) took over the family business after his father’s death, he moved the direction of the company from financing more secure and confident loans to riskier venture capital loans. The History Channel presents the strong relationship between Morgan and Thomas Edison, the investor of the incandescent light bulb. According to the History Channel, Morgan wanted to be like the other great entrepreneurs of his day by joining that highest echelon. But he didn’t have a product or business that was able to offer something to the masses like Vanderbilt, Rockefeller or others could. That is, until he met Edison.
Edison was the inventor, Morgan the investor. To show people the wonders of electricity, Morgan had an electrical system installed in his own home. People were amazed and soon enough, the city of New York was powered by Edison’s design. Morgan’s next goal was to be able to power the whole country.
He thought that there was no competition from this new industry, but one of Edison’s workers, Nikola Tesla, resigned because Edison ignored his successful invention of alternative current (AC). Edison thought it was too dangerous and impractical; Edison used direct current (DC) which moved at a lower voltage. This resignation led to some marketplace competition between Morgan and the Westinghouse Co. (the organization that bought and paid Tesla for his work).
Morgan lost some big projects such as the World’s Fair in Chicago and the Niagara Falls Power Plant to Westinghouse Co., which infuriated him. He bought more stock in Edison General Electric to have a majority share, fired Edison, converted over to AC, and formed a merger with Thomas-Houston Electric Company to create General Electric.
Not only did Morgan invest and loan to businesses, but he bailed out organizations from their troubling predicaments. In 1895 he was a part of providing the U.S. Treasury with 3.5 million ounces of gold in exchange for a 30-year bond. Also, he was a part of a major bailout of New York banks during the Panic of 1907.
Morgan’s risks of investing and loaning money played a crucial role in expanding the United States during the progressive era. He’s often seen as one of the greedy robber barons, someone who uses their money to suppress the poor from moving out of their unwanted social state. Morgan was responsible for the increase in the wealth gap between the rich and the poor; he exemplifies all the problems with capitalism. In my next post, I will expose the shortcomings of these rhetorical arguments against Morgan.