H102 Lecture 06: The Social Philosophy of American Businessmen

Stanley K. Schultz, Professor of History
William P. Tishler, Producer

Lecture 06

The Social Philosophy of American Businessmen

Corporations, and the businessmen who were their recognizable heads, came under increasing attack at the end of the nineteenth century. Many Americans who had once associated "laissez-faire" with individual freedom now linked the term to unfettered corporate power, bullying trusts, and an unprecedented loss of individual freedom. American businessmen found themselves resorting to new ideologies and "scientific" terminology to defend themselves from angry Americans who felt the trusts were destroying traditional ways of life.

Some questions to keep in mind:

What was Social Darwinism and why did so many American businessmen find it appealing during the Gilded Age?

How did businessmen justify their actions between 1870 and 1900?

What did many Americans think about corporations?

"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness..." (Thomas Jefferson, "Declaration of Independence," 1776).

When Thomas Jefferson substituted "Pursuit of Happiness" for philosopher John Locke's original term, "Property," he may have foreseen the controversy over the meaning of freedom that would dominate Gilded Age politics. Two contrasting ideals of freedom clashed during this period. A intellectual contest ensued between Americans who believed that the "Pursuit of Happiness" was the driving force in American history, and others, such as Andrew Carnegie and John D. Rockefeller, who championed the "Pursuit of Property" as the source of American greatness. Both sides constructed logical arguments to justify their positions. Eventually, however, advocates of the "Pursuit of Property" applied the "scientific" lessons of Social Darwinism and laissez-faire economics to win over the public.

Pursuit of Happiness

Why did so many Americans view the new corporations and trusts as evil entities that destroyed the American dream of the "Pursuit of Happiness?" Though we can provide many answers to this question, there are three important points that can help us understand the logic of those who despised growing corporate power:

There was no analogy in the past

The corporation was an artificial creation

Corporations threatened free competition

There was no analogy in the past

Thomas Jefferson assumed America would become a land of independent yeoman farmers when he authored the "Declaration of Independence" in 1776. He believed that an agrarian lifestyle rooted in hard work would keep individual farmers and, ultimately, the nation, strong and vibrant. This ethos of individualism has permeated American culture since the days of the Pilgrims. One conspicuous symbol of the American attachment to romantic individualism is the "American Cowboy" and the images of the "Wild West." (See lecture 3) After the corporation revolution, many Americans struggled to adjust to a new form of economic organization that seemed to emphasize cold-hearted acquisitiveness over more compassionate business practices.

The corporation was an artificial creation

Corporations were essentially nothing more than a legal agreement between legislators and businessmen. As we can see in our own era, Americans often mistrust lawyers, legislators, and businesspeople. Thus, it is not surprising that many Americans disapproved of a legislative process that allowed a group of investors to create a money-making device that only existed on paper.

Corporations threatened to destroy competition

Perhaps the most convincing argument advanced against the corporations and trusts was that they threatened to destroy the age-old concept of free trade and healthy competition. Capitalism certainly has faults. One of its great advantages, however, is that healthy commercial competition can benefit consumers by providing more economic choices and lower prices. As trusts and corporations grew larger and became more dominant during the Gilded Age, people began to fear that corporations would destroy free competition and eliminate the benefits of capitalism.

Some Americans, of course, believed that the "Pursuit of Happiness" and the "Pursuit of Property" went hand in hand. For instance, Abram S. Hewitt, a well-respected businessman, philanthropist, public official, and political leader, maintained that corporations were merely a more efficient means of producing the age-old "American Dream:"

"It is curious that the mass of the people of this country should fail to recognize that their best friends are the corporations, because corporations have been the only barrier between the despotisms of ignorance and the invasion of the rights of property. Doubtless they abuse their privileges at times but they alone have the ability and the courage to resist attack, and they are doing the work which was done by Jefferson and Madison in the early days of the Republic."--Abram S. Hewitt

Ultimately, Hewitt was on honest man with a good public record. Even though he tried to rationalize the actions of corporations, he worked under the general assumption that the "Pursuit of Happiness"--the quest for greater social good for the greatest number--was the driving force behind the corporatization of America. Other Americans, however, believed that the "Pursuit of Property"--the search for greater material wealth--was, in fact, the only justification needed for the corporation revolution.

Pursuit of Property

Attempts to reconcile the "Pursuit of Happiness" with the "Pursuit of Property" were unpersuasive to most Americans. Though men like Hewitt could claim that corporations could mass-produce individual happiness, many Americans disagreed. For this reason, businessmen resorted to another tactic to persuade Americans that corporations offered the best way of doing business. Three main themes of late-nineteenth-century thought provided American businessmen with a set of terms and ideologies to justify their activities as "Robber Barons:"

Social Darwinism

Self-adjusting economy

Profit incentive as only human motive

Social Darwinism

Charles Darwin

Charles Darwin was a humble, mild-mannered Englishman whose ideas helped change the world. In 1859, Darwin published published On the Origin of Species. Although theories of evolution had existed for centuries, Darwin's theory of "natural selection" was an innovative hypothesis that captured the attention of scientists and philosophers around the world. Darwin purposely avoided applying "natural selection" to human societies. Later intellectuals, however, treated his ideas as the philosophical foundation for a far-reaching theory of "Social Darwinism."

Charles Darwin

Herbert Spencer

Herbert Spencer, also an Englishman, took Darwin's theories out of the realm of biology and applied them to human society. Spencer, not Darwin, was the first person to coin the phrase "survival of the fittest." He believed that government intervention in the "natural" processes of human evolution, such as welfare for the poor, public education, and government healthcare, helped weak humans survive and, in the process, undermined the health of the entire race. Spencer, of course, never defined what he meant by the "natural" process of evolution. Nevertheless, his books sold over 400,000 copies in the United States alone, and he became one of the most influential thinkers of the late-nineteenth century.

Herbert Spencer (1820-1903), English philosopher

William Graham Sumner

Sumner was Spencer's American counterpart. "In his economic and social outlook, Sumner was a Social Darwinist, holding that distinctions of wealth and status among men were the direct result of inherently different capacities, that this stratifying tendency worked to the good of society by eliminating weaker and encouraging stronger strains (as natural selection does among animals and plants), and that this tendency should not be interfered with by sentimental, unintelligent attempts to hedge the free play of economic forces and personal abilities. Sumner thus championed laissez-faire as the only true principle of both economics and government; in lectures and written works with such titles as "The Absurd Attempt to Make the World Over" and What Social Classes Owe Each Other (1883), he decried any and all movements that pointed to a welfare state..." (Source: Webster's American Biographies, G. &C. Merriam, 1975).

William Graham Sumner (1840-1910), Yale social scientist

American businessmen adopted eagerly the ideology of Social Darwinism in order to defend their business practices as "natural." James J. Hill, a leading "Robber Baron" of the railroad-building era, saw the chance to justify his actions with "scientific" terminology:

"The fortunes of railroad companies are determined by the law of the survival of the fittest." --James J. Hill

James Jerome Hill (1838-1916), financier and railroad magnate

There were, of course, influential Americans who challenged Social Darwinism. One such individual was the historian Henry Adams, who said,

"The progress of evolution from President Washington to President Grant is alone evidence enough to upset Darwin." --Henry Adams

Self-Adjusting Economy

Along with Social Darwinism, many nineteenth-century businessmen accepted the idea that the American economy was "self-adjusting." This idea traced its roots back to Adam Smith and his conception of the "invisible hand" of capitalism.

"The ideas of laissez-faire applied to economics appealed greatly to Scottish economist Adam Smith. Using these ideas, Smith began another kind of revolution during the period in which the American colonists were fighting their revolutionary war. In 1776, the year that Jefferson wrote the Declaration of Independence, Smith published one of the most important books in the history of economics. The book's full title is An Inquiry Into the Nature and Causes of Wealth of Nations. Most people simply call it The Wealth of Nations. Smith wrote the book after discussing laissez-faire beliefs with some of the physiocrats. Smith's book is an argument in favor of allowing people to engage in trade, manufacturing or other economic activity without unnecessary control or interference from government.

The main argument in The Wealth of Nations might be stated rather simply: People are naturally selfish. When they engage in manufacturing or trade, they do so in order to gain wealth and/or power. This process should not be interfered with because, despite the self-interest of these individuals, their activity is good for all of society. The more goods they make or trade, the more goods people will have. The more people who manufacture and trade, the greater the competition. Competition among manufacturers and merchants helps all people by providing even more goods and probably lower prices. This activity creates jobs and spreads wealth."

This document was provided by the UNITED STATES INFORMATION AGENCY in the About the United States series, which can be found at: http://www.salsem.ac.at/csacl/as_modules/economy.htm

Following Adam Smith's lead, nineteenth-century American political economists generally agreed on four principle points:

They equated the rules of political economy with the unchanging, everlasting laws Nature or God

They argued that individual self-interest was socially beneficial

They maintained that free competition was a permanent and necessary law of economics

They held that government was an inefficient agency that should not be involved in economic matters

American businessmen were grateful to hear economists and influential thinkers like William Graham Sumner justifying the existence of large corporations and trusts. With the backing of the "science" of economics, late-nineteenth-century businessmen felt that their actions, no matter how immoral or corrupt, actually benefited the entire nation.

Profit motive was the only reliable incentive for action

Andrew Carnegie (1835-1919), industrialist and philanthropist

Finally, businessmen tried to justify their actions by linking the profit motive to the public interest. During the second half of the century, many American businessmen, politicians, and economists believed that the pursuit of profits bolstered the material and spiritual health of the nation. Even as corporate capitalists acquired enormous commercial power and influence in American society, their dogged pursuit of personal profits also drove the economic growth, provided jobs to poor workers, and seemed to ensure the nation's prosperity. Andrew Carnegie, for example, one of the least selfish of the nation's early industrialists, claimed that even the most ridiculous spending habits of the wealthy were beneficial to the rest of the nation:

"Millionaires are the bees that make the most honey and contribute most to the hive even after they have gorged themselves full."--Andrew Carnegie

In the end, Carnegie and other American business leaders often relied on science, economic theory, and social philosophy to try and justify their business practices and their growing profits at the end of the nineteenth-century.

At times, businessmen faced extraordinarily difficult economic problems. The "boom-and-bust" cycle of depressions and recoveries from 1873 to the turn of the century, in particular, made investing precarious and competition fierce as companies struggled to survive. For all the difficulties that company directors faced during this period, however, the common workers who labored in their factories dealt with much more fundamental economic problems. As business leaders became wealthier and more powerful, the men, women, and children who formed the nation's industrial workforce began to demand higher wages, shorter working hours, and a greater voice in corporate decision-making. The story of these common workers and their search for power is an important and fascinating aspect of American history; so important, in fact, that we will continue it in the next lecture: Labor and the Workers' Search for Power.

Lecture 06	*Related Web Links*
Content	Presentation	Audience	Link	Info
		College	"Making Microsoft Safe for Capitalism," by James Gleick
		College	"Wealth," by Andrew Carnegie
		College	William Graham Sumner-- Social Darwinism and laissez-faire capitalism
		College	Horatio Alger, Jr. Resources
		College	"The Death of Darwinism," by George Sim Johnston
		College	"Evolution and Philosophy: Does Evolution Make Might Right?" by John Wilkins

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