A threatened competitive struggle among certain steel manufacturers in 1901 led to the formation of the United States Steel Corporation, the most famous consolidation of the period. It was, strictly speaking, a "holding corporation" which did not manufacture at all, but merely held the securities and directed the policies of the group of companies of which it was composed. It integrated all the elements of the industry—ore deposits, coal mines, limestone, a thousand miles of railroads, ore vessels on the Great Lakes, furnaces, steel works, rolling mills and other related interests. The value of the tangible property which was thus brought under the control of a single group of men was estimated by the United States Commissioner of Corporations at about $700,000,000. The company issued securities, however, to somewhat over twice this amount. In other words, about $700,000,000 of the capitalization was "water," that is, securities issued in excess of the value of the tangible properties owned. The prices paid to those who controlled the constituent companies were such as to make them multi-millionaires over night, and the commission given to the financiers who organized the Corporation was unparalleled in size, amounting to $62,500,000.
The appreciation of the value of the ore deposits controlled by the Steel Corporation later replaced some of the water in its securities, but in many cases no such process came about. Investors therefore discovered that the paper which they had purchased did not represent real property, but merely the hope of a company that its profits would be large enough to provide returns upon all its securities. One hundred of the leading industrial stocks shrank in value $1,750,000,000 within eighteen months. In the case of the Steel Corporation it was noticeable that its supremacy depended to a large extent on the possession of resources of ore on land much of which had originally belonged to the public, a fact which, the Commissioner of Corporations remarked, made the affairs of the company a matter of public interest.
The growth and consolidation which characterized the history of industry were also taking place in the railway system, although somewhat more slowly. It has already been noted that the length of the railroads had reached 160,000 miles by 1890. For the next two decades the rate of construction diminished slightly, yet the total in 1914 was 252,231 miles, and the par value of all railroad securities was estimated at $20,500,000,000. Nearly four and a half million persons, a railroad president estimated in 1915, were at that time interested in the industry as employees, as workmen in shops making railroad supplies, or through the ownership of stocks and bonds.
The management of the roads is, of course, continually changing; alliances are made and broken; groups form and dissolve. About the time that the United States Steel Corporation was being organized, however, about ninety-five per cent. of the important lines were in the control of six groups of influential persons, which were dominated by fourteen individuals. Each group had obtained the upper hand in the roads of one or more sections. The Morgan-Hill group, for example, held the Chicago, Burlington and Quincy, the Northern Pacific, the Great Northern, the Southern, the Atlantic Coast Line, the Erie and others, amounting to 47,206 miles. E.H. Harriman, chairman of the board of directors of the Union Pacific, succeeded in obtaining control of so many lines that by 1901 the Interstate Commerce Commission asserted that the consummation of plans which he then had in mind would subject nearly one-half the territory of the United States to the power of a single will. Before his death in 1909 he had obtained practical control of a system of roads running from coast to coast and passing through the most important cities of the country and had planned to continue indefinitely the process of acquiring new lines.
[Illustration:
Morgan-Hill railroads as listed shortly after 1900]
The concentration of the banking interests of the country went hand in hand with consolidation in industry and railway control. The unprecedented operations which have just been mentioned demanded unprecedented amounts of capital and credit, and the concentration of these necessities occurred in New York City. The Standard Oil group and the Morgan group dominated the banking interests to such an extent that it was doubtful whether any great business enterprise demanding large capital could be started without the aid of one or the other of them. Some years later a congressional investigation was started, to discover whether the control of a few men over the financial affairs of the nation amounted to a "money trust," and at that time it was found that the members of four allied financial institutions in New York City held 341 directorships in banks, insurance companies, railroads, steamship companies and trading and public utility corporations, having aggregate resources of $22,245,000,000.
The financial power thus placed in the hands of a small number of men was the cause of much legislation passed by the states and by Congress in connection with the railroads and trusts. Opinions varied widely in regard to the effects of concentration. On the one hand it was argued that the men of greatest ability and vision naturally came to the top; that industry received the necessary stabilizing influence; that production and demand were compelled to harmonize; that scientific research directed toward the discovery of new processes and products, and the better utilization of old ones could be successfully carried on only by concerns with large resources; and that efficiency and economy resulted from large-scale operation. On the other hand it was pointed out that a small number of persons who were responsible to nobody could dominate the fortunes of hundreds of thousands of wage earners, manipulate production, make or break a region or a rival, bring about financial crises and, in a controversy or for private gain, use a great industry or a railroad as a weapon and wreck it regardless of the welfare of the public at large.
Among the intellectual forces underlying American history after 1890, a prominent place should be given to the expansion of the public library, the growth of public education and the development of the press. Many libraries, of course, had been established long before the Civil War—the Library of Congress, for example, having been founded in 1800—but the great growth of the public library supported by taxation and open to all citizens alike occurred after 1865. Between that year and 1900 no fewer than thirty-seven states passed laws enabling the towns within their borders to levy taxes for the support of public libraries; private bequests amounted to fabulous sums, the outstanding example of which were the gifts of Andrew Carnegie, amounting to $62,500,000 between 1881 and 1915. By 1914 there were over 2,000 libraries containing at least 5,000 volumes, and forty that contained more than 200,000 each.
The significant features in the growth of education between 1865 and 1890 had been the improvement of the public grammar school, the establishment of high schools and the foundation of the great state universities. After 1890 the public high schools were greatly improved, business and vocational courses were added, and the enrollment at the colleges and universities received large additions. Such universities as that in Wisconsin exerted an unusual influence on intellectual and political currents in individual states.
A large proportion of the political, social and economic changes and reforms that have taken place in the United States since 1890 have done so because public opinion was educated, quietly influenced or noisily bestirred by the press. Governors and presidents appealed to their constituents through the newspaper and the periodical. Political campaigns have become increasingly matters of publicity; candidates for office have their press bureaus; corporations, abandoning their traditional policy of silence, explain their practices; and railroads defend their policies by means of advertisements in the newspapers. Newspaper correspondents go out through the country months before candidates for the presidency are nominated, and discover and publish sentiment favorable to the individual whom the particular organ desires to see placed in office. In 1918 the circulation of the daily newspapers amounted to approximately 28,000,000 copies for each issue. In the North, the Middle West, and on the Pacific Coast the number published was sufficient to provide every family with one copy. The South and the Rocky Mountain region were less well supplied. The great metropolitan newspapers circulate widely, not only in the immediate vicinity of the publisher's office, but over a wide area outside. At least one of them in 1918 approached half a million copies daily, another exceeded 800,000, and a third issued nearly three-fourths of a million on Sunday. William R. Hearst established a chain of newspapers which gave him an audience of over a million readers every day. Several of the weekly and monthly magazines circulated in hundreds of thousands of copies; and one weekly periodical which presented newspaper opinion of all shades of political partisanship had a circulation of 750,000 copies for every issue.