Do you remember when retailers used to give away things in order to promote customer loyalty? If you filled up your tank at a particular brand of gas station you would get, say, a drinking glass with a cartoon character on it.
Consumers were encouraged to collect all eight glasses, so that they would have Snow White and the Seven Dwarfs, or whatever. The problem, from the customer’s standpoint, was that you didn’t get to choose which character you got, so you would end up with 10 Sleepys and no Sneezys. The cynical among us always suspected that the oil companies did that on purpose.
Although gas stations had the most visible and highly advertised loyalty programs, other retailers had programs of their own. The supermarket where my mother bought groceries, for example, had one that I particularly appreciated.
Whenever she bought a certain amount of food, she would get one volume in whatever set of books the store was featuring at the time. The only problem was that she would only get a few volumes out of a 20-volume set before the store would move on to a new one.
So I got bits and pieces of several different sets, but my favorite by far was the American Heritage “New Illustrated History of the United States.” The three volumes I got were about the Revolution, World War II, and the Age of Steel. The first two were very popular topics for me, but until I got the book I wasn’t really aware that there was an age of steel.
The title referred to the industrialization of America, which took place from roughly the end of the Civil War to the end of the 19th century. A lot of things were made out of steel, of course, but the book makes clear from the front cover onward that there was one vital steel structure upon which the history of the era was dependent: the railroad.
Railroads got their start in the early 1800s in England, and the idea was quickly transported to the rapidly expanding U.S. By the 1830s, a myriad of small railroad lines were taking over the transportation of people and products, putting canal boats and stagecoaches out of business. There were more than 30,000 miles of track in place by the time the war started, and Lincoln would greatly expand the network by passing the Pacific Railroad Act in 1862.
After the war, a self-made shipping magnate named Cornelius Vanderbilt started buying up the rail lines around his native New York, merging them all into a behemoth called the New York Central Railroad. He is generally considered the first of what we now refer to as the “robber barons,” with an estate valued in today’s dollars at $250 billion.
His son William expanded the business even further, bringing the Vanderbilts into conflict with famous financiers such as Jay Gould and James Fisk, and later with railroad titans Edward Harriman and James J. Hill. Those battles were so large that they sometimes drew in the great tycoons from other industries, men whose names still resonate today.
One of those was Andrew Carnegie, the steel magnate, and another was the banker J.P. Morgan. Still another was the wealthiest robber baron of them all, John D. Rockefeller.
At the dawn of the 20th century, Standard Oil controlled over 90 percent of the U.S. oil business, providing Rockefeller with a personal net worth approaching a half trillion dollars. The richest individual in modern history didn’t own the railroads, but he certainly depended upon them.
If all this is starting to ring a bell for you, it does for me as well. We are living through an era right now that is in many ways similar to that of the robber barons. Once again, the boom was started by the construction of a network that connects most of the people on the planet, both socially and commercially.
In this case the pathways aren’t made of steel, or even wire anymore, but the flow of electrons through space. There seems little choice but to call it the Electronic Age.
So who are the new robber barons? The first two are generally thought to be Bill Gates and Steve Jobs, neither of whom relied upon the internet for his initial business model, but both created products that became an integral part of it. The more recent additions to that club are more clearly internet players, including Mark Zuckerberg of Facebook, Jeff Bezos of Amazon, and Google cofounders Larry Page and Sergey Brin.
Like their spiritual forebears of the Gilded Age, all of these entrepreneurs have retained personal control of their companies, and all have sought to control their industry by acquiring or destroying their competitors. Though none were the first to market in their segment, Amazon now has 38 percent of ecommerce, Facebook has 70 percent of social media, and Goggle has 92 percent of search.
On June third of this year, The New York Times published an article entitled “Antitrust Troubles Snowball for Tech Giants as Lawmakers Join In,” which reported that the federal government is investigating four of the most powerful new-age companies for violating antitrust laws. In order to manage such a monumental effort, two agencies have divided the task, with the Justice Department taking on Apple and Google while the Federal Trade Commission tackles Facebook and Amazon.
The article indicates that some sort of prosecution, and even possibly a breakup, of the four companies is likely because the issue is one of the few things in which there is a general consensus among the public, the president, the Congress, and the 20-some Democrats running for the presidency in 2020. It seems that nobody likes a monopoly.
Any case against the tech giants would depend upon the Sherman Antitrust Act, which was passed by a nearly unanimous vote of Congress in 1890 in order to curb the power of the original robber barons. It prohibits “contracts, combinations or conspiracies … in the restraint of trade or commerce.”
The problem with that law is that it was rather vague, and failed to define terms such as “monopoly.” In its first decade it was used more against the labor unions than it was against corporations, but eventually it grew teeth, and by 1911 it was strong enough to break up Standard Oil.
Over the years, the rule of thumb became that size alone was not a sufficient reason to break up a company. The company had to be shown to have used its size to stifle competition, and ultimately to harm consumers. That may be difficult in the case of Facebook and Google, which provide their service to consumers at no charge.
Nonetheless, there is momentum building, with even the cofounder of Facebook advocating a breakup of the company. Such an action would potentially have a major impact on small businesses such as yours and mine, and that would be in keeping with the courts’ attitude toward monopolies. In 1956, the Chief Justice of the Supreme Court, Earl Warren, wrote that the priority in antitrust actions should be “the protection of viable, small, locally owned businesses.”
By the way, in leafing through my old book about the Age of Steel, I noticed that there were three dominant issues in the political discussions of the late 19th century. They were tariffs, immigration, and income inequality.
You can e-mail Kevin at email@example.com.