How New York’s stock went up

Thomas KESSNER sets out to tell the prehistory of New York City’s rise to pre-eminence as the capital of capitalism in “Capital City,” a well-crafted instance of what might be called “winner-take-all” history. The book has an air of inevitability: What happened had to happen. Embedded in this approach is a whiggish benediction: What happened not only had to happen but, after all is said and done, society is the better for it.

“Capital City” is among the most artfully constructed of the revisionist renderings of Gilded Age New York and in particular the men who gilded it. Once stigmatized as “robber barons,” earlier writers have told us they lorded it over a society notorious for its rapaciousness and callous indifference to the masses of less fortunate. The newer view is that they were instead master builders, agents of a historic transformation that turned America into a mighty engine of industrial and financial enterprise, material abundance and, a century later, the world’s unchallengeable hyper-power.

Kessner and others who take this approach duly note their character flaws: the predatory ruthlessness and money-mania, the insouciant disdain for constituted authority, the capacity for deceit and corruption, the wolfish appetite for public resources, the “nothing lost save honour” moral flippancy of a “Jubilee” Jim Fisk, the era’s most roguish railroad speculator. Recent tycoonography, however, treats these behaviors, once reckoned deplorable, as natural for their time, refreshingly candid and irreverent, necessary and even admirable in so far as they are credited with transforming by sheer force of will an agrarian, underdeveloped nation into a global economic colossus.

This is the approach adopted by Kessner, a history professor at the graduate school of the City University of New York, in his sprightly miniatures of men like Vanderbilt, Rockefeller, Carnegie, Morgan and even Jay Gould, widely known by contemporaries as the “mephistopheles of Wall Street.”

“Capital City” exudes a triumphalist air but is informative and insightful. It is fascinating to learn how early New Yorkers envisioned their imperial future. Blessed with an extraordinary harbor and a heterogeneous population for whom enterprise always took precedence over religion and other inhibiting traditions, the city’s antebellum merchant elite, its civic promoters and literary luminaries were predicting the city someday soon would contend with London for commercial supremacy. With the Erie Canal linking the city to the agrarian Midwest and the merchant banking establishment’s central role in the international cotton trade tying it to the South and Europe, such prophecies had a certain plausibility. Daniel Webster anointed New York the “Imperial City of the American continent” a generation before it emerged as the engine of the country’s transcontinental industrial explosion.

“Capital City” also reminds that the notorious Boss Tweed, who ran the metropolis during the founding era of crony capitalism in the “vanity fair” years immediately after the Civil War was more than a master of boodle. He left a legacy of public buildings, paved roads, street railways, new parks and piers, water pipes and sewage systems and a vastly expanded urban settlement. All this made him popular not only among businessmen and politicians whose rewards, legal and otherwise, were sumptuous but also among the hoi polloi who welcomed the jobs and other goodies handed out by the “Tweed Ring.” Tweed eventually went to jail. But his coalition of the avaricious and the merely hungry gets us closer to the more problematic heart of the book.

New York became the capital of capitalism, Kessner argues, above all because of Wall Street. It was there that all the nation’s great undertakings -- its coast-to-coast railroads and stupendous agricultural output, its gigantic steel, oil and raw material industries, its pioneering technologies in electricity and chemicals -- got alchemized. The city’s investment bankers and brokers turned this tangible wherewithal into its paper facsimile, a virtual economy whose very liquidity made possible the mobilizing of ever greater capital resources to further enlarge the scope, efficiency and power of the whole U.S. economy. New York became queen of American cities and soon assumed that position in the world because it was the financial locomotive pulling the nation forward into the modern age of corporate-finance capitalism.

Kessner notes how downtown became the gathering place not only for core commercial and investment banking institutions of the new economy but also for all those ancillary ones -- insurance companies, trust companies, law and accounting firms, advertising and marketing activities -- that quickly became vital components of the brave new world of the corporation. And it was the publicly traded corporation, midwived and directed by the city’s top-rank investment banks during the great merger movement at the turn of the century, that supplanted the family firm as the defining organizational form of 20th century economic life. So New York became the corporate headquarters of choice, outnumbering the next half dozen or so cities combined. Men like Andrew Carnegie and Collis Huntington, whose steel and railroad enterprises were hundreds and thousands of miles from the Big Apple, nonetheless directed their affairs from Wall Street, where all the critical capital transactions originated, where the best legal advice was available, where new sophisticated insights into cost accounting were devised and revised. Wall Street, that synedoche for the free market, turned New York into the nation’s “capital city” by putting an end to the internecine competition of the free market. In its place, the formidable financial and administrative structures of the holding company and the trust stabilized as they also dominated the marketplace.

Kessner discusses mid-level businessmen’s opposition to the rise of trusts, of farmers to the discriminatory rates of the railroads and what they deemed the New York banks’ usurious monopoly over the nation’s credit.Industrial workers opposed the draconian discipline, wage-gouging and union-busting of Vanderbilt, Carnegie and others. But “Capital City” offers two ripostes to the Gilded Age’s Dickensian reputation.

The first might be called the Tweed defense. It argues that most people, like Tweed’s lower-class constituents, were beneficiaries of the system and admirers of its continental accomplishments: Its taming of the West, its technological marvels, its cornucopia of material delights. Therefore, whatever opposition materialized was ephemeral, its significance exaggerated. Moreover, the opposition was, itself, retrograde and bound to die out.

Kessner rightly emphasizes that millions savored the nation’s spectacular economic achievements and idolized captains of finance and industry, some of whom began as little more than confidence men, but thanks to a combination of happenstance and temperament, morphed into tycoons. Businessmen -- not warriors, artists or statesmen -- emerged as that culture’s superheroes. But his assertion that opposition to Gilded Age tycoonery was fleeting relies on circular reasoning. Here, defeat becomes evidence of irrelevance and history as actually experienced is subordinated to the author’s meta-history.

Thus the various greenback-labor parties, the anti-monopoly movements, the violent clashes between Jay Gould and workers on his Western railroads, the Populist Party, and so on, were all but extinct by the turn of the century; evidence enough from Kessner’s Olympian perspective, that their roots were shallow. Moreover, even if many people were convinced the nation was in danger of fissioning into armed camps of plutocrats and the dangerous classes, none of that came to pass. That was history as they understood and lived it. But it is a blinkered history, not privy to Kessner’s historical subtext that all of this was never meant to withstand the inexorable logic of History.

When the opposition nearly undid the prevailing political system in 1896 and seemed to most people to pose a fundamental choice about the disposition of the nation’s wealth and income, Kessner depicts it as hopelessly regressive. In his treatment of Populism, he quotes from a barely literate Populist partisan to caricature the rural ignorance and backwardness presumably characteristic of the movement. In fact, whatever Jeffersonian nostalgia played out in Populist gatherings, the People’s Party platform called for the nationalization of railroads and public utilities, government agricultural price supports, the income tax and the direct election of the Senate, not exactly a “retreat from the new economy” and well in advance of anything on offer from the party of order.

Kessner’s second line of attack on the old notion of the Gilded Age as an era of prolonged class struggle is to argue there was no ruling class to struggle against. There were simply too many crosscutting interests even within the business and financial community -- not to mention the galaxy of divergent, even antagonistic religious, ethnic, ideological and social clusters within the ranks of the privileged -- for there ever to emerge something as coherent and purposeful as a ruling elite.

But the book offers equally compelling evidence that there was indeed an “Age of [J.P.] Morgan,” during which the tycoon and his conferees were fiercely determined that the crisis-ridden system of free market competitive capitalism -- wracked by chronic panics, mass bankruptcies and depressions -- give way to a more stable, managed corporate capitalism directed by an elite circle of investment bankers. They assiduously campaigned for and relished their victory in 1896. It banished their great fear of social upheaval and confirmed their overlordship of the political economy, not to mention their social and cultural preeminence. Even the efforts of Theodore Roosevelt to rein in the presumptuousness of this putative ruling elite went only so far until the Great Depression ended the Age of Morgan.

Indeed the triumph of the “Morganizers” paved the road to the disaster of 1929. But New York was still a magnificent city in the 1930s and ‘40s, a place of astonishing creativity and resilience, precisely because it was no longer in thrall to the “lords of creation.” Instead, Kessner’s master builders suffered the ignominy of public ridicule, their imperial rectitude and power in ruins. Today, New York reigns again as the “Capital City,” its triumphs of the last half century arguably exceeding those of the half century after the Civil War. Triumph, however, is neither as inevitable nor as salubrious as his book sometimes implies.