The Menace of Enormous Fortunes

CLEVELAND MOFFETT, IN SUCCESS February 1 1906

The Menace of Enormous Fortunes

CLEVELAND MOFFETT, IN SUCCESS February 1 1906

Five thousand men in the United States are said to own one-sixth of the entire national wealth and the holdings of these five thousand are rapidly increasing. The birth-rate among them is very low, so that the proportion of very rich men will be much smaller in future years. The question is what will these men do with their money. Is it to be spent for their own selfish pleasures or for the amelioration of the poor?

BEFORE taking up a consideration of luxury and want, it may be well to survey briefly the great fortunes that have sprung up so amazingly in this country during recent decades, and that to-day, in the opinion of many serious thinkers, constitute a menace to our national well being. Without these great fortunes there would be no reign of luxury in America, no flaunting of feasts and follies, no riot of extravagance. With them we may expect all the evils that have in previous civilizations attended upon enormous riches. And many of these evils, as we have already seen, are actually with us.

James Bryce, in the American Commonwealth, observes that up to 1830 or 1840 there were no great fortunes in America, few large fortunes and no poverty. But, writing of the later eighties, he says: “Now there is some poverty, many large fortunes and a greater number of gigantic fortunes than in any other country in the world.” That was twenty years ago! What would Mr. Bryce say today if he could read statistics showing that there are three million officially recognized paupers in the United States? That a million and a half children between the ages of ten and fifteen are employed in our mines and factories? That one person in every twelve who dies in New York city is buried in potter’s field?

As showing the rapid growth of individual fortunes in this country, there is interest in a list of rich men printed in 1885, according to which New York city at that time boasted only twenty-eight millionaires. And a pamphlet published some years earlier says that in 1845 Philadelphia could show only ten estates valued at a million or more, the richest being that of Stephen Girard, which reached seven millions. In contrast to which in 1892, according to another authority, there were then over two hundred millionaires in Philadelphia.

As to New York city, the number of its millionaires, according to best information, is more than two thousand, while the number of millionaires in the United States is at least five thousand, or half the total number in the world. We shall presently see what a huge part of the national wealth is possessed and controlled by these five thousand individuals. There is one family alone, at the head of which stands the richest and most powerful man in the world, John D. Rockefeller, and the wealth of this family is estimated at a thousand million dollars, a sum so huge that the human mind quite fails to grasp it, a sum so huge that if at the birth of Christ Mr. Rockefeller had begun making a dollar a minute and had let all these dollars accumulate day and night for all these centuries he would not yet, in 1906, have amassed a thousand million dollars. And if Mr. Rockefeller should to-day turn his wealth into gold coin and take it out of the country, say into Canada, he would carry across the border three times as much gold as would then remain in the United States.

Nor would he carry it himself, for the weight of it would be one thousand seven hundred and fifty tons. And if he loaded it on the backs of porters, each man bearing his own weight in solid gold (say 150 pounds), it would require twenty-three thousand men to move it. And if they walked ten feet apart the line would occupy fifteen hours in passing a given point, None of which takes any account of the daily interest on this fortune, which interest if paid in gold would require the strength of seven men to carry it, for it would weigh a thousand pounds. Such are the riches of a single family!

It may be asked how much reliance can be placed on this estimate of the Rockefeller wealth. Who knows that it amounts to a billion? May it not be half a billion or three-quarters of a billion? I can only say that prominent men, whose business it is to get at the truth in these things, have assured me that they consider a billion a reasonable approximation of the holdings of this family. They see nothing improbable in this estimate of a billion.

The editor of a conservative Wall Street publication says a billion; H. C. Watson, a statistical expert, says $1,000,000,000, and a well informed editorial writer in New York city says a billion. Another editorial writer, discussing this subject recently, estimated the yearly income of John D. Rockefeller alone, without counting other members of his family, at forty million dollars, which is the income on a billion at four per cent. At any rate, we may be sure that the billion mark will soon be reached, for the size of the Rockefeller fortune is scarcely more startling than the rapidity of its increase. Within a dozen years it has doubled and doubled again. In a single year (1901) it increased, counting income and enhanced values of holdings—I have this from a statistical expert—by not less than a hundred and fifty million dollars!

“But that was in a rising market,” some one may object. “In a falling market the fortune would decrease.”

Not at all. In a falling market the fortune would go on increasing, for these great masters of industry and finance have so perfect an organization over this country and the world and such sure sources of information that they really know the future and can operate with absolute certainty of gain, “catching it both ways,” buying or selling in a market which they have foreseen for months and usually control.

I asked a financial authority if it never happens that a man like Mr. Rockefeller makes mistakes in his investments and suffers loss.

He shook his head. “Almost never. And if it did happen he would probably save himself by making the loss only temporary. I remember a case where one of our great Wall Street figures, an enormously rich man, made a mistake in Sugar. He bought a hundred thousand shares at 130, expecting to make a quick turn, but the market dropped suddenly against him and continued to drop. Instead of taking his loss as a small man must have done, he simply paid thirteen million dollars for the shares, locked them up in his safe and forgot he had them. Sugar dropped to nearly 60, a loss of almost sixty points, or six million dollars, but the stock was in his safe, he said he would sell it, out at a profit, and six years later he disposed of it at about 160.”

Continuing our list of multi-millionaires and taking the nine richest Americans after Mr. Rockefeller, it is easy to see that these nine must have a billion among them, since Andrew Carnegie alone has more than a third of a billion and the other eight include Marshall Field, W. K. Vanderbilt, John Jacob Astor, J. P. Morgan, Russell Sage, J. J. Hill, Senator William A. Clark and William Rockefeller—which gives us two thousand million dollars for ten men.

And without mentioning further names, I offer the following estimate of the five thousand leading fortunes in the United States ; it is only an approximation, but it has been approved as reasonable by the statistical expert of R. G. Dun & Co. and by Byron W. Holt, editor of Moody’s Magazine, a monthly review for investors, bankers and men of affairs; also by several financial authorities in New York city to whom I have submitted it. I have seen higher estimates, but after careful consideration , I believe that this one may be accepted as well within the truth:

So that five thousand men in this country actually own (without counting what they control) nearly one-sixth of our entire national wealth, money, land, mines, buildings, industries. everything, which sixth if put into gold would give them all the gold in the world and leave more than nine thousand million dollars still owing them! All this for five thousand men, absolutely theirs, whether they work or not, whether they deserve it or not, whether they use it or not; all this in a land where, according to Waldron’s “Handbook of Currency and Wealth” (p. 98) “More than four million families, or nearly one-third of the nation, must get along on incomes of less than $400: more than one-half the families get less than $600; two-thirds of the families get less than $900, while only one in twenty of the nation’s families is able to obtain an income of over $3,000 a year."

It is interesting to consider how much richer the rich will get, and I may remark here, that there is no need to inquire how much poorer the poor will get. If they are to live at all they can not get much poorer. What greater burden of poverty can be put on the four million American families who to-day with their best toil can gather less than $400 a year? What more can we take from them than we have already taken? The Massachesutts Bureau of Labor has collected statistics showing how these poor families spend their pitiful incomes. It appears that $3.88 each week goes for food. Shall we cut that down? Or shall we cut down the $2.91 a month they spend for clothing? or the $7.50 a year they spend for furniture and household furnishings? or the $7 a month they pay for foul dark rooms in a tainted tenement? Think what it means to support a family in a city on $400 a year, to bring up children, to provide for sickness, to furnish pleasures on $400 a year!

And these are not the poorest of the poor; these are self-respecting laborers, producers of the national wealth. There are millions of others whose lot is worse than theirs—ten million, Robert Hunter estimates, in helpless poverty, out of work, out of health, out of heart, with the world, broken driftwood, vagrants, tramps — what shall we take from them?

So the question simply is, How much richer will the rich get? Will any limit be set to these vast fortunes? Are billionnaires to become as abundant in the twentieth century as millionaires were in the nineteenth Why not? We have scarcely scraped the outside crust of our national resources. What our land and industries produce to-day is nothing to what they will produce, and our present population is only a small part of what it will be. By 1960, we are assured, the national wealth that seems so enormous now —say a hundred billions in 1905—will have increased to nearly a thousand billions, and by 1990 to more than two thousand billions.

Such are the conclusions of experts in financial statistics, who also say that under the present competitive system nearly two-thirds of this vast increase in our national wealth will be permanently absorbed by a few thousand very rich families. Which means that whatever may befall individual millionaires or individual sons or grandsons of millionaires, the rich as a class will continue to grow richer, much richer, so that in thirty or forty years, under existing conditions, the five thousand richest Americans instead of having fifteen billions between them, as to-day, may have fifty or a hundred billions. And still the mass of the people will have practically nothing, still hundreds of thousands with bitter toil will barely secure the necessities of life and millions will be crushed and broken in the struggle.

So, if present conditions continue, one looks ahead vainly for some brightening in the picture of our poverty and wealth, our misery and affluence, our luxury and want. Things will be worse, not better, and every year will show a more painful contrast between the few that have everything, and the many who lack everything. Ponder these words from that hard financial compendium of Waldron’s, already quoted (p. 102); — “Little wonder, then, that the rich are rapidly growing richer, when, but one-twentieth of the families, they are receiving one-third of the nation’s annual income and are able to absorb nearly two-thirds of the annual increase made in the wealth of the nation.” Think what that means to the poor!

What it means to the rich is that they will find it more and more difficult to spend their enormous incomes, and will set a faster and madder pace of luxury and extravagance. All the signs point that way, and, after all, what else can they do with their money? They cannot eat it or hang it around their necks (except some odd millions in trinkets), or buy seats in heaven with it. There is nothing to do but flaunt it before the nation in palaces and gorgeous fetes, in costly laces and plates of gold, in furious follies that seem to cry out;—“Se, we are rich, rich, rich, and you are poor.” Nor can any man say what will be the echo of that cry!

Sixteen years ago, Thomas G. Shearman, a distinguished corporation lawyer, and brilliant writer on economic questions, prophesied that “within thirty years the United States will be substantially owned by less than one in five hundred of the male population!” Nor is evidence wanting that his words are coming true. The land in the country is still widely owned, although hundreds of millions of its acres, grazing lands, timber lands, mineral lands, have been shamelessly stolen in land grants find land grabs; but the farmers and small producers are absolutely at the mercy of the railroads, which, with their two hundred thousand miles of tracks, their capitalization of over twelve billion (par value) and their army of five million people dependent on them for a livelihood, are practically controlled by nine men —John D. Rockefeller, J. P. Morgan, E. IT. Harriman, George Gould, W. K. Vanderbilt, J. J. Hill, A. J. Cassatt, W. H. Moore and William Rockefeller.

And John Moody, in his exhaustive and authoritative work, “The Truth About Trusts,” finds that in the United States to-day there are 440 large industrial, franchise and transportation trusts, with a capitalization of more than twenty thousand million dollars, which, says a Wall Street paper, is “one-fifth of the wealth in the country and the most powerful part of it, for it is wealth under such concentrated control that it practically sways the whole.” And Mr. Moody concludes that a score of men practically control this twenty billion dollars, which is the aggregate of our manufacturing and transportation resources. They control the avenues of distribution and the agencies for transforming raw material into finished products, so it is plain that these twenty men— Rockefeller, Morgan, Gould, Harriman and the rest—indirectly control nearly all the remaining wealth in the country, since whatever comes out of the ground or is fed by it must pass over their lines of transit and through their factories (and at their terms) before it can get from the producer to the consumer. These are signs of the times!

And, speaking of the assorption of our national wealth, think what a great part of it will go to one man. John D. Rockefeller, if he can escape the threatening tomb for even a score of years. Let us assume that he is able, after paying his modest living expenses, to save forty millions or fifty millions a year, which is the same as leaving a billion dollars to accumulate under his marvellous direction. In seven years his billion will double (no banker questions this), so that in 1912, if he lives, he will have two billions, in 1919 four billions, in 1926 eight billions, and he will still be a younger man than Russell Sage is to-day!

A still more startling conclusion is reached if we give rein to our fancy and imagine John D. Rochefeller fifteen or twenty years hence leaving $6,000,000,000 or $8,000,000,000 to a son or grandson possessed of his own great force; in other words if we imagine him perpetuated in his descendants, say for forty or fifty years. The Rothschilds in Europe prove that such powers may be perpetuated and that such a purpose of wealth accumulation may be steadily pursued for generations. Of course this happens very rarely, but America has outstripped Europe is so many things that it is interesting to consider what would result if she should outstrip her also in producing a great line of hereditary money kings. And if you should set $6,000,000,000 or $8,000,000,000 doubling every seven years for a single family—well, think of it!

We shall come presently to the sons of our multi-millionaires and consider what manner of men they are and what likelihood there is that they will make aggressive use of their vast inheritance and increase rather than squander them. For the moment we may note that our very rich families are very unprolific and that the question of virtues or follies in future sons is often superfluous, since there are none. Thus Andrew Carnegie has no son and only one daughter, so his hundreds of millions will start no line of Carnegie kings. Russell Sage has neither son nor daughter and his fortune will be scattered among strangers. Leland Stanford had only one son and he died. C. P. Huntington had no children.

And three of the younger Rockefellers, although married for ten years or more, have no children. So we might go on through the list of millonaires, and while we should meet with some exceptions, like William H. Vanderbilt, with eight children; George Gould, with six, and J. P. Morgan, with four, we should quickly establish the fact that the average number of children in our very rich American families is far below the general average; instead of approaching four it would probably not reach two. And I have it on the authority of Dr. Guilfoy, registrar of vital statistics in New York, that the Fifth Avenue residence section where our mutli-millionaires live shows by far the lowest birth rate of any other section in the city. I may add that a doctor of great authority on this subject assures me that as riches increase not only is there a rapidly diminishing number of births, but there is an increasing number of crimes against birth. Probably this is a new and it may be a passing condition, for we are told that seventy-five years ago rich New Yorkers were accustomed to have large families. Thus we read in “New Yorkers of the Ninetenth Century," that Colonel Nicholas Fish and Elizabeth Stuyvesant had five children and fifty-nine great-grandchildren, that Colonel William Duer and Catherine Alexander had eight children and one hundred great-grandchildren, etc. Which clearly shows how things have changed since then in the fashionable set!

A recent writer in the Contemporary Review gives figures that show strikingly how unfruitful is the rich American woman compared with women from the British colonies. He drawls up a comparative table thus: So it appears that the American women thus imported into England have given birth to an average of only 1.4 children, against an average of 2.8 for their colonial sisters. And we know that small families are by no means the rule among English ladies. Did not Queen Victoria herself set the fashion of large families with four sons and four daughters? And did not the Duchess of Abercorn, who died recently, have seven sons and seven daughters? Did not her eldest son have seven sons and two daughters, and her eldest daughter eight sons and five daughters, and her second daughter nine sons and three daughters? If our multi-millionaires, had families like these there would be less danger of the stock dwindling away and perishing!

The above are influences that make for the disintegration of our great fortunes; there will obviously be no money kings in families that die out, nor will the millions diverted to Europe by sons and daughters of the rich ever menace American institutions. But there are millionaire families that do not die out and sons of the rich who stay in America, quietly or restlessly, with the burden of fifty or a hundred millions on their shoulders. What about these sons, these princes of our money aristocracy? How much chance is there that one of them will develop the genius of the founder of his line and instead of squandering millions will accumulate tens of millions, instead of living in useless luxury on his income will prove himself a force in the industrial and financial world, a man able to fight and conquer like his father or grandfather? How much chance is there of that?

It goes without saying that there are millionaires' sons possessed of force and virtues, men like Graham Stokes and the late Norton Goddard, who led useful and admirable lives.

Many of them, on the other hand, are insignificant figures without talent or serious purpose—idlers and triflers quite content to be pleasant fellows at the club, good sports at the race track; and many of them are shamefully and stupidly wasting their opportunities. Think of James Hazen Hyde with his $50,000 private car and his foolish French ball! Think of young McCurdy, "Prince Robert,” spending $500 a week on personal traveling expenses.

It may be objected that these young scions of millionaire lines have a perfect right to dispose as they please of their fortunes and their lives. If they choose to follow the unprofitable ways of steam yachts and motor cars, why, after all, this is a free country. To which we might reply that no man has a moral right to squander millions on show and selfish pleasures while thousands of his fellow men are perishing of want, while tens of thousands by their utmost labor and pain can barely secure the necessities of life. Remember the vast toiling army enslaved in our factories and mines, men, women and children, millions of them, giving the strength of their bodies and the hope of their souls that a few thousand rich men may draw handsome dividends on investments, dividends which they have done nothing to earn and which it bores them to spend.

A second point is that no man has a right to demoralize his fellow men by setting them an example of extravagance and folly, by instilling in their hearts the seeds of envy and discontent, not to say hatred. Of course if our multi-millionaires insist on being mere amusement seekers, money flaunters, we cannot make them otherwise, but we can at least let them know how right minded citizens regard them — that is, as harmful and vicious influences, enemies of the State.

Finally there is a special reason why we may express ourselves frankly about these enormous fortunes and the manner of their getting, we can usually trace back their sources to dishonesty, monoply or unfair privilege. Is it possible for any man to earn several hundred million dollars without one of these three to aid him? How many of our huge fortunes rest simply on high tariff favoritism? How many of the discriminating rates of railroad companies, which, says Henry George, Jr., in his “Menace of Privilege,” have become “organizations for public plundering and monoply breeding?” Did not William J. Gaynor, Judge of the Supreme Court of New York, recently declare that favoritism in railway freight rates is “the greatest crime of our day and generation, a crime that has crushed and beggared thousands all over the land, a crime so infamous and heartless that we will be looked upon as a generation lost to moral sense for having allowed it so long?”

Let us now return to our inquiry whether it is likely that among the sons of our multi-millionaires, there will presently arise a master spirit, one able to make formidable use of his opportunities. Think what our industrial magnates, our great merchants and bankers would accomplish if they could take control of their vast enterprises with the strength of youth! But their sons, for the most part, prefer polo playing and cross country riding or art dabbling in Paris, or the excitement of race tracks and divorce proceedings!

Indeed, it seems that the burden of inherited millions is too heavy for most of us, and it is far more likely that these unfortunates of the second and third generations in millionaire descent, victims of conditions, slaves to temptations—far more likely that they will destroy themselves, than greatly injure this republic, except as their example in extravagance will injure it. But this is a most serious point, a most real injury, for there is no end in sight to the reign of luxury and show that is year by year exalting itself in this land.

It may be said that spendthrifts will soon wreck and scatter their fortunes, but others will take their places; besides, it is not so easy, even with most amiable intentions, to wreck and scatter fortunes that automatically bring in two or three million dollars a year, fortunes in first class securities or New York real estate, fortunes that accumulate resistlessly as the country grows. A very foolish dictum is that of three generations from shirt sleeves to shirt sleeves if applied to such conditions. Indeed, with their utmost extravagance and vanity, with palaces here and castles abroad, with twenty thousand dollar balls and hundred thousand dollar rugs, with all the endless ways that fashion and folly have devised for wasting millions, it is still very difficult, often impossible, for the sons and daughters and wives of our multi-millionaires to spend even their incomes. So the reign of luxury must continue.

As a last word let us note that there is always a chance that this most unlikely thing will come about. I mean the sudden emergence into a first class power of one of these multimillionaire sons or grandsons. Already several of them have developed conspiciouslv accumulative force. Thus William H. Vanderbilt increased the ninety millions of his inheritance to two hundred millions. And J. P. Morgan has certainly surpassed his father, Junius Morgan. And August Belmont and William R. Hearst are abler men than were their fathers. And Philip Armour was a less formidable force than his son, who now towers at the head of the Beef Trust, and J. Ogden Armour, than whom, says Charles E. Russell, “no more extraordinary figure has ever appeared in the world's commercial affairs, nor has any man, not even Mr. Rockefeller, conceived a commercial empire so dazzling."

Extraordinary happenings are always unexpected, yet once in a century or so, like the advent of a mighty conqueror or reformer, they do come to pass. And if there should arise in this land a man of thirty or forty, who, starting with two or three billions (owned or controlled by him), should be great enough to brush aside the trammels of idolence and temptation, great enough to see that never in modern times has there been offered to a man, not even to Napoleon, so stupendous a chance as this to - wield absolute despotic power, great enough finally to use his two or three billions to its full potentiality, then—well, there would surely be interesting history made in that man's lifetime. We have had iron king's, railroad kings, copper kings, sugar kings and others, but there is one kind of king we have not had yet. A real king? Yes, for how long, pray, would this Republic stand against the aggressions of such a man, a great minded despot without conscience or bounds to his ambition, one in comparison to whom our Rockefellers and Morgans would seem like blundering beginners?

Already our millionaire magnates have begun to buy our courts and legislatures, to corrupt our cities, to debauch the public conscience. He would finish the work and do it thoroughly, he would make the laws, own the newspapers, subsidize the churches and colleges, mould public opinion, direct the machinery of justice, control the industries, the banks, the insurance companies, the conditions of labor; regulate supply and demand, fix prices, absorb profits, centralize everything, be everything. Why not? Even as things are, has the world any king more powerful than J. P. Morgan or John D. Rockefeller? Remember how Europe cringed to Mr. Morgan at his last visit, with Emperors seeking his favor and princes waiting at his door! A real king? Why, we practically have two of them already.

Whatever happens, then, there is peril in the existence of these enormous fortunes, peril to the possessor through the corroding blight of indolence and vanity, peril to the people through the example set them of luxury and extravagance, peril, finally, to the State if some surpassing money lord shall presently arise and with his vast resources work the undoing of this Republic. “A triumphant plutocracy," says E. J. Shriver, “has enslaved the vast body of our people ; and unless there is some relief its weight will crush the bearers of the burden, or the uprising of the latter will wreck the Republic and bring such chaos as France saw in 1789.'’

And Russell Sage, certainly a conservative authority, recently denounced the further consolidation of industry and predicted that if this continues, “the result will be widespread revolt of the people and subsequent financial ruin unequalled in the history of the world."