American Economy and the End of Laissez-Faire – 3 of 13 – The Decline of Laissez-Faire

The American Economy and the End of Laissez-Faire: 1870 to World War II

3. The Decline of Laissez-Faire
Lecture by Murray N. Rothbard

Economics is a constant fight between the market and the government. The railroad cartel did not work against the free market even with ideal conditions. Airlines were tightly regulated until the small airlines began to compete in quality. Deregulation followed. Cleveland deviated from laissez-faire because of Morgan interests.

After the Civil War, manufacturing thrived – our own Industrial Revolution was underway. Prices fell. Savings rose. Capitalists owned the machinery so the workers no longer had to. The factory system enormously increased productivity.

Corporations are legitimate as libertarian entities. Industry made petroleum a natural resource.

Lecture 3 of 13 presented in Fall of 1986 at the New York Polytechnic University.

This lecture as a Podcast: http://enemyofthestate.podomatic.com/

Sourced from: https://mises.org/library/american-economy-and-end-laissez-faire-1870-world-war-ii

Source: American Economy and the End of Laissez-Faire – 3 of 13 – The Decline of Laissez-Faire – YouTube

http://www.readrothbard.com/american-economy-and-the-end-of-laissez-faire-3-of-13-the-decline-of-laissez-faire

TRANSCRIPT

00:00
here we saw a situation well seem to be
00:02
an ideal setup for a cartel we had three
00:05
railroads knowing a key area from
00:07
Chicago to Omaha really Union Pacific
00:12
had its eastern terminus there were two
00:17
free railroads
00:19
two of which are owned by the same guy
00:21
if they had something like that and
00:26
these two guys then got together and
00:27
formed a cartel and said okay we’re
00:29
cutting the shipments will raise the
00:30
freight rates and the either something
00:32
won’t be able to do anything about it
00:33
they’ll be stuck and we saw it started
00:38
in 1870 we saw that even under these
00:41
ideal situations the cartel was smashed
00:44
I happen to repeat is that we Pacific
00:49
ganna look around for ways of getting
00:51
around this and they they finally put
00:54
together a discover there’s another
00:56
Burlington system which ran all the way
00:57
down to st. Louis and up and dealt with
01:02
them and it thereby breaking the cartel
01:04
even though of course it was a longer
01:06
route what’s the seize assist rear
01:09
arrows are charging a much higher rate
01:11
than before it paid for them to go look
01:13
around and get organized and get
01:16
together with these st. Louis guys
01:17
northern undercut a cartel the Iowa pool
01:20
yeah I will pool last only about six
01:22
years and by the 1876 or so the whole
01:26
thing was busted there’s a big rate war
01:27
and as I said even before that there was
01:29
competition between even the same
01:31
railroad they were owned by the same guy
01:32
as a sales vice president for
01:34
undercutting the rates anyway but when
01:37
they when the st. Louis system was used
01:39
just cut undercut the whole cartel so on
01:42
a free market a cartel does not work
01:44
cannot work even in the situation we
01:45
have only a couple of railroad in a
01:47
seemingly ideal situation for cartellis
01:52
the same thing happened with the big
01:55
four big five so-called trunk lines the
02:02
the trunk lines worthy of the thing I’ve
02:04
mentioned already but it’s repeated so
02:06
full of pump lines were basically the
02:07
basic lines to Chicago from Chicago to
02:11
eastern seaboard
02:13
in other words that were originally for
02:15
competing railroads the New York Central
02:17
which went to Buffalo and then Albany
02:22
and down in New York City the the Erie
02:28
Railroad I think went to Iowa or
02:31
something like that and the Pennsylvania
02:37
Railroad which went to Philadelphia note
02:40
the Philadelphia New York City of
02:41
competing for mid east-west trade and
02:45
the Baltimore in Ohio and last one going
02:47
to Baltimore the you know and I think I
02:54
think boy of mine was the last one to be
02:57
built at least for thing was built 1874
03:00
that was the final final building of be
03:03
a no so the oles railroad competed and
03:05
they tried to get together and have a
03:08
cartel and they would first of all it
03:11
took them a long time to organize I
03:12
mentioned before each one want to have a
03:15
different pricing system New York
03:16
Central had an easier gray they want to
03:18
do it by grades or whatever so finally
03:20
they got together they make some kind of
03:21
quota system in other words they agree
03:23
or the trunkline cartel system is cool
03:26
the Seaboard agreement and say yes they
03:34
are hey well here’s what we’ll do we
03:35
have we’ll have a don’t forget a
03:36
thousands literally thousands of rates
03:38
all sorts of things they have a very
03:39
complex system here aside to have a
03:42
quota system they’ll have a one-time
03:46
they had a quota system Erie will take
03:48
one-third of them of the business and
03:49
New York Central once they’re at
03:51
Pennsylvania a quarter and B&O; 10%
03:53
something like that and they have to
03:54
then they have to have some core of
03:56
internal policing agency there we
03:57
regulate this so they had a guy they set
04:00
up a whole association because it was
04:03
not illegal then whole association to
04:05
regulate this to run at representatives
04:07
and whole whole internal bureaucracy
04:09
they picked the guy with a German
04:10
engineer railroad engineer came over he
04:12
became a professional car tellest name
04:15
was albert think and he baqia he wound
04:21
up as a head of a whole bunch of court
04:22
tell railroad cartel association
04:24
south from the east and the west later
04:25
on he became a professional railroad
04:28
cartellis and his job was the trial
04:31
police the agreements and trying to make
04:33
sure that nobody cheats and all that
04:35
sort of stuff and there’s also put
04:39
together helping these four people put
04:42
together was more JP Morgan than company
04:43
in a Drexel Morgan was now become
04:45
assisting panic of 1873 became the big
04:47
investment banker
04:48
Morgan was heavily invested in railroads
04:50
and underwriting railroads and he he
04:52
gets all these guys together to arrive
04:54
at the cartel so he have his partner
04:57
partner Anthony Drexel still have those
05:01
big name in Philadelphia Columbia and
05:03
Wall Street and JP Morgan himself was
05:07
the son of a British banker who also had
05:09
important connections he didn’t start
05:10
off on the ground off he stole off of a
05:12
wealthy and important banker English
05:15
banker father named genius Morgan anyway
05:17
pretty soon Morgan became the senior
05:19
partner here became the dominant force
05:21
so Morgan in direct forget then if they
05:23
get these guys they’d whip them into
05:24
shape okay let’s have a cartel great
05:25
great but it’s very difficult you have
05:27
to agree on a quota they always wanted
05:28
to change the quota if you have a quota
05:30
system you’re in a business or in a
05:32
railroad next year when a code of the
05:35
cartel agreements say glass for a year
05:37
or two you want to change the quota not
05:39
like I have a more efficient since I got
05:40
a better product I got a better machine
05:42
why should I be stuck with a damn
05:44
quarter that was I was engineered in
05:46
assigning two years ago you’re trying to
05:48
reopen the quota system get a larger
05:49
quota constant fights among the
05:52
railroads and Salazar but uh between
05:53
where was or any other business any kind
05:55
of business you kind of have a I have a
05:57
cartel agreeing there’s a constant
05:58
argument about quotas because everybody
06:00
wants to produce more every firm
06:02
whatever it is more every where I want
06:03
the ship more and always always kicking
06:06
at the quarter no like and I should have
06:08
more of a quarter I got a better machine
06:09
now I got a better product
06:10
I even fight a little better quota the
06:11
other guy says no no you’re not so any
06:14
right you have endless bickering and
06:16
endless opportunities for the whole
06:18
system of collapse the whole cool the
06:20
system would collapse in the criminais
06:21
ssin any rate what would happen they
06:23
have a sign of quota they have the
06:24
agreement then it would then would go
06:26
bust and they’d be cheating and whatever
06:29
and literally the system only lasts for
06:31
a year the 1877 pool seaboard agreement
06:34
I answer for about six months and then
06:36
y’all get
06:37
laughs again they have another quota
06:38
that we even they reorganize the quotas
06:41
the guys don’t look like like new summit
06:43
agreements no no the next six months
06:45
later the whole thing collapses in the
06:47
case of the trunk lines it’s something
06:49
else happened namely because of the
06:52
increased profit so because of the
06:53
expected increased profits because of
06:55
the cartel a new where I developed the
06:57
new trunk line the grand I mentioned
06:59
already before the Grand Trunk which
07:02
goes to Chicago to Boston su camión
07:04
around Canada and it wasn’t part of any
07:08
agreement what do you do with crummy
07:10
grand choice the Grand Trunk was
07:11
inefficiently or a managed they were
07:13
constantly cutting rates they’re nothing
07:14
to lose in a sense they were constantly
07:16
the edge of bankruptcy you have to
07:18
realize another thing about bankruptcy
07:20
most people to think I’ll come back to
07:24
this again later because most people
07:26
think example is easy to get another
07:27
amount of business you you let’s say you
07:29
have a big business have a small
07:30
business small firm it’s easy to get the
07:33
fourth the other guy you undercut the
07:35
rate of a price war you go down almost
07:37
zero the other firm goes bankrupt and
07:39
then you raise the price it doesn’t work
07:41
that way because even if you do that the
07:43
other firm goes bankrupt bankrupt plant
07:45
does not disappear doesn’t go up and
07:47
with no smell that’s still there if you
07:49
raise the price in your profits go up
07:50
against somebody else buys a bankrupt
07:52
firms assets it comes in with no cost
07:54
great position undercut the bigger firm
07:56
again the bankrupt this cuz this does
07:59
your go bankrupt doesn’t mean the plan
08:00
disappear it’s the layer if a bank of
08:03
you can buy it for sewing your mail but
08:04
a new kind of a businessman you know are
08:06
still competing once again this is what
08:08
happens a constant attempts to establish
08:10
this kind of a cartel accustomed
08:12
specially going bust so the Grand Trunk
08:15
comes in an old bets are all off and
08:16
they and what they want but they when a
08:18
new cartel firm always says ok cut us
08:20
into the give us a credit system I can’t
08:22
do that they’re already think I’m not
08:24
producing enough but not shipping enough
08:25
I can’t get it they can’t strip their
08:27
own quota by 10% and make room for those
08:29
over and shrunk so the whole thing
08:31
collapses once with once again the same
08:34
thing happened the Western Railroad they
08:36
find have a cartel usually think of the
08:37
head of it and again it doesn’t work it
08:40
finally thinks says he makes a statement
08:44
as early in 1876 after a few years
08:46
experience with her
08:47
he says he thinks about this and he says
08:52
quote whether this cooperation can be
08:55
secured meaning a card card my voluntary
08:57
action of the transportation company is
08:59
that fall governmental supervision and
09:02
authority may be required to some extent
09:04
to accomplish the object in view and as
09:07
he keeps going kick more this position
09:09
we got to have the government to enforce
09:10
the cartel cartels won’t work on the
09:12
free market and says he’s in favor of a
09:14
cartel except he says you have to have
09:16
governmental action state and then look
09:18
federal sea state is okay but states
09:20
only are interested for railroads or go
09:22
throughout the whole country can’t
09:23
really do much in a state action
09:25
although then you start having state
09:27
commissions by 1856 uh and what he says
09:32
is that by 1879 he works out a whole
09:34
proposal thank you he says we needed a
09:37
federal law the federal Commission of
09:39
course to regulate it doing the
09:41
following things and somehow to outlaw
09:42
railroad rate discrimination by
09:47
discrimination for the fancy words of
09:48
saying changes in rates cutting a rate a
09:52
rebate charging less for a long haul and
09:57
short halt because the you know you have
10:01
one lower fixed cost per unit you’re
10:04
having a longer ride this is other words
10:06
these the way you compete railroads
10:08
compete by discloses remain on call by
10:10
having giving discount for a longer live
10:12
giving discounts for for a fuller car
10:15
instead of having to load up my car
10:16
every we’ll call it fee for a thing
10:18
giving discounts for cut low to get more
10:21
customers outlawed these are ways in
10:23
which in other words the government can
10:24
enforce a cartel
10:25
I will extermination outlaw secret
10:28
rebates remember the Sikh Arabia is a
10:30
key here because this is the way cart
10:32
tell us undercut their opposition they
10:34
break the cartel by quietly without
10:36
fanfare
10:37
giving a rebate to a shipper in order to
10:39
get shipment in other words giving a
10:41
discount
10:41
it’s secretly I want to tell your
10:43
competitor about it because then he’ll
10:45
break the agreement so and talk a lot
10:50
about compulsory publicity via sounds
10:52
Democratic in other words you put it in
10:54
such a way you sucker in the public and
10:56
is thinking you’re doing something in
10:57
favor of competition
10:59
we want publicity oles gimme all these
11:02
guys are war cartels saying when will we
11:05
want we don’t want food regulation we
11:07
don’t want the yeah I see the Fair Work
11:10
Commission a set rate we want them out
11:12
to have compulsory publicity so the
11:13
public will know what’s going on but it
11:14
will probably never know what’s going on
11:15
their arms you know what they don’t need
11:17
to know the internal processes of the
11:20
corporation what they really meant was
11:21
they want every railroad to know what
11:23
their competitors are doing for making
11:24
four and fourths we wouldn’t wouldn’t be
11:26
any secret price cutting they’re gonna
11:28
force a cartel agreement he also wanted
11:32
a federal Commission to enforce it okay
11:36
and to arbitrate and also to ratify to
11:42
have the railroads get together and make
11:44
decisions about race and have the
11:45
government enforce it government
11:47
Commission ratifying rates under
11:54
following uh agreements and we’re rate
11:57
agreements oh this is basically what
12:00
happens is precisely this this plan of
12:02
thing proposal in 1879 was precisely
12:05
what the government did in 1887 passing
12:08
the Interstate Commerce Act putting in
12:12
their Interstate Commerce Commission
12:14
1886 I guess a teeny seven that set it
12:16
up essentially what they did the first
12:22
government regulatory commission in the
12:23
country within railroads which passed in
12:26
1886 the Interstate Commerce Act and it
12:29
was forced by playing Interstate
12:32
Commerce Commission and of course there
12:37
are many forces favor of Interstate
12:40
Commerce Act for real a regulation ICC
12:46
which I think it’s gonna go out of
12:47
existence I think there’s a drive on I
12:49
don’t eliminate the ICC can’t believe it
12:51
but it may actually happen for a hundred
12:53
years of messing everything up and they
12:55
write me yeah yeah
13:05
what for airlines that not anymore see
13:10
the Civil Aeronautics Board was
13:12
supporting them and now having ghosts
13:14
actually disappeared laughing in the
13:16
last year there was no more severe I
13:18
don’t know what explored there’s a
13:19
little bit of rate regulation in the FAA
13:21
where not much really basically we have
13:23
a free market on airlines and in trucks
13:25
we don’t have a railroad yet but there’s
13:28
been a big deregulation move since the
13:30
end of the last two years of a Carter
13:31
Administration into the Reagan
13:33
administration so we now have a reason
13:35
why there is work by the way they fan
13:37
out for a hundred years then wasn’t
13:38
working especially except the railroads
13:40
are all going bankrupt and the airlines
13:42
are going or in bad shape so they
13:43
finally realized the game is up just
13:46
after a hundred years of mess ups I’ll
13:50
go into the air I actually know any old
13:52
business the procedure is the same in
13:54
other words the procedure is trying to
13:56
keep out competition you doing the name
13:58
of monopoly yeah how do you do it I mean
14:00
the name of competition you have the
14:03
airline’s get together about saying this
14:04
is a heaven in the mid 30s
14:05
I think 32 airlines yeah I’m doing this
14:09
to keep out competition so you do it cut
14:11
the supply curve the left keeping out
14:13
competitors signing route in the case of
14:17
airlines actually find routes go very
14:19
recently it’s set up the central air and
14:21
Civil Aeronautics Board CMD which by the
14:26
way has nothing to do with safety at the
14:28
FAA we’re sewing this board which fix
14:33
the rates a very high level by the way
14:36
and kept an assigned
14:38
rationed routes in other words they said
14:40
for example the Boston New York route
14:42
has to go to Eastern Airlines that’s it
14:44
nobody else know where they granted
14:45
monopoly routes
14:46
Pacific Airlines a matter of fact in the
14:48
old days Pan Am had pull monopoly the
14:51
entire Pacific there are no other
14:53
American wanted did fly in the Pacific
14:55
they I think Penn I was a Republican
14:57
hair elastics in the night it was a
14:59
democratic or something your early
15:01
Republican years I think they set up
15:02
total Pan Am monopoly she’s finally
15:05
broken after a while but I mean thing is
15:07
they assign routes and nobody else could
15:09
compete if you competed you’re taught
15:11
that the Eagle other thing you had a CA
15:13
B issue certificates of convenience
15:15
necessity allowing people to fly in that
15:18
room now originally what happened was of
15:22
course a lot of small airlines and the
15:25
small airlines used to be East compete a
15:27
lot and first thing the see ad said they
15:31
said well you are not permitted to fly
15:35
scheduled in other words schedule is
15:39
important that you have a timetable and
15:40
a schedule says you will take off at 10
15:42
a.m. – a cargo or something small
15:45
airlines are not permitted to do it
15:46
they’re not committed to have a schedule
15:48
they’re only permitted to fly when they
15:49
fill up or whatever it is certain loops
15:51
in other words you went to take it small
15:52
airline you know when you’re taking off
15:55
it’s already of course of tremendous
15:56
competitive disadvantage more airline
15:58
they would it was a lovable ethical
16:01
TransAmerican Airlines there is I
16:03
remember now now you have small airlines
16:06
I mean by now I mean before love
16:07
weakened deregulation but they’re only
16:08
committed to fly in small roots in other
16:11
words air Wisconsin admitted to fly from
16:15
Chicago to Apple no major Illinois wants
16:17
a fine Apple one-horse town they
16:20
committed slowly honor to be a feeder in
16:21
line it is definitely they’re not from
16:23
it’s more like the New York
16:24
Chicago and they are washing over the
16:25
key routes in North Los Angeles so these
16:28
small airline used to flight on the
16:30
major routes first they were first thing
16:31
happened with him not permitted to
16:32
schedule no timetables was a minute but
16:36
they even so even as a so-called
16:37
non-skid on scheduled airline they still
16:41
out competed but they did was at the in
16:43
those days means up up up up through the
16:45
nineteen fifties it was no such thing as
16:48
coaching and first-class everything was
16:50
first class and all eyes were extremely
16:52
expensive you really had to be almost a
16:54
millionaire to fly you in Los Angeles so
16:57
what this nothing but the Transamerica
16:58
on these other one-horse Airlines Italy
17:00
simply charged half of fee the ancestor
17:05
of the beginning of a so-called no froze
17:06
movement now they know frozen to this
17:09
extent for examinees cheap airlines of
17:11
foodie europe but they finally look some
17:13
berg okay they fly from iceland in new
17:16
york they fight on on the or they fly to
17:17
some dump in New Hampshire some
17:19
one-horse if some little feel in New
17:22
Hampshire to Iceland or in Luxembourg
17:25
and Aviv on half a price of the regular
17:27
flight
17:28
are you oh I’m so sure they were not
17:31
throw the such an acceptor for example
17:32
they used to weigh you along with a
17:34
luggage
17:35
kind of humiliating loss fat people
17:37
other words they have a maximum a
17:39
maximum weight for the person plus his
17:41
or her like you take credit has the
17:45
that’s yours it’s your choice of the
17:46
consumer you take a little bit of
17:48
humiliation for half of the bite they’re
17:50
not my wife wants to took an airline
17:52
field from the Los Angeles New York
17:54
small airline not only was she weighed
17:57
him on with a luggage don’t forget about
17:59
safety these planes are great safety
18:01
like I never had an accident but there
18:03
was kind of a non-profit landfill she
18:06
was told at one point please everybody
18:07
walk with a back of a plane doesn’t give
18:10
you a great feeling of comfort
18:11
another point she said that the ceiling
18:15
started leaking right cuz and so they
18:18
still were that’s very calmly went to
18:21
those what other thing and just put a
18:23
band-aid over a week well it definitely
18:25
doesn’t give you a feeling great compost
18:27
so got there and it was a fair so
18:30
finally all the see eight beds they just
18:32
outlawed them some early one they just
18:34
put all these wants to get a long amount
18:35
of business but by that time this fourth
18:38
the competition these small airlines
18:40
force of the major airlines to go to
18:43
start a little coach they cut their
18:45
fares in half her coach and that was the
18:46
beginning of the first-class coach thing
18:48
I said before that everything was
18:49
first-class I only had to be a
18:51
millionaire or be on expensive an
18:53
expense account forth to get the flying
18:55
airline and then the whole thing changed
18:57
because of a heroic competition of these
18:59
small semi illegal airline always always
19:02
on the brink of a legality and so
19:06
finally but but then what happened was
19:09
you have at one point by the way that
19:11
the rates were fixed
19:13
began to have competition and quality so
19:15
that you have law if you can’t compete
19:17
in pricing a fee none of those things so
19:18
you have what time like we still have
19:21
still a very strong international cartel
19:23
in Europe so the European flights the
19:25
fly say from one of the power is almost
19:27
more expensive than funding me from New
19:28
York and London but of the height
19:30
government intergovernmental cartel
19:31
fixing all the lace keeping them very
19:33
high so one point that I say if you
19:37
can’t compete in price you compete in
19:38
quality they started giving luxurious
19:40
food
19:41
so then the the goddamn an international
19:43
cartel thicker than I think Yocto
19:45
international area my authority of
19:47
something the issue to the Korean no no
19:50
airline probably in a Europe can serve
19:52
anything except sandwiches and couldn’t
19:55
Kenda couldn’t serve real food part of a
19:58
cartel so at the end individual Airlines
20:00
you gonna do with an undercut that
20:01
thesis certainly even pilot before Union
20:03
loss if except they put a piece of bread
20:05
on them he’s gonna call it an open
20:06
sandwich it always raises it shows you
20:09
can economic history is a constant fight
20:11
between the market on the government a
20:12
government sponte trying to screw things
20:14
up the Mortgage Finance evade the
20:15
restorations and serve the consumers and
20:18
so this is again a beautiful example of
20:20
that in your life but finally happen is
20:22
of the after 50 years of this the
20:25
airlines got so inefficient that there
20:28
and some monopolistic first of all the
20:29
course go up second of all of the
20:31
salaries get did up for the pilots were
20:34
making enormous pilots and stewardesses
20:35
were making an enormous amount of money
20:37
way above the market level because
20:39
they’re all getting pushy monopolistic
20:41
jobs so to speak and the airlines around
20:45
I’m not really making any money because
20:46
they were so inefficient so if you’re a
20:47
chronic than when a deregulation
20:50
movement came along in the late nineteen
20:52
seventies they sent out of how well
20:53
maybe we should have any regulation and
20:55
so the airline sort of reluctantly went
20:57
along with it and what finally what
21:00
happens is all of the regulations
21:01
current a whole shift in the industry
21:02
and for it’s much better service and
21:05
lower prices all rest of it some some
21:08
some a lines went bust because they
21:09
didn’t spend adjust with the new free
21:11
market conditions others prospered
21:12
people’s expressive for the beautiful
21:14
example and those roles again you find
21:17
lousy service and sense of you know you
21:18
never know when you’re taking it off but
21:20
much cheaper
21:22
way the two things I have a colleague
21:27
this University who will show her main
21:29
nameless to protect the guilty who was a
21:33
big Marxist and his life as an airline
21:35
stewardess some note he was against the
21:38
regulation because he said her for a
21:41
deregulation her salaries gonna go down
21:43
I was a monopolies factor so to speak on
21:47
the airline these airlines and go down
21:48
course that’s exactly what happened and
21:52
any right
21:53
you think it’s far removes me from the
21:56
railroads it’s the same damn thing
21:57
that’s the same principle just quiet
21:59
again in different form railroads have
22:01
took a little longer for this to happen
22:02
the airline started with they’re willing
22:04
you know the big five or something yeah
22:06
but basically the same principles of
22:07
work the use of the government in the
22:09
name of the common good public welfare
22:11
almost of the general name of humanity
22:14
and democracy whenever other names you
22:15
can think of putting in a law in order
22:18
to Carta lies the system and put in by
22:21
the railroads installed by the airline’s
22:23
themselves the case of the ICC’s sure
22:25
some farmers in favor of us and shippers
22:27
in favor of it but they they ignore the
22:29
railroads of the main force behind it
22:31
and they acknowledged afterward the
22:33
shippers the form of the railroad G we
22:34
were worse off now they were before the
22:35
rates are higher of course they could
22:37
have been able to have been able to
22:38
predict the idly Morgan was trying to
22:41
raise the race when the ICC kind came in
22:45
the Interstate Commerce Commission they
22:46
started manoeuvring they started
22:47
establishing rates usually by ratifying
22:50
cartels they get the trade associations
22:52
together they set the right
22:53
they set the rates at exactly where our
22:55
race is such and such they’re always
22:57
going down remember
22:59
Morgan was trying to get the right hooks
23:01
say here the ICC came in they fixed the
23:04
race up push them up as nothing where
23:06
Morgan I’m one of them and that failed
23:08
to do what cuz the free market action
23:09
other words the use of the railroads
23:12
using the government in the name of
23:14
competition and democracy over I’m not
23:15
such a gonna think of using the
23:18
government of Cornell eyes the system
23:19
that was using a government car lines
23:20
the industry where they couldn’t have
23:21
ambushed a cartel twice in the free
23:23
market I think this is the essence of
23:25
government of a current system model yes
23:27
is a welfare state yes is a little
23:30
government regulation we can thank this
23:31
whole course is really approximate of
23:33
demonstrating this in different areas
23:34
that the welfare state the government
23:37
government the mixed economy whatever
23:39
you want to call it is the system by
23:41
which big business groups established
23:43
cartels use it use the governor savage
23:46
cartel and call it competition democracy
23:49
whatever essentially so the essence of
23:51
situation if you go down a list as Coco
23:54
points on railroads and regulations
23:56
you’re sitting and looking at them
23:57
morning we’re deeply
24:00
cocoa alone is the one the one area
24:02
doesn’t talk about in the finest yet
24:04
server doesn’t railroads because here’s
24:06
a special look
24:07
you go through those things you look at
24:09
the most people think of big businesses
24:12
always against government regulation I’m
24:14
true if you go through the hearings you
24:16
find out what these guys are favor of
24:18
the hearings before Congress the
24:21
governor railroad officials almost to a
24:23
man or a favor of course they were
24:25
different bills jockeying for power
24:27
the House bill Senate there’s all sorts
24:30
of maneuvering within the system
24:31
that’s not really very important but the
24:33
key is that they they all want a
24:36
government regulation they don’t want to
24:37
race to go up we all want an outlaw
24:39
secretly betting all our outlaw of price
24:40
discrimination the whole bit and because
24:44
they realize what the situation was and
24:46
there’s only a couple of railroad people
24:47
with the no no shouldn’t should be free
24:49
competition small minority all the
24:51
others were favored of this new system
24:55
of government control before I get to
25:00
that further I just want to told I’m one
25:02
of my one of my heroes in this whole set
25:04
up one of my heroes I already says Jane
25:06
J Hill actually both the crash on now
25:08
I’m aware without government subsidy the
25:10
Great Northern and worked and out
25:13
competed Northern Pacific which had lots
25:15
of subject another one of my heroes a
25:16
guy named Jay Gould there’s a more
25:22
lithography of Google by Julius Crow
25:24
density and long-range missing biography
25:26
chair interesting this called Jay Gould
25:30
so this team by the way wrote another
25:32
book on the Iowa pool they’re just a
25:34
nanny or a small book tentative work on
25:37
the isle of pool anyway cool with a
25:41
great carrot he was not this forte was
25:45
not building great railroads he wasn’t
25:47
course consciousness he wasn’t a great
25:48
manager or anything like that he had one
25:50
game in life
25:51
his name was the bus the cartel he’s
25:54
known as a rape Buster he was hated by
25:55
all the other railroad the petty bio
25:58
railroad he merely break the agreement
25:59
he merely startup secret price cutting
26:01
all the other stuff and made a lot of
26:02
money that way because you see here the
26:04
situation economically going a little
26:08
bit of economic theory which is
26:09
important to understand this every firm
26:13
faces an elastic demand curve there was
26:15
every firm
26:17
individual firm you cut the price you
26:19
increase your sales and such an ascent
26:21
your total revenue and go up for example
26:25
of Wonder Bread were cut from a dollar
26:26
or loaf 60 cents a loaf and all the
26:28
other bread prices remain the same if
26:29
the ki8 haven’t they make a lot of money
26:31
everybody with from pepperidge form
26:33
and tasty the Wonder Bread every firm is
26:36
elastic demand curve right mat fed we
26:38
can prove an economic theory every firm
26:39
must have an elastic demand curve the
26:42
other hand is a man curve for the
26:43
industry is much less much more much
26:45
less elastic and in some cases will be
26:47
inelastic like this anchor for industry
26:50
that means this is a setup for cartel
26:54
that means if you can organize a cartel
26:57
Wonderbread prices are gonna be cut
26:59
wonder better pressure you pick up a lot
27:00
of revenue if you cut all the bread
27:02
prices you probably wouldn’t pick up any
27:03
revenue probably might lose revenue so
27:06
the idea of a cartel is list its the
27:09
demand curve for the firm of the last
27:11
thing into the manager if the industry
27:12
is quite inelastic then you if you can
27:15
organize it you can cut the shuffling
27:17
production from here to here raise the
27:20
price in such a way the total revenue
27:21
will increase
27:22
you can then parcel out the increases
27:24
for the different firms in other words
27:26
they have ten firms in the industry if
27:28
you get everybody increase the price by
27:30
10% you can cut revenue will will
27:34
increase a lot of the sales only go up
27:36
down by 5% or something you might have
27:38
an increased total revenue if you keep
27:40
all to get limits of supply in cuts of
27:43
supplies and you can pour slab a total
27:45
of you between the different firms every
27:46
all the firm’s will be happy but the
27:47
consumers will be chastised
27:48
but to do this you have to get an
27:50
agreement you have to make sure the
27:51
little firm is cut and if you’re up here
27:53
there’s always a temptation each firm
27:55
the undercut a secret price kind of
27:57
capture enormous amount of the market if
27:59
that’s the temptation of secret pie
28:00
Frank wait boy they only cut my with an
28:02
Nicky’s Norma’s prophecy a way up here
28:04
there’s only cut my price right 10
28:06
percent nobody else finds out I gotta
28:07
clean up the temptation is enormous and
28:09
that’s why every railroad would cut the
28:11
price every we get later the
28:12
manufacturing all the big cartel and
28:15
merger agreements and late night 1890
28:16
the same thing happened manufacturing
28:18
always going to cut the price a new firm
28:19
look I’m gonna meet the profits and all
28:21
that
28:21
so in any rate the idea is you try to so
28:26
what they Ghul will do you would buy a
28:29
railroad
28:30
and and start going down as elastic
28:32
demand curve of picking up all these
28:33
great sales and making enormous profits
28:35
boy was he hated it’s very much like
28:37
Union unionists hate strike breakers
28:40
Oldham scab that their unions are trying
28:42
to raise the wage rate keep other
28:44
employees out leave people they hate the
28:47
most is not the employers but the
28:49
non-union people take the jaws of a
28:50
striker same way people and other
28:53
manufacturers or other railroad people
28:54
hate most of a other railroad man or
28:57
other things I couldn’t break the cartel
28:58
agreement that was goof function he
29:00
looked for a good high profit place he
29:02
figured out the high profit balloon
29:03
agreement nippon there’s viola rarer
29:05
undercut them magnificent it was cooler
29:08
the sterber of the piece and because he
29:12
competed and he’s his whole career was
29:16
that a breaking rate agreement the sword
29:18
go in a bar where undercut smash the
29:20
agreement finish the cartel and clean up
29:23
he did it when he’s a charge of Union
29:25
Pacific he bought you need to suffocate
29:27
there in 1870 that are there and
29:31
personal long-run e benefit of the
29:33
railroads because it meant that they
29:34
have a compete they had to lower their
29:36
course of the place goes down the place
29:39
is cut and means advancing like shape up
29:42
lower that court get rid of waste and
29:44
sort of stuff but the court they didn’t
29:46
like to be didn’t like to be shaped up
29:47
in that way you can imagine and there’s
29:52
a great character hated by everybody as
29:55
if sumers didn’t appreciate him either
29:56
didn’t understand what was going on but
29:58
they like they like the rate cuts they
29:59
didn’t understand that he was different
30:01
from the other so-called robber barons
30:03
and look at Goulding’s again a self a
30:05
man he fit the image of hill he also
30:07
Carnegie and Rockefeller later right
30:09
along people were all born with nothing
30:11
no capital no they were he was a he was
30:15
parents were quite poor born upstate New
30:18
York
30:18
he was short five-foot coal giggle short
30:23
and thin cause everybody was shorter in
30:27
that pair but he thought was unusually
30:28
short didn’t have an average of 5 foot
30:30
is the height theory of history I keep
30:32
coming up with earlier he was so poor he
30:35
didn’t go to college no these guys went
30:37
on college by the ways another thing
30:38
hold college nonsense the didn’t have
30:41
and I say to that period very few people
30:43
want the college
30:44
and the people would didn’t seem to
30:46
suffer from not going on college they
30:47
started working in age of 12 or whatever
30:49
husband by the age of 20 then they’ve
30:50
could be millionaires the rest of people
30:52
with plugging away to the pellet I’m not
30:55
knocking College first say you have to
30:57
realize the other side of this picture
30:58
you wake a lot of time in college in the
31:03
south thoughts are there barbers the
31:05
railroad surveyor and he started to
31:07
speculate he was frail also a half dead
31:10
most of the time and he’s a great great
31:14
corporate financier you saw the rates
31:16
you know he saw the maneuvering with and
31:17
he filed back profits is cool detached
31:21
emotionless source only there’s a little
31:24
stereotype of a great guy all of them
31:28
the benefited consumers do better for
31:31
the industry and the made a lot of that
31:32
amazing all the way I’m good I’ve
31:34
blossomed anyway yes sir
31:40
well this is I think I just before
31:42
tivity the point is that the that the
31:44
every firm face is an elastic demand
31:46
curve okay huh yeah okay right right the
31:54
man for the industry is less elastic can
31:57
be very inelastic depends on the
31:58
conditions in the industry the by the
32:01
way that the man the man curve here is
32:03
simply price will pipeline quantities
32:09
pull revenue okay so if you cut the
32:12
price you have an elastic demand curve a
32:14
quantity roll up much much more than
32:16
high school we have an increase over yet
32:18
if you have an inelastic demand curve
32:20
you cut the price the color of your oh
32:23
damn quantity only goes up a little bit
32:26
so I’m saying is if you have if you have
32:28
a very high price a cartel price each
32:30
each firm they can cut cinematic are
32:33
they gonna make enormous amount of money
32:34
if they can go down their firm the
32:35
manager in other words if they guys cut
32:37
some pricing other guy doesn’t find out
32:38
about it take a pick out the enormous
32:40
amount of money and they can do that for
32:41
six months if they keep it quiet
32:43
it’s just that eventually of course the
32:45
competitors find out about this yuechu
32:47
illumination hatred the whole cartel
32:48
goes bust so essentially what is the
32:54
graph will be explaining that
32:59
anyway so this is the railroad
33:03
Commission’s begin in the state level
33:05
and again in the I think the first
33:07
Commission was Massachusetts and the dry
33:13
down comes for the National Commission
33:15
the the first bill House bill for first
33:22
folks admitted that the Congress was
33:24
written by the attorney for one of the
33:26
one of the top railroad night one of the
33:28
things we’ll see later the oil the span
33:32
of the oil was getting a lot of this
33:33
discount in railroad because they were
33:34
have a big big oil business and
33:36
therefore since they had a bigger
33:37
quantity or getting bigger discount a
33:39
lot of a smaller oil company wanted to
33:41
have a railroad cartel in order to screw
33:43
Standard Oil so they got together with a
33:45
railroad attorney in Pennsylvania he had
33:48
a drive for railroad commission state
33:51
railroad commission to raise the rate
33:53
the court alloys with the railroads of
33:56
course behind a plus C some of the small
33:57
people one of the put the screws and
34:00
salmon oil so that you had different
34:03
interest in the part of the shippers the
34:04
railroads almost unanimous thing in
34:06
favor of a car of a cartel he had a two
34:10
bills of three bills no land and a lot
34:12
of jockeying for for victory etcetera
34:15
and finally in 1886 1887 they passed
34:18
they passed the Interstate Commerce Act
34:21
and which outlaw discrimination the same
34:25
thing I think it really composed it out
34:28
Lord we Bates it compulsory for Blissett
34:31
II the whole bit didn’t turn out it
34:34
wasn’t very enforcement procedures
34:36
weren’t super but anyway they that was
34:38
the first attempt they set up the
34:40
Interstate Commerce Commission one of
34:44
the things the railroad didn’t like that
34:45
you the outlawed cartel pools which were
34:48
not part of the process of the
34:49
Commission Philly raros try to eliminate
34:51
that but basically railroad all love
34:52
that they when they I see when the
34:54
interstate commerce bill with passed
34:56
1887 the the railroad magazines love
35:00
that we’re we’re way gives that railroad
35:02
is that rail work their way review two
35:04
major Merrill magazines
35:06
praised that highlights this is great so
35:08
on and so on
35:10
and the question is who should be
35:12
commissioner for if you have something
35:13
like this nor for the railroads that we
35:15
really run it they had to have had a
35:17
controller Commission and all these
35:19
situations and this by the way
35:22
– before that I’ll repeat it this is
35:26
counter to the little usual liberal
35:27
organ called a Ralph later meant the
35:29
Ralph later in myth is these
35:31
Commission’s were originally favor of
35:33
lowering prices lowering rates and they
35:35
were taken over by the industry later
35:36
they were dominated by the industry
35:39
after 20 or 30 years but originally had
35:41
a Golden Age situation originally we
35:42
needed Pro competition anti-monopoly
35:44
non-stop but those were written written
35:47
by the railroads lobbied for the
35:48
railroads and staff in the very
35:50
beginning by the railroad interests
35:53
example the by the way the major person
35:56
of the chairman Nina state Commerce
36:00
Commission the first Commission 1887
36:07
distinguished judge thomas and mcintyre
36:09
Cooley who was unfortunately pictured by
36:14
most historians being a great lazy a
36:16
fair advocate he might have been at
36:19
least a chair now they can accept them
36:20
we’re wrong he was course he wasn’t just
36:28
sure he was a judge of the of the
36:32
Michigan Supreme Court Chief Justice the
36:34
Michigan Supreme Court he was Dean of
36:35
the University of Michigan Law School he
36:36
all he was also however a railroad pool
36:39
member he’s a railroad pool arbitrator
36:42
is so like thank you wanna think and he
36:45
think was not the only professional
36:46
railroad pool person he’s also Cooley
36:49
and you know Lubbock Carter paid her
36:53
assistant to think in many of his pools
36:55
he was a railroad lawyer he’s a very Pro
36:59
cartel pro pool other members of the ICU
37:03
first ICC where well one guy saw the old
37:09
Democratic Congress attack is
37:11
unimportant
37:12
Morrison another guy was Walter Bragg
37:14
was formally the Alabama Railroad
37:17
Commission there was a narrow Alabama
37:18
railroad car tell us
37:20
ah a guy named shoemaker named lycurgus
37:24
which was a former railroad attorney and
37:32
guy named Walker with the railroad
37:36
person so so much of a railroad person
37:38
he wound up after he left the
37:39
commissioning roundup as chairman of the
37:40
board of the actions of the actions in
37:42
Topeka and Santa Fe is one of the
37:43
biggest railroad of the country’s
37:45
connect up with the Southern Pacific
37:47
so anyway big railroad person this is a
37:49
railroad dominated come in old
37:50
commission where railroad people from
37:53
cooling on them and and the idea was the
37:57
ICC would upset race directly there
37:59
would help the railroad to set the rates
38:00
and an outlaw discrimination all the
38:02
rest of it
38:04
so Cooley is one person who focused on
38:06
another guy is one of my particular pet
38:08
peeves because I don’t like the pipe I
38:11
guess Hollis Francis Adams jr. the
38:13
Boston Brahmin or a distinguished member
38:16
of the Adams family
38:23
Bostonians a kind of interesting group
38:25
there they’re all interconnected it’s a
38:28
very it’s an elite power a leaf people
38:31
who are families about half a dozen
38:32
maybe does the family gold but into the
38:34
connected since the 17th century the
38:36
leaves the atoms the Higginson’s the
38:38
Cabot’s the lodges the Lowell’s there
38:43
was a famous jingle when I was growing
38:44
up something to the effect that Boston
38:46
the layoffs Boston the land of a beam in
38:48
the cod or the lols talk only to canvas
38:51
the canvas called only to God
38:53
and it’s sort of that sort of attitude
38:56
animus was a always the Addams Family go
39:00
he’s sneering at Commerce and
39:01
manufacturing things but a low type and
39:03
on aristocratic Adams himself the great
39:07
advocate of cartels and railroad
39:09
Commission’s no effect he said when the
39:14
Interstate Commerce Commission Act was
39:16
passed he said it should be rigidly and
39:18
literally enforced every provision
39:20
should be literally and rigidly
39:21
literally enforced he became the first
39:24
Massachusetts Railroad Commissioner
39:25
first editor and he then became when the
39:28
Interstate Commerce Act was passing the
39:29
chair of the board of Union Pacific
39:30
Railroad so here’s a guy as he who was
39:33
none
39:34
pretend the aristocrats always belly
39:36
aching about the evils of Commerce in
39:38
this tree here Ian’s head of the Rome
39:39
units of the River Road and a big
39:41
advocate of courses si of government of
39:43
course cartels the next question I ask
39:49
is how come all by the way after the
39:52
Interstate Commerce Act was passed they
39:54
couldn’t force done the Interstate
39:56
Commerce Commission try to establish the
39:57
cartels wasn’t actually spewed weren’t
39:59
very successful at it the railroad
40:01
industries are so vast they still were
40:03
think with school having a rates going
40:05
busted even cartels going but even with
40:07
the government and for even the ICC and
40:09
forcing thinks pools and fourteen final
40:12
and fourth they’re like there’s going to
40:13
be competition
40:14
this will be great busting this but we
40:16
knew country railroads coming in and so
40:18
the railroads kept point for more and
40:19
more enforcement and over the years they
40:21
kept tightening the interstate commerce
40:23
I have furn a goalies act which had
40:25
opened improve the enforcement increase
40:28
the enforcement fine outlawed
40:29
competition so the market was still
40:33
successful undercutting even with the
40:35
ICC probably one kind of use the power
40:38
of federal government to enforce the
40:39
before stinks quotas it wasn’t very
40:42
successful but it successful enough that
40:44
sort of screw up the industry over the
40:46
years my question about that the the
40:52
shippers finally said with gee we’re
40:53
worse off now than when the Act was
40:55
before the Act was passed we find out
40:56
rates are going up instead of going down
40:58
and they were they were euchre they
40:59
didn’t understand the situation the next
41:01
question I ask here is last next time
41:04
how come the Interstate Commerce Act was
41:06
passed during the first democratic
41:09
administration since the Civil War
41:10
Cleveland administration but you have to
41:13
realize is that the most historians used
41:16
to talk about the period from 1865 to of
41:21
1912 at the in totally Republican
41:23
dominated was not Republican nominee
41:25
with very close the elections are very
41:26
close in 1876 Democrats really won the
41:30
election the election Samuel Tilden of
41:32
New York really won the election who
41:33
actually was stolen from them I have by
41:36
each by fraud and you Cory so the Hayes
41:40
wins by one electoral vote really tell
41:42
them won the election why far as a
41:44
matter of fact the popular vote
41:46
till one hat 4.3 million votes 1976 and
41:49
haze only had four point oh man Oh with
41:51
a big victory by children which is only
41:54
taken away from like fraudulent means
41:55
weathered by various reconstruction
41:57
governments and apparently what happened
42:00
was Hayes made a deal with a southern
42:03
Democrat some of the sudden are
42:04
Democrats would throw their vote to
42:06
Hayes why does a federal troops get out
42:08
of the SAP I was the n reconstruction
42:09
get the federal troops out so the
42:13
Democrats really won the election of
42:15
1876 matter of fact just giving give you
42:17
a very quick popular vote here the other
42:22
elections are extremely close
42:24
usually the Democrats won have at least
42:26
one house of Congress for this whole
42:27
period on 1876 Republican Democrat Hayes
42:34
has 4.0 million votes until then they
42:37
have 4.3 million in 1880 Garfield of the
42:44
Republican Victor at 4.45 million votes
42:49
and Hancock Democrat at 4.4 4 million is
42:54
almost tied he’s like 60,000 votes or
42:57
something very very close in 1884 when
43:00
Cleveland won first Democrat to win he
43:03
had four point nine million votes and
43:09
Blaine known as a Continental liar for
43:12
the state of Maine at four point eight
43:14
five millions 0.91 very very very very
43:17
close elections anyway
43:19
Cleveland wins the first time and
43:21
Democrats have committed a lays a fair
43:23
free-trade allure rest of us how come
43:24
the ice Interstate Commerce Act was
43:26
passed and signed undemocratic
43:28
administration by Cleveland how come
43:29
Cleveland violated there’s only a fair
43:31
principles we pass to agree chewing a
43:34
railroad regulation that’s the next
43:36
question we will look at next Tuesday
43:38
namely a mystery of this which will be
43:40
solve how it is the Cleveland was
43:43
basically all of the rifle is a fair
43:45
person how come he wimped out this key
43:47
area railroad regulation the lessons of
43:50
it we learned by that
43:54
why did quite a Cleveland pass
43:57
an interstate commerce act the first
43:59
federal regulatory commission on
44:01
Cleveland was a lazy affair Democrat
44:03
leads if you’re a liberal Cleveland was
44:06
an interesting figure anyway Cleveland
44:07
the many ways a heroic figure he was
44:10
first of all he came from Buffalo we
44:12
can’t realize a New York state New York
44:19
I talked about Yankee Pietism in the
44:23
first class or so that the fanatical dry
44:26
for stamping out sin and so forth so
44:28
long but sleds of statism an economic
44:30
front by Yankees later became the basic
44:34
members of the Whig party and then the
44:35
Republican Party well Yankees were
44:39
settled from rural Massachusetts all the
44:43
way out of Michigan and Wisconsin but
44:45
the heartland of Yankee them I really
44:48
got some Yankee land with western New
44:50
York tossing the lake from approximately
44:54
from the Hudson Valley West the Buffalo
44:57
over this whole area which is the heart
45:02
and soul of the of the Yankee Pietism it
45:06
was cool by the people landed by scoring
45:08
after had the burned over district their
45:11
charming names for it
45:13
burned over by repeated fires of
45:16
religious fanaticism you name it and it
45:20
started in western New York the Mormon
45:22
Church said I want to thank Mormonism of
45:24
the Mormon Church started western New
45:25
York the Shakers northern Western New
45:28
York you need a community people like
45:31
favorites all of us saying they found
45:32
out the all there for the rest who
45:34
means in order to continue the movie
45:36
have to have continual convert that you
45:38
can’t reproduce anybody it’s kind of
45:39
apparently a long run difficult
45:41
stainless so this is a heart the
45:45
heartland of caiaphas fanaticism and
45:48
many of the leaders of the Republican
45:50
Party and Whig party change from western
45:52
New York for that reason Thurlow weed
45:54
William Seward a separate that on and on
45:57
and on but he has Cleveland comes from
46:01
Western your the Protestant from Buffalo
46:03
how does that fit in the way it fits in
46:05
is this was very interesting Cleveland
46:06
was an old school president Perry
46:08
in other words he was part of a small
46:11
minority of the Presbyterian Church in
46:13
the Congregational Church and other
46:15
Protestant churches which resists that
46:18
and we’re very much opposed to the playa
46:20
tests revival as kind of evangelical
46:22
framework an old-style Calvinist
46:24
believing being and that seems very much
46:26
like Catholics and Lutheran’s in a sense
46:28
is in favor of obeying church law with
46:31
the way to get saved if you if you can
46:33
get say you know what Calment kind of
46:35
difficult
46:36
the way to get saved is you join a
46:38
church in Bay the law and that’s it Bay
46:40
the church law so you don’t worry about
46:43
being born again and all the other stuff
46:44
you don’t worry about compulsory
46:45
stamping out of sin all that stuff as a
46:47
NASA but the old-style counseling us as
46:49
it is to cast like the Lutheran’s and
46:51
even to this day I my friends of mine
46:52
who are old-style cowboy doesn’t take
46:54
exactly the same position so Cleveland
46:56
was an old-style Calvinist and therefore
47:00
was in the Democratic Party and he
47:05
wasn’t a thing that he stamped as an
47:07
offense he stances mark a Democratic
47:10
Party he ran for president and won in
47:12
1884 the first Democrats of the Civil
47:14
War was a big thing he ran for president
47:16
88 and just lost by a fraction II he got
47:19
his vote mmmm mentioned this already his
47:21
vote was 5.5 four million 1888 and
47:24
Benjamin Harrison Republican from
47:27
Indiana defeated him had vote was five
47:31
point five or four million no if he
47:35
Cleveland one of the popular vote and
47:37
lost in the electoral college and in
47:40
1892 he wins again in a row well as a
47:43
landslide so Cleveland was a leader of
47:46
Democratic Party never again for many
47:48
years and so as a matter of fact when
47:50
Charles beard wrote an excellent book
47:52
now forgotten either very good asourian
47:54
wrote a book on world war ii called a
47:56
republic the charming bugger sort of
47:58
fashioned pattern after Plato’s Republic
48:00
with three guys or four guys that around
48:01
discuss political philosophy for the
48:03
whole book that’s very very well done
48:05
and the guy who represents for beard
48:08
lays a fair libertarian type Democrat
48:11
Democrat was clearly cold something cool
48:12
in the Cleveland Democrat old-fashioned
48:14
Cleveland Democrat
48:15
this is 1944 so
48:18
so Cleveland put his marquee the leader
48:21
of the ladies a fair wing of the
48:23
Democratic Party so why does for the
48:26
mystery becomes even greater why de
48:27
Cleveland then where is in favor of and
48:29
put through with his administration the
48:31
first federal regulatory commission for
48:33
railroads and so that’s that sets the
48:37
stage of the problem well the answer the
48:39
basic answer is look Cleveland no yes no
48:44
he be playing I need 1884 be blinded
48:51
1976 totally Democrat ran and behaved
48:55
the lost them at the election stolen an
48:58
electoral college we’re gonna be playin
49:02
1884 so Cleveland was the first Democrat
49:06
if I’m president that’s a civil war
49:11
while I wasn’t a complete Democratic era
49:13
I was a very closely knit it was great
49:15
there’s almost tied but the point is the
49:17
Cleveland was was exactly the you know
49:20
the major figure in the Democratic Party
49:22
for many years provide twenty years or
49:24
so
49:26
Tilden who was Cleveland’s mentor in the
49:30
end was a New York Democrat oh really
49:32
should have won really did win in 1876
49:34
he’s from New York City question is what
49:38
was the film was also late agenda my
49:40
crabbit Oldham was above all things a
49:42
railroad lawyer he’s probably a most
49:44
distinguished highlight most highly paid
49:46
well railroad lawyer on the country now
49:49
we had also have to realize and one of
49:51
the things that happens I mentioned
49:52
later on today about the the rise of the
49:54
manufacturing and Industry that’s a
49:56
civil war period but one of the things
49:58
that happens the rise of corporate law
50:00
because lawyers before the Civil War
50:01
really and everybody was a lawyer in
50:03
politics they didn’t make much money
50:05
example the highest-paid lawyer the
50:07
highest income where before the Civil
50:09
War with Daniel Webster I my father
50:11
highest they eaten a about $20,000 a
50:13
year 25,000 a year it was the highest
50:15
pay lawyer and in common terms but if
50:19
you multiply that by seven or eight he
50:20
means making about eight hundred forty
50:21
thousand a year which is yeah it’s not
50:23
bad but it’s kind of top where salary
50:25
obviously is a pop V top lawyer
50:28
after the Civil War from 20,000 years
50:31
pop after the civil war lawyers making
50:36
much more than what corporate law then
50:37
comes in because corporations come in
50:39
railroads are the big corporation they
50:40
were coming in and so top lawyers are
50:43
essentially railroad lawyers and so the
50:48
top lawyer from making about two hundred
50:49
thousand a year which you know our term
50:51
is like a million dollars a year damn
50:53
good say the least so this is for the
50:56
whole the whole the profession of
50:58
corporate law becomes a very important
51:00
one in other words before that most of
51:03
the ways of trial lawyers you know they
51:04
defended people and that sort of stuff
51:06
that worked since there were no
51:07
corporations there wasn’t much corporate
51:09
law a very few corporation Bank
51:12
sentiment canals so we have children as
51:16
a railroad lawyer and we’re and
51:17
railroads of course were mostly in favor
51:18
of the of the kind of government
51:20
regulation in favor of this new system
51:21
of cartilage a shoe in particular a
51:24
favor of new system with JP Morgan and
51:26
company I’ve already mentioned with the
51:27
becomes the big investment banker and a
51:30
big railroad banker after certain after
51:32
certainly after the panic of 1873 the
51:36
Cleveland administration from top to
51:38
bottom cleaning Cleveland was very
51:40
heavily tied in with railroads and with
51:42
Morgan railroads in general and Morgan
51:44
specifically and so what we have then is
51:47
the with Morgan’s beginning to dominate
51:49
a Democratic Party especially in the
51:51
higher reaches and the top meet reaches
51:53
we didn’t begin he danced to be able to
51:55
shift their attitude toward railroad
51:58
paralyzation government interference and
52:00
railroads and government concerns of
52:01
government carmelization Cleveland
52:03
himself before he became mayor of
52:04
Buffalo in other words when he’s in the
52:06
private sector it was a railroad lawyer
52:08
his partner was made one of the major
52:15
partners was a Francis Linda’s Dutchman
52:20
well appeal later still wanting of
52:22
course on the time who with Cleveland
52:29
after the people leaves the presidency
52:31
finally in 1896 he then joined spectrum
52:35
again so and specs it was the top Morgan
52:38
he doesn’t Morgan JP Morgan’s personal
52:40
lawyer he was a little partner of a law
52:43
firm it was JP Morgan a company’s lawyer
52:45
so he was sort of a cop Morgan lawyer
52:48
also Cleveland’s one of the Cleveland
52:52
major clients with New York Central
52:54
Railroad which was the largest railroad
52:59
in New York State and also originally
53:02
owned by Commodore Vanderbilt a very
53:03
famous character Eastern character and
53:05
soft but who then there’s more or less
53:08
taken over by Morgan you have a
53:09
essentially Vanderbilt – Morgan so in
53:16
later years Morgan essentially runs it
53:18
and an alliance with the Vanderbilt
53:21
family so you have the Cleveland of
53:25
Southland is essentially a Morgan very
53:27
old lawyer type person which I can’t you
53:31
see very neatly for his deviation from
53:33
lazy fare in this particular key area is
53:36
shipped to a so-called progressive when
53:39
you want to call it compulsory
53:41
cartelization of government and let’s
53:43
look at the rest of the key of the
53:45
Cleveland cabinet Cleveland comes in has
53:49
a cabin okay have a whole cabin almost
53:52
whole cabinet either Morgan’s cabinet or
53:54
very closely allied Secretary of State
54:02
was a Thomas Bay yard there was several
54:06
of course during the years but the major
54:09
Delaware Senator Bay art is essentially
54:17
you know he came from old aristocratic
54:19
family in Delaware he’s essentially was
54:21
a disciple and tool will most of August
54:24
Belmont
54:25
such an extent on want was a German
54:30
investment banker it was an agent of
54:32
Rothschild Wachau company which is a the
54:36
most famous investment bank in France
54:38
Britain and Germany international
54:40
investment bankers Belmont came into New
54:44
York as a thing with Schoenberg and came
54:46
in New York as a the Rothschild agent
54:48
thing you’d be rocked by leaving all of
54:50
his life you know
54:51
of course became a millionaire zone he
54:53
of course was the answer the founder of
54:55
Belmont racetrack or so the Belmont
54:57
family anyway Belmont they are is
55:02
virtually a tool of Belmont Belmont son
55:04
Perry Belmont not only was it they are
55:07
the main administrative assistants in
55:08
many years you also lived in his house
55:10
and it sort of like a close buddy
55:11
secretary in because he’s now cooling
55:13
this control in the Espionage turns and
55:17
they right so Belmont and Mel bought was
55:20
the secretary treasurer of the National
55:21
Democratic Party forgot from decade you
55:23
know like forty years so and Morgan’s
55:27
and button watch jaws were quite close
55:28
they weren’t always close but they were
55:30
basically an alliance
55:31
so again again you have the Rothschild
55:34
wing so to speak of an investment banker
55:36
looping here so that’s the Secretary of
55:39
State under Cleveland Secretary of
55:42
Treasury first person Harry sugar
55:46
treasurer guy named Daniel Manning
55:48
supports of this uh he post and Manning
56:01
was a close friend of Tilden sort of one
56:04
of his top lieutenants Tilden was still
56:07
around feeling was over the elder
56:08
statesman of New York Democratic Party
56:10
and and also a lawyer and director of
56:14
the opening in Susquehanna railroad
56:16
which not only was a Morgan type
56:18
railroads also had JP Morgan himself on
56:20
the board of directors which show that
56:21
it was very intimately Morgan oriented
56:25
so once again we can put parentheses
56:27
with Morgan around the name is Daniel
56:29
Manning he gets he got ill after a year
56:35
or two and resigned as Papa sister then
56:37
takes over that secretary the Treasury
56:40
and that was any Charles Fairchild
56:43
you know wealthy family yeah
56:47
and he won one Canada member one
56:54
president could be an accident if he’s
56:56
have a whole cabinet of the more godori
56:57
at he begin to see of this there’s a
56:59
pattern here which can’t be denied and
57:01
then you’re a Charles Fairchild was
57:03
Attorney General of New York before that
57:06
he was a disciple of Tilden once again
57:08
and then the children machines of the
57:09
speak he married the niece of Henry
57:14
scene one
57:15
everything more was the run for the
57:16
president 1858 in New York and it’s
57:19
father Sidney Fairchild and board of
57:21
directors of Erie Railroad Pittsburgh
57:24
Railroad and also attorney chief counsel
57:26
in New York Central Railroad in other
57:28
words guy’s father with a chief counsel
57:31
in New York Central which is Morgan you
57:41
have these patterns which cannot be an
57:42
accident it can’t be coincidence or the
57:44
whole damn gang becomes a Morgan tightly
57:46
how we end with a Morgan M but the the
57:55
Attorney General guy named garland of
57:57
Arkansas it’s a railroad Railroad
57:59
director Secretary of War another there
58:03
was no secondary defense without there’s
58:04
Ward apart frankly called the War
58:06
Department then the name Defense
58:09
Department Lee comes in after World War
58:10
two is a euphemism
58:11
anyway secretary at war touch me was the
58:15
army it was the Secretary of War those
58:17
days in Secretary of the Navy she took
58:18
care of the Navy this guy’s name was
58:20
William Endicott that’s the very name in
58:25
the economies that he’s a Boston Brahmin
58:27
pipe and indeed he was
58:32
Boston patrician lawyer former judge and
58:37
I think the guy who almost was the first
58:41
show I almost got the pose was John
58:42
Quincy Adams junior brother bought the
58:44
body remember the Adams family son of
58:47
the former president he was urged upon
58:50
Cleveland to pick this guy by Francis
58:53
when Stetson his former law partner and
58:55
Morgan lawyer and he was very much
58:59
connected with
59:00
Boston financial a leaf the particular
59:04
wife always have to look at those other
59:07
life connections in these people so his
59:09
wife was one of the Peabody Peabody I
59:11
guess was pronounced family a very
59:14
distinguished Boston’s family the head
59:17
of home George Peabody I guess it would
59:19
be uncle thank you anyway George Peabody
59:22
he was like it was the head of a banking
59:28
firm which had as a partner JP Morgan’s
59:31
father genius genius Morgan the British
59:34
banker it’s always very good I have a
59:38
partner who is that either Morgan
59:39
sovereign father good fear career okay
59:44
so his okay his partner Morgan father
59:53
and and also one of the Peabody another
59:58
uncle was the best man at JP Morgan’s
60:00
wedding it’s also good that than the
60:01
best man at Morgan’s wedding those are
60:03
very good another thing you have to
60:05
realize about the whole Boston Financial
60:07
Group after about 1870 from then on
60:09
until the present day
60:12
Boston first of all they’re all
60:14
interconnected the whole Boston group
60:15
leaves the Higgins’s of low over Cabot
60:19
the lodges the Adams of this whole group
60:21
becomes connected to first Boston
60:24
Corporation is another big bank through
60:26
to the Morgans in other word the Pink’s
60:28
got to the point where Morgan
60:29
equal and both so they were the Morgan
60:31
people and this I think stroke and I’m
60:33
not sure what’s going on now but
60:34
certainly its own lease until World War
60:36
two the basta Thatcher will be explained
60:40
Henry Cabot Lodge equals Morgan that’s
60:43
in the north of that that was part of
60:44
the whole equation you’ll see later on
60:45
comes important Secretary of the Navy
60:49
but I really had it made
60:52
a member of a Whitney family has the
60:55
Whitney Museum here and things like that
60:57
and I’ve realized the Navy those things
61:00
more important than the army there’s a
61:01
maybe was permanent the army only comes
61:03
in during wartime
61:04
so when you see what me that’s a very
61:11
learn a V a close friend of the cycle of
61:15
tilden politically once again comes from
61:18
New York and close friend of not only
61:23
close friend of Cleveland those up
61:24
leading with campaign manager during the
61:26
campaign and a big railroad board member
61:34
the border records of two railroads
61:35
in New York both of which were
61:37
Vanderbilt and and therefore connected
61:47
with the Morgans it’s really Morgan –
61:48
vendored though so it’s important maybe
61:52
with maybe today there’s also the
61:54
son-in-law Whitney of Henry here of
61:56
Harry Payne Henry VIII Payne that’s why
62:00
there are people now right now for whose
62:02
name is that the name is Payne Whitney
62:03
okay connector the two mighty families
62:07
and Henry Payne the director of several
62:12
about four vendor both Venable railroads
62:14
okay but his brother Oliver a pain
62:24
brother all the pain with a director or
62:27
officer old would like the span of the
62:30
oil and the Jersey standard oil plus
62:32
being a big rock afar as we’ve seen
62:35
later I think today I hope Rockefeller
62:37
family especially dominated the
62:39
Republican Party in about 1876 it’s all
62:42
about well probably a whole now released
62:44
in the whole 1960 any right there here’s
62:47
the two mighty Titanic competing
62:50
financial forces in the United States
62:51
the Morgans essentially around the
62:53
Democratic Party the Rockefellers
62:54
especially around the Republican Party
62:56
here’s this guy hold paint when you are
62:58
in with both camps that’s a very good
62:59
thing that they both of in with the
63:03
Morgans and be a relative of the
63:04
Rockefellers can’t hurt I thought I mean
63:07
wealth of somebody whose family of there
63:10
are connected with Rockwell Rockefellers
63:11
a little scene later have a whole group
63:13
of families who have invested with them
63:15
since 1870 they insane group right until
63:18
right now the Bedford
63:19
Pratt C except there’s a whole bunch of
63:21
the Hartness is ever said all whom
63:23
actually the Rockefellers and invest
63:25
worthless which of course makes the
63:27
Rockefeller power much greater than just
63:28
one family of course the Secretary of
63:32
the Interior is very importantly here I
63:35
ran the whole public land system of
63:37
course still does look nice and
63:38
Mississippi you happen to be a cop
63:40
railroad lawyer which usually means
63:42
Morgan and then became then another guy
63:45
from Wisconsin actually the great guy
63:46
who was a well then Postmaster General
63:49
who was a van demote Morgan they were a
63:52
lawyer so and the attorney for the
63:55
Chicago northwestern railroad which was
63:57
a Vanderbilt so you have a whole really
63:58
the whole cabinet I think the whole
64:00
cabinet was connected with the Morgans
64:02
also the ambassador of the Great
64:03
Britain’s is always a top post master
64:06
reporters saying James was a Vermont guy
64:08
who was the chairman of a big of a
64:09
railroad which is Vanderbilt
64:11
and also afterward he he resigned the
64:16
other guy comes in who’s who the the
64:20
chairman of the board of the but New
64:22
York central with the horses Vanderbilt
64:23
Morgan the ambassador to France those
64:26
days Minister de France the second most
64:28
important postman the Atlantic service
64:30
was very MacLean was a whose father was
64:33
the president Baltimore Ohio Railroad
64:35
was also in with a Morgan Thea home so
64:37
the whole cabinet the whole damn camp
64:38
knows where camera is much smaller whole
64:41
cabinet was a Morgan cabinet or Morgan
64:43
Vanderbilt cabinet essentially the
64:45
Secretary of State it was a Rothschild
64:47
person but we’re very closely allied of
64:52
course so there we have our answer I
64:55
think the second administration of
64:57
Cleveland’s were much very similar
64:58
you’ll have to go into that as a man
65:01
attacked by the way the interesting
65:02
thing about Stetson who’s the top of the
65:05
mentioned for the top
65:07
Morgan lawyer his law firm which is cool
65:10
those they think Stetson and Stetson
65:12
Jennings and something-or-other
65:14
yeah wolf firms are never corporation
65:17
they’re always partnerships they can
65:18
keep the names keep changing it new guys
65:19
come in this is the same law firm which
65:21
is now Davis pulled them word while
65:23
which is probably one of the top still
65:24
one of the top Morgan or firms right now
65:26
it’s like a hundred years later because
65:29
of continuity in by the way to leap
65:35
ahead a little bit to show you Lee a
65:39
caveny American politics in 1924 and
65:43
Calvin Coolidge runs for president wants
65:45
for reelection
65:47
he come in because of hoarding died and
65:51
office
65:52
Harding by the way was an Ohio
65:54
Republican and therefore a rockefeller
65:56
person Coolidge was a Boston Pike person
65:59
that item of the Morgan therefore it
66:00
kind of in the mortgage and this is
66:02
always haven’t usually have an American
66:03
politics if two factions in the party
66:05
over the party is the winning factually
66:08
gets the presidency than losing fashion
66:09
if the vice presidency is continued
66:11
nautical Kennedy Johnson so if you have
66:15
a Harding who’s gonna hire Republicans
66:17
will see in a minute there for a walk a
66:18
hall or someone
66:21
with President Coolidge in Massachusetts
66:26
and therefore and connected personally
66:29
also was worse than financial growth and
66:31
therefore Morgan Rockefeller dies
66:37
Coolidge becomes president in 1924 who
66:40
would run began for president for
66:41
reelection on the Republican ticket
66:45
Democrat pick after 103 ballots the
66:48
titanic struggle for power which we’ll
66:50
get to later on of course I hope
66:52
emerging as a dark courts half of a
66:54
hundred and second ballot I mean
66:55
nowadays have usually somebody wins on
66:57
the first ballot understand my living
66:59
memory Wendell Willkie I think one of
67:01
the 8th ballot of the longest I guess I
67:03
got one of these 3 ballots were
67:04
magnificent I mean right so 100 and 300
67:07
4th ballot Davis emerges John W Davis’s
67:11
Democrat present ahead of the top Morgan
67:12
law firm Morgan personal lawyer have a
67:14
Morgan a guy running for Republican
67:17
ticket I’m working on running a
67:18
democratic second the Morgan this is
67:19
Morgan heaven
67:20
thank you 24 really he’s controlled both
67:24
of natural nominations oh all right so
67:28
this is the this is the aunt this is the
67:30
reason I’ve now answer the question why
67:31
it is the Cleveland deviated from lays a
67:33
spear and it’s one crucial point namely
67:35
railroad regulation because he was a
67:37
Morgan railroad lawyer and his whole
67:39
cabinet reflected this Morgan influence
67:44
morning it’s increasingly by wife status
67:47
as time goes on what happens is to leap
67:48
ahead a little bit the Morgans decided
67:51
an eighteen late 1890s with an industry
67:53
manufacturing begins to incorporate
67:55
manufacturing was a partnership until
67:58
1890
67:59
none of these outfits were really
68:00
corporations when they begin to
68:02
incorporate and become much larger in
68:04
1890s they try to achieve monopoly
68:06
prices through mergers on the free
68:08
market they can’t do it that lose they
68:10
lose out and then they they shift the
68:12
Morgans then shift to a general status
68:14
program not just for era for the whole
68:16
old Hong GI estate the economy it become
68:18
progressive quote unquote old general
68:20
status by around 1900 so anyway that’s
68:24
the and then the whole party shift along
68:26
with the
68:28
okay to the next step if the Sholay rise
68:31
of after the Civil War especially time
68:33
goes on but manufacturing a big business
68:36
not just in railroads but in
68:37
manufacturing in general there are
68:42
various statistics for this there’s GNP
68:45
statistics one way to look at it is
68:47
statistics value added by selected
68:50
industries you look at and this is
68:58
constant prices 1879 prices and one day
69:01
price changes and those days pork prices
69:03
were falling every year magnificent a
69:10
value added by different industry 1869
69:21
agriculture was 1.7 billion
69:29
1899 it was 3.9 billion if I say it cuts
69:33
the dollar you can forget about
69:34
inflation or deflation
69:36
that’s about more than double no there
69:40
was a reflects real output more or less
69:44
and it’s not precise and give you an
69:45
idea mining goes up from 0.07 billion to
69:52
0.55 so each poll increase this is a bat
69:57
there’s more than double with a poll
69:59
increased construction goes up from 0.4
70:05
than the end at one point oh it’s like
70:07
we’re two and a half fold and
70:11
manufacturing goes up from one point one
70:16
at six point three makes me a six-fold
70:18
increase and in 30 years that’s one one
70:21
way of looking engaged when we’re
70:23
looking at it
70:25
Haggai on now we’re looking at physical
70:28
units
70:33
he going on what went up from I was this
70:37
is basically our industrial revolutions
70:38
that are fake pig iron goes up from 1848
70:44
pig iron woods
70:45
he’s a pig iron shipments thousands of
70:48
short tons hey guy goes up from nine
71:00
hundred short term nine hundred thousand
71:03
short part of 1848 1865 930 not much
71:06
difference and 1899 fifteen thousand two
71:11
hundred and fifty thousand over fifteen
71:13
point two million Norman increase partly
71:16
sixteen full increased
71:27
now his own spice I’m correcting here
71:29
correcting actually those days was
71:31
deflation prices are going down in this
71:32
period correcting for price change is a
71:34
magnificent period I guess without all
71:35
that light in this thanks we were
71:37
falling throughout only wait 1965 1896
71:40
magnificent imagine waking up in the
71:42
morning and knowing your heart your gut
71:43
but make sure your prices will be three
71:45
percent less savings preparing you know
71:49
savings are encouraged people are going
71:51
to worry about the dollar being wiped
71:52
out what salary might remain about the
71:56
same in money terms and the prices kept
71:58
falling the real income kept going up
72:00
and if that would say the same for age
72:03
of the person and then you know the
72:06
prices of course the living kept going
72:07
down we always went up grazie
72:10
okay marvellous period of living in but
72:14
there’s no air conditioning abandoned we
72:15
can’t remember everything steel ingots
72:21
and castings and other steel of course
72:24
comes in really starts with a civil war
72:26
period so around there feel any knots
72:30
and castings produced in 1867 twenty
72:40
thousand long tongues I know some of
72:41
these things are measuring a short-term
72:43
tons it’s kind of long I know exactly
72:46
why anyway didn’t ring difference 20,000
72:50
1899 it was ten point six million so
72:58
that’s about five hundred fold increase
73:03
of Steel of stealing guts
73:07
there’s an index of physical production
73:10
a very difficult physical manufacture
73:12
actually very tricky and you can’t
73:13
really do it very well but actually went
73:15
out by by by about six fold in this
73:17
period with stealing that’s again
73:21
most of it one of the things is
73:24
reflective change in technology of steel
73:27
or in 1867
73:38
most the CEO with crucible steel which
73:40
is apparently high quality of each can
73:43
make much of it crucible which is about
73:49
17,000 tons a little bit of Bessemer but
73:53
that’s what I’ll just coming in then
73:55
starts in Europe it’s 2.7 Bessemer I
74:02
think it’s a prize I don’t ask me in any
74:05
detail veterans applying the force hot
74:06
air and of course oxygen and I think
74:08
high temperatures which makes it more
74:12
malleable and so 1899 who supposes up to
74:18
101 point two thousand Bessemer seven
74:23
point six million thousand one six
74:28
million and coming up fast on the
74:30
outside an open heart steel which comes
74:33
in which starts about 1870 and zero in
74:36
1867 over hardly even hotter objections
74:42
or whatever and then mister 3.0 million
74:45
of passes passes Bessemer by buy a 19-5
74:48
is something I like that open hearth on
74:51
becomes the key steel remains the key
74:54
steel thing until 1932 something with a
74:56
bell was the oxygen cool huh
75:00
cool oxygen converter with the same
75:03
event oxygen version or something that
75:06
again started yeah something like a
75:09
sudden conversion or something well see
75:11
light at a USD which was supposed to be
75:13
a monopoly a design of the monopoly and
75:15
steals the last company there’s any of
75:17
these things alas I’ll ask corporation
75:18
in the world and steel of engines with
75:20
the current process there there were
75:22
never they were always been a flaw Peru
75:28
okay so Bessemer that they ruled the
75:30
roost until about nineteen six or open
75:32
hearth essentially takes over ninety
75:35
eight and then roll Lauren steel comes
75:39
done something again knew which was
75:41
didn’t exist in 1867
75:46
rolled iron and steel huh crash
75:49
forecasting and ingots so zero in 1867
75:53
and then by 1890 or 1885 of 3.1 million
76:00
tons and 1899 is about ten point three
76:04
million coming out very fast
76:06
it’s an edition of all the other stuff
76:08
at this is roll line so enormous
76:13
enormous increasing ions Giambi’s iron
76:15
steel production where do you think all
76:19
of the place deliver huh railways rail
76:22
line of steel rails and manufacturing
76:25
office of other things that’s the basic
76:27
thing and I want meant for machine tool
76:28
machines in general huh well no this is
76:38
just an indication what was going on as
76:39
I’m showing the tremendous increase in
76:41
production and they’re just taking
76:42
different industries this is an example
76:45
illustration was going like the
76:46
ministering a production will look like
76:48
manufacturing size of the factory comes
76:52
on them I mentioned this in a minute
76:53
factories really come in in the superior
76:55
they weren’t didn’t exist before much
76:57
except the norms on the manufacturer so
77:00
I mean the whole thing just an explosion
77:01
of and they will fit together
77:04
rails produced steel rails go up about
77:08
six folder in 1857 they were four nine
77:17
four and a half thousand tons in 1899 it
77:22
was 2.3 million pounds this is a period
77:26
by the way when there wasn’t much rail
77:27
railway increase in rail ride mileage by
77:30
this pond that’s cool no I think
77:32
outpouring of rails so this is my
77:38
foreign fifteen that so those up my must
77:40
exfol
77:45
structural iron steel goes in a lock of
77:48
those days by about tenfold bricks still
77:50
up by by threefold cotton textiles
77:53
increased by by fivefold coal you piece
77:57
by 14 times and kudo of course in people
78:00
have a 19th I will get the Coulomb it’s
78:02
a big new industry on oil industries
78:04
virtually brand-new CUDA were like
78:08
pieces from 1867 it really begins in
78:16
1859 the first oil wells dug Titusville
78:19
Pennsylvania 1859 1867 3.3 million
78:24
barrels a big increase in twisting zero
78:28
1999 was 57 point 1 million thousand 19
78:32
fold increase the again the mostly
78:43
profit Bessemer begins in England the
78:45
open hearth process begins in Germany’s
78:47
Siemens Martin process especially United
78:49
States however the most greatest thing
78:51
creeps me thing with us revolution
78:53
really takes off iron begins to tap in
78:58
the Minnesota iron mines are gonna come
79:00
into production then the zombie iron ore
79:02
engines like so the area comes in the
79:04
production coal holes start in
79:07
Pennsylvania an increase spreads to
79:08
Illinois West Virginia and Kentucky and
79:10
crude oil sea begins a Pennsylvanian
79:13
continue there and spreads down Ohio and
79:15
Indiana so what’s up what a Civil War
79:22
most of the power and industry is water
79:24
power let’s say you got the power and
79:25
the motor of powering ëthis what if I
79:28
wasn’t that bad
79:29
he had a situate Nero with some kind of
79:30
water for those kind of limited location
79:33
for approval forever a lot of no one
79:35
y’all been to England do you want to
79:36
leave me what I call me man thank you
79:41
turbine whatever you know the water goes
79:43
over it and produces power
79:46
theme comes in effort civil war it takes
79:48
over and one of the great things about
79:49
steam is you don’t have to worry about
79:50
being near a waterfall
79:52
you’d be anyplace so you can you can
79:54
locate near markets you can okay
79:56
your fuel supply you’re not stuck with
79:58
the financed no when of course have a
80:01
lot of screens of waterfalls it was
80:02
again for that other place is very
80:04
different all the fine one steam turbine
80:08
comes in separate cetera factory comes
80:12
as I’m as a mention about the fourth the
80:13
civil war basically there were no
80:15
factories what happens is you have a
80:17
capitalist advise invest saves up an
80:19
invest in material wall materials they
80:23
say cotton textile the invested in
80:25
material and he finds weavers knitters
80:27
and we’re everything hires of them using
80:29
on piecework basis to produce this stuff
80:32
and he gets it so go down the line the
80:35
weavers and then have to have their own
80:37
equipment you have your own loom and the
80:38
basement or wherever the ground floor
80:40
and so it’s obviously limits production
80:44
you have any embrace it school of
80:45
putting out system of the message system
80:48
and where the merchant potentially saves
80:55
up an investor this thing and then but
80:57
the workers own their equipment there
80:59
was no alienation on quota workers in
81:01
that capital they have to own their
81:02
equipment that’s a big that’s a big
81:04
problem know was if you’re a weaver you
81:05
have to only you’re a loom and weed you
81:06
have to have a lot of money to buy the
81:07
loom or the little over you get a clean
81:11
system so after the Civil War factory
81:19
comes in we bring the workers together
81:21
in the one spot and you have a
81:22
continuous flow some sort of equipment
81:26
you have a machines together the
81:27
capitalist owns the machine drunk a
81:28
worker happen invest in the machine this
81:30
is a big thing in fact it’s a big
81:32
benefit to the worker it means anybody
81:33
can get a job they don’t have to own a
81:35
room or whatever else it to earn own
81:38
iron forging equipment or event they so
81:42
the factory has been the fine I guess
81:44
it’s pretty good definition as a place
81:48
where quote raw material can be
81:49
converted into finished goods by
81:51
consecutive harmonious process of
81:53
carried along by central power
81:55
he’s a simple power source so that was
82:01
the growth of the factory system and men
82:04
afford an enormous increase in
82:05
productivity and how many goods could be
82:07
produced coming out of the factory
82:09
and a bunch of people from each one with
82:12
a loom present meant you had a
82:14
supervisor employees you have buildings
82:16
or if everybody gets the you know just
82:18
together he had a machine located out in
82:19
the same spot I have much larger
82:22
aggregations of capital equipment you
82:24
can have before that and means I say the
82:27
worker doesn’t have to save up the money
82:28
to buy his own looming I have then have
82:30
a central location system by the way one
82:33
interesting thing is an anti-capitalist
82:35
pipes
82:36
left us and so forever then belly aching
82:38
about the factory system for about 150
82:41
years this alienates the people from
82:42
their labor they don’t good old ladies
82:44
to work at home like I’m a farm work at
82:46
home family works at home and now you
82:49
father the husband of something is
82:51
yanked away from this I love a part you
82:55
know that has to go to the workplace and
82:56
works in the factory is alienated
82:58
somewhere so on now we have a situation
82:59
now a very high-tech the more and more
83:02
the situation when people can work at
83:03
home as you know what computers and so
83:05
forth and and so now that the belly
83:08
aching again for the leftist
83:10
anti-capitalist fun now they no they
83:12
don’t call by alienation what it’s not
83:13
belly aching the purple thing is they
83:14
can be exploited when they’re at home
83:17
this happened with a beloved knittingham
83:20
ladies of Vermont I think they work few
83:22
years ago apparently remind I forget it
83:26
was a perm on it Hampshire anyway that
83:27
whole bunch of ladies and sit at home
83:29
and knit ski caps and sweater stuff like
83:31
I think eat naps and they were happily
83:35
you know knitting away a great shade
83:37
there they were making money they
83:39
couldn’t have made before they could
83:41
work at home and have that babysitter
83:42
that sort of stuff so however it
83:45
violated the Department of Labor
83:47
regulations you can’t have homework
83:49
homework is illegal
83:51
most for most occupations this was put
83:53
in by the labor unions in the 30s
83:56
there’s eat nice there’s somebody
83:57
working at home was not going to join a
83:58
union I’ll be very rare for it’s good
84:01
for a home purse homework person or
84:03
joint some damn Union
84:04
so unions have a little passive outlaw
84:07
homework and when they part my labor a
84:10
few years ago found out there’s a Carter
84:12
Administration find out for these people
84:13
were illegally crack down there you
84:15
can’t you
84:16
I think we ski captain anymore there’s a
84:18
lot of complaints but picture the
84:20
lovable middle-aged middle-aged lady to
84:22
have a private their homework and we’re
84:25
getting and they and you mean you go
84:26
claiming they mean exploited it getting
84:27
below the minimum wage it turn out that
84:28
weren’t getting all of them in wage but
84:30
they were exploited under evil
84:31
conditions of course they didn’t think
84:32
their homes are evil working condition
84:34
doesn’t leave a pretty good shape so in
84:36
general this this that this you know the
84:40
agitation the result was the Reagan
84:42
administration came in what they did is
84:43
they passed a war thing I think they say
84:45
that he came from in England
84:47
outerwear he can’t living or something
84:50
legal and nothing else
84:51
gonna wear sweaters are fully illegal
84:53
knitting sweaters at home everything
84:55
else is a legal just he can’t be some
84:56
other thing well subcategories now legal
85:00
yeah I hope it’s Carly I think they
85:02
probably blow that threw up a pie panic
85:04
struggle so anybody so they don’t throw
85:08
any more about alienation I’m greeted as
85:10
to work at home now that complaining of
85:11
mattify now you have a situation like
85:12
the pewter pipe sir and Lowell Island I
85:15
working at home and people are gonna
85:16
think I’m playing because they have
85:18
visitors traffic walking later the
85:21
rodents and stuff like that the country
85:24
struggling they finally zoning laws we
85:26
cannot supposed to do anything at
85:27
homeland yeah the whole big nonsense oh
85:29
that marvelous shrinks often staying
85:33
home and they found out laws as a whole
85:34
web it was on and on so anyway somehow
85:36
homework even though allegedly beloved
85:39
by status leftist pipes and it did web
85:42
didn’t the half exists much now that a
85:44
can existence does much more than
85:45
bel-air hang about that too
85:54
okay corporations come in first let’s
85:56
say for railroads and next for
85:58
manufacturing of a much lighter report
86:00
app example standard oil as a
86:01
partnership until quite late so with all
86:04
the other companies corporations
86:07
advantage of corporate the corporation
86:09
the corporate form over partnerships is
86:15
well several obvious advantages first of
86:20
all the corporate form it’s permanent
86:22
in the word you have a bunch of people
86:23
at all yeah deflation well yeah and
86:30
they’re only in the sense that they did
86:32
was don’t worry about inflation don’t
86:33
worry about a dollar with deflation yeah
86:56
yeah that’s right yeah so yeah yeah your
87:02
your real income goes up what why well
87:07
that’s I don’t think deflation creates
87:09
the situation if a thief I should permit
87:12
productivity to the lower prices
87:13
it wouldn’t work the other way around it
87:15
increasing productivity saving
87:17
investment and I think pieces supplying
87:19
good nowhere i curve shifts to the right
87:22
license go then this increases
87:25
everybody’s real income in terms of
87:26
purchasing powers they can invest more
87:28
and spend more yeah sure
87:30
well okay I wouldn’t say deflation says
87:33
just over the causal fourth factor ‘as
87:36
you have an increase in you don’t have
87:38
any much monetary inflation so he permit
87:41
the price to fall if this increases
87:43
everybody the only company that’s bad
87:44
yeah right there was nothing some house
87:47
it’s good that deflation per say if it’s
87:49
good limit it’s caused by increasing
87:51
productivity and allows everybody to
87:53
have increased real income all right
87:56
does Maxine we have inflation a lot of
87:59
people have decreased real income to the
88:00
wages don’t catch up at prices but yeah
88:04
they don’t have that problem here
88:05
go up so okay let’s take a ten-minute
88:10
break er selling will be cooperation for
88:13
a lot of been able to acquire a large
88:15
amounts of capital first place I mean
88:20
Isis or not the rank-ordered
88:22
different advantages one of the
88:25
permanent in other words you have a
88:27
partnership you and your brother alone
88:30
your friends or whatever on one pointer
88:33
dies it’s a big headache you usually
88:34
have to reorganize the partnership and
88:36
we distribute the assets stuff like that
88:38
corporation is permanent one stockholder
88:40
dies nobody cares yeah and the end of
88:43
the it subject continues on with other
88:44
stockholders second of all this is part
88:47
of the whole picture you can transfer
88:49
your stock in other words you know
88:51
transferability of ownership in other
88:56
words you have a corporation with a
89:00
minyan shareholders let’s say you have a
89:03
ten million dollar corporation only $1
89:05
an asset and you have a minyan
89:09
shareholders so that means one gift you
89:15
own one share your attention the only
89:17
one one one tenth of the give me one one
89:20
of one share means you’re only one tenth
89:25
Yeah right
89:26
what’s a 1 1 million I’m ten million one
89:31
ten minutes right limit 1 million 1
89:34
million I’m sorry ok you own one one
89:37
millions of operation if you own the
89:42
whole million shares young the whole
89:43
ball of light coat each each shares
89:46
worth $10 with that it’s a shared league
89:49
$10 and if you own one chair you own one
89:55
1 million for the corporation so you can
89:57
the things you can set your share in
89:59
other words you’re a partner therefore
90:00
partners in this firm you can’t sell
90:03
your share I mean you’re sort of stuck
90:04
you have to you can ask your partner’s
90:07
to buy you out but sometimes I don’t
90:09
want to buy you out and you’re stuck so
90:10
if you have transferability very
90:12
important your liquid in other words
90:14
sell out tomorrow I want to buy 10
90:17
shares of IBM I want to tell them I can
90:18
do it like that I don’t so wait
90:20
negotiate with somebody etcetera
90:22
etcetera so this means if you know Lee
90:25
you can transfer ownership whatever you
90:26
want you’re much more likely to invest
90:28
in the corporation obviously we’ll sort
90:30
of lifetime commitment to be a partner
90:32
in some firm and three you’re only the
90:36
stockholder is only liable for the
90:38
assets of it it’s in the corporation in
90:40
other words limited liabilities it’s
90:45
cool so in the case of if you own in
90:50
other words $10 worth of General Motors
90:54
whatever it is your General Motors
90:55
always bankrupt you lose your attends
90:57
all let’s say you lose the whole thing
90:58
you think don’t because they can resell
91:00
it and whatever but anyway let’s assume
91:01
the whole corporation goes disappears
91:03
just go bluey all you loses 10 bucks in
91:08
other words the maximum you can lose 10
91:10
million dollars of the total asset if
91:12
you’re a push the lion in liability your
91:14
partnership you can lose your whole will
91:15
your personal assets in other words if
91:17
you if you owe your a partnership you a
91:20
million dollars and you liquidate you
91:23
gonna bankrupt me only owned you can
91:24
only raise 100,000 libel if the other
91:26
nine are the size you can have to sell
91:27
your house and whatever I mean usually
91:29
bankruptcy will is limited but the point
91:31
is your personal assets are involved
91:33
where personal assets are never at risk
91:35
in the corporation and you can say it
91:38
isn’t this there are many arguments
91:40
about this many libertarians free morgan
91:43
types argue the corporations are immoral
91:45
because the government limits the
91:47
liability in other words this is an
91:49
artificial limiting it’s a subsidy of
91:51
the corporation that was the argument I
91:53
don’t I don’t think the argument is
91:54
correct because the thing is when you’re
91:57
a corporation you put your creditors on
91:59
notice in other words essentially if you
92:00
want to lend money to General Motors or
92:02
IBM or if you’re a worker and you’re
92:05
waiting for money if you so you buy a
92:07
bond or whatever you know whatever the
92:08
loan happens to be you know that the
92:10
corporation is soft over the limited
92:12
liability and you take that risk
92:14
so it isn’t as if it so the government
92:16
something interferes and says no no
92:18
person you can’t you can’t attach the
92:21
personal assets that whoever owns the
92:22
core price you know that beginning you
92:23
take that chance so it’s I did not
92:25
consider that a subsidy the only subsidy
92:28
that comes in here is when a corporation
92:30
commits a tort in other words a tort is
92:34
run a corporation somehow injures some
92:36
person or whatever third party injury in
92:40
other words the person doesn’t contract
92:41
for it I don’t know what the young
92:43
corporation truck of a corporation told
92:46
somebody
92:47
whatever and whatever a pollution is
92:49
nothing or nuclear a nuclear accident
92:50
now these things of course are are tort
92:54
therefore you can’t contract a limited
92:55
liability the corporation has a limit of
92:57
liability for torts that is a subsidy
92:59
because it’s not part of a contract with
93:01
a creditor at least to it because if
93:03
you’re a third party a victim of some
93:06
court over corporations one way or the
93:08
other you haven’t agreed to any
93:10
limitation liability outside of that
93:12
this doesn’t happen very often a
93:13
corporation is perfectly legitimate from
93:15
the point of view of a supreme market or
93:17
a little carrying a legal structure
93:20
anyway there is disease this is the
93:22
corporation needs are you’re going to
93:23
acquire a vast amount of capital
93:25
somebody’s willing to investor they know
93:26
they can sell their shares at any time
93:28
and so forth so on the tremendous
93:30
advantage to the to the company to the
93:34
to the investor an enable enormous
93:38
amount of growth from the important
93:40
manufacturing and in railroad
93:41
corporations another thing that comes in
93:43
in after the Civil War look from nothing
93:48
isn’t she the whole kind of insurance
93:50
insurance really begins around after the
93:51
Civil War period more or less and keeps
93:54
growing until this day life insurance
93:56
accident your whole bunch of stuff
93:59
assets keep growing thing about
94:02
insurance company for example give you
94:03
an idea that your the tremendous
94:05
increase in 1860 the total assets of
94:10
life insurance companies which has been
94:13
a major pileup insurance will see told
94:18
laugh have 224 million dollars of all
94:21
life insurance you know faith 1897
94:25
so laugh is for 1.35 billion and it’s
94:31
been dropped growing almost of this
94:32
rates and this rate since their enormous
94:34
increase in capital as the reason does
94:37
and they most invested in railroads and
94:39
set that stuff other thing is that life
94:41
insurance is a very peculiar industry
94:43
much more peculiar than accident
94:44
insurance or a fire insurance principles
94:48
of insurance are they with fire accident
94:51
essentially you’re pooling risks let’s
94:53
say there are there are thousand
94:54
buildings some town and you’re worried
94:58
about fire until you pull your risk and
95:00
statistically they have a large number
95:02
like that you can pretty well for digger
95:03
one building will burn down in a year
95:05
she went over a B so everybody pulls
95:08
their risks you’ll contribute a certain
95:10
amount of premiums and then when one
95:12
building burns down they pay off the
95:14
other guy who you know suffers with loss
95:17
and they’re going to calculate it fairly
95:19
fairly neatly precisely an actuarial
95:23
basis so if you know that 1 billion turn
95:26
out there and then believes worth a
95:27
hundred thousand dollars the pool these
95:30
villas you get together you know charge
95:31
the premiums which more or less fit
95:33
fitness competitively you wind up you
95:37
pay the guy off and that’s it there’s no
95:38
amassment of capital access donut
95:40
there’s a big capital investment it’s
95:42
just you’re pulling resting and pay off
95:44
with either losers so this time
95:48
insurance fire insurance actually sure
95:49
it doesn’t pile up capital it’s not
95:52
great no great advantage to any group of
95:54
financial interest to control it because
95:56
who care and just in a sense and the
95:59
pure sense that you this is the assets
96:00
disappear at the end of the year pile up
96:03
a hundred thousand each guy could let’s
96:04
say that 10 people each one contributing
96:06
certain amount of money or hunt let’s
96:08
say a thousand a hundred people each
96:10
contributes $1,000 a year premium if
96:12
they collect one hundred thousand
96:13
dollars they pay you off one your a year
96:15
hundred thousand they don’t have any
96:16
assets at all except you know a little
96:17
bit of salary or something so there’s no
96:20
reason for our shorts companies become
96:22
become big financial plums so to speak
96:26
now of course what insurance by the way
96:28
another thing about insurance the thing
96:30
which screws up insurance is when the
96:32
loser actually put this the loser
96:35
creates his own
96:36
praise his own loss in other words you
96:41
have to assume these are acts of God or
96:42
nature in New York for example is an old
96:47
tradition where burning down is you’re
96:49
losing money on a store let’s say you
96:50
burn down the store collect the fire
96:51
insurance this not supposed to do that
96:54
it’s obviously illegal because you’re
96:56
defrauding the insurance company that’s
96:58
supposed to be paying for somebody
97:00
consciously burns out some you’re only
97:01
paying for an accidental fire obviously
97:03
so so setting your own fire your
97:08
so-called will obviously yeah no no and
97:12
life insurance the whole life insurance
97:13
system is different from or less of it
97:15
my feature is a very peculiar industry
97:16
because in life insurance with so-called
97:20
term insurance was more or less like
97:21
this in other words you can tell more or
97:23
less how many people will die in each
97:25
age group the United States every year
97:27
and then you can people to their
97:30
resources they can set premiums in such
97:32
a way they pay off the people term
97:34
insurance they don’t build up a lot a
97:35
large amount of capital of the way life
97:37
insurance is functioned most the United
97:39
States is so-called whole life insurance
97:41
where you pile up an enormous amount you
97:44
charge much more than they than the
97:45
competitive rate you pile up the norm
97:48
eternal capital which sits there and
97:49
coach somebody died as a result of this
97:51
you’re essentially paying double in
97:53
other words you’re you’re amassing
97:57
department becomes sort of a capital
98:00
investment in a camp and veterinary
98:01
whether the policyholder doesn’t really
98:04
benefit in other words he still feeds
98:05
that pays a high premium and the
98:07
insurance company has enormous amount of
98:08
capital which they can use them to lower
98:09
their and increase their profits so
98:13
there and then a capital amassed the
98:16
reason why this was allowed to take
98:17
place is who as we see the progressive
98:19
period edition everything else that cart
98:21
allows the insurance industry an
98:22
outlawed so call like a Terry insurance
98:24
though with insurance clearly the charge
98:26
a lower rate you have to have licenses a
98:29
very heavily regulated industry for each
98:31
state as a result you have the whole
98:33
thing becomes a quasi racket where they
98:35
have a monopolize or Cottle eyes
98:37
industry which which then where they
98:39
charge a very high premium now now whole
98:40
life has become more or less that’s
98:42
predator they’re getting away from that
98:44
it’s because people obviously lose a lot
98:45
of money
98:46
he saw the age of 21 or something keep
98:49
Orion preemie
98:50
and try to you wind up by about 40 or
98:53
something you’re really paying the
98:54
insurance companies in other words what
98:56
you should really do if you have a whole
98:57
life policy keep turning it over cash
99:01
the policy and get your cash surrender
99:02
value and get another coffee somewhere
99:04
else
99:04
insurance coming take back because
99:06
that’s the stories a whole racket as
99:09
ugly insurance
99:11
well I’m sure in salesmen always told
99:13
nothing encourage people do it Mac I try
99:15
to prevent them from doing you don’t
99:16
want to turn it over that’s unethical
99:18
competition they would say it’s okay to
99:20
have a new policy but nothing not to
99:21
have nothing yet your new policy like
99:23
getting any personal cash in the other
99:25
policies once they do that they realize
99:26
the hoping in the racket anyway there
99:28
was also an enormous piling up of
99:30
resources with NASA plus the fact that
99:33
insurance companies are mostly nonprofit
99:36
they’re mutually own most of them which
99:41
means trustees don’t really own the
99:44
assets here they have they pile up an
99:47
enormous amount of assets they don’t
99:48
make any profit on them long as they
99:50
don’t go bankrupt it’s like colleges
99:52
only they don’t go back up they can hang
99:53
on forever but there’s no incentive to
99:55
maximize your profits busy there’s no
99:57
stockholders there’s only no partners
99:59
even just trustees members of the board
100:02
whose love a sort of altruistic function
100:05
of keeping everything going it’s another
100:07
way to have an enormous amount of
100:08
capital pile up life insurance and it’s
100:12
a plumper financial lives to take hold
100:13
of it and the way the trustees are never
100:15
trust these a self-appointed in other
100:16
words nobody chooses those stockholders
100:19
and so in the mutual we own companies
100:22
they have things like the depositor hold
100:24
an owner unquote and so technically the
100:27
depositors vote for the for the
100:28
water record the other hand the
100:29
positives can ever vote other words they
100:31
define Prentiss that you can’t vote so
100:34
what happens is if they’re a trustee
100:35
they’re twelve fifty they keep
100:36
reappointing vacancy they suffer
100:38
fluctuating oligarchy
100:39
so what happens is after the late
100:42
nineteenth century these were taken over
100:44
by various financial groups the Morgans
100:46
of rockefeller they all have their own
100:47
insurance company then they could take
100:48
the assets and most of the control their
100:51
company they want to control I was
100:52
investiment fan of the oil in a Morgan
100:54
company and the vote whistling way they
100:57
Morgan people over the rock puppy were
100:58
one of the vote they become allies and
101:00
they don’t actually lose a lot of money
101:02
and go bankrupt you know
101:03
about making profits so they become in
101:04
other words voting allies of the Morgans
101:07
Rockefellers Vanderbilt Oh every night
101:10
whatever Financial Group is so this is
101:13
by the late nineteenth century by the
101:14
1890s other kinds of important
101:16
consideration so there’s a New York is
101:20
never a Mickle pause and I forget now
101:21
which it is one of them two of them are
101:22
Walker fellow have it to him organ or
101:24
something like that
101:27
Investment Banking I’ve already talked
101:29
at that invested Mackey an oddly enough
101:31
has never been a corporation it’s always
101:32
been a partnership Morgan to lower bull
101:35
these companies were there right now as
101:37
of this moment of becoming corporations
101:39
so from the beginning of Investment
101:41
Banking from the present they’ve been
101:43
partnerships one of the reasons for that
101:46
is and they maintain secrecy in other
101:48
words if your partnership you don’t have
101:49
to have you know make public the county
101:52
not fulfill requirements nobody really
101:55
knows what’s going on they can have
101:56
secret deals without getting being in
101:58
the public all right they could just
102:00
increase the number of partners look and
102:03
the more in the case of the Morgans I
102:04
don’t see in particular they have
102:08
political partners in other words two or
102:10
three guys are assigned the path did
102:12
almost does it almost there’s no
102:13
Investment Banking their job to put the
102:14
burgers together in the lobbying
102:16
government a government regulations they
102:17
don’t want something like that it became
102:19
sort of political partners rather than
102:23
strict investment bankers in the
102:25
anything a narrow sense so by the as
102:34
we’ll see by the 1890s as the is we’re
102:37
gonna have corporations in manufacturing
102:39
and the Morgans get into that the
102:41
Morgans we’re going to promote the idea
102:42
of mergers or either cartels are mergers
102:45
a Clark tells doesn’t work very well
102:47
with railroads so instead of cartel they
102:49
they got another gimmick namely why
102:52
don’t we have a situation all the
102:53
companies with their eight Humvees in
102:55
one industry one of the old Cooley
102:57
resorts and become one company and then
102:59
I have a monopoly then they can raise a
103:00
price that was the idea so the great
103:02
merger movement well we’ll go into some
103:05
details and that’s only next time maybe
103:10
Tuesday the next thing that well the
103:12
idea that merger was will act like a
103:14
cartel except you wouldn’t have to worry
103:16
about
103:16
internal competition and cheating
103:18
because they just merge into one
103:20
corporation of one holding company one
103:22
trust as it was called it was called a
103:26
custom a use the tough instrument they
103:28
have have a trusty ship instrument so
103:31
the idea is this ok we’ll take the
103:33
speaker all the steel company let’s say
103:35
they’re 80 steel company they’re all
103:36
competing very vigorously why don’t they
103:38
all merge it in once the old companies
103:39
at us do two yards and us steel by 1901
103:43
and we’ll have and then you see they
103:45
could take all these merger everything
103:48
and then they gonna take supply and they
103:50
can cut the production and raise price
103:52
that’s the whole point other they can
103:54
dump some of the implants which are
103:57
inefficient or whatever a dump that and
103:58
then we’ll cut production raise price
104:00
and cheese their monopoly profits that
104:02
they’ve been longing for so that’s the
104:04
that was the and they did this by the
104:06
way in late 1890s great with to merger
104:09
white one of the early nineties a major
104:10
one few years 1898 in 1901 well
104:15
literally several hundred industries all
104:18
have these merger monopolies mergers the
104:20
whole rasa then I go into some example a
104:23
little bit later sugar refining oil
104:25
steel agricultural machinery the whole
104:28
bit and the interesting things each of
104:30
every one of these cases virtually the
104:32
whole thing is a flopper route they’re
104:33
usually put through by the Morgans US
104:35
Steel was a Morgan merger General
104:37
Electric’s the idea don’t like to have
104:39
one merger monopoly company I was also
104:41
Morgan AT&T; was Morgan of courses
104:45
achieved monopolies through government
104:47
regulations for patents and Federal
104:49
Communications Commission later all
104:53
these all these things were reflections
104:55
of attempt usually led by Morgans and
104:58
others to having monopolies and then
105:00
they could cut production rates price it
105:02
flopped every time the reason of Kwadwo
105:04
first of all monopolies are inefficient
105:05
we’ll get to this a little later the
105:08
National Biscuit Company was originally
105:09
monopolies have to have a monopoly
105:11
Napoles old biscuits and cooking in a
105:13
country packaged cookie little of
105:15
flopper ooh those new companies have
105:17
come in either even though there isn’t
105:18
she even though they merged they raised
105:21
their profit immediately hey this is a
105:23
monopoly coming a high profit looks as
105:24
if in there a new plant a better plant
105:26
over so they have new guy new cookies
105:28
no sugar refining new oil and new
105:31
whatever and then there’s stuck then
105:33
they have done that whole heart Eleanor
105:35
juris broken
105:36
the company loses her percentage of
105:39
share all-time and I stuck with two or
105:41
three new permanent company to a good
105:42
competitors has modern equipment much
105:44
more monument to their new I think it
105:46
come to the brand new equipment and
105:48
they’ve stuck from then on I wholly US
105:51
Steel for example is a classic case of
105:53
companies of total flopper rules in the
105:55
very beginning it started with you try
105:57
to get 100% of the market the only
105:59
achieve about eighty is something at the
106:02
P they kept losing shares all the time
106:04
instead of losing money losing having
106:07
suffering losses and ferment for that
106:10
say from 1901 gonna present yours feels
106:12
about a crummy company they didn’t look
106:13
good constantly losing their share of
106:15
the market always behind the new
106:17
technology the last people have put in
106:19
the oxygen whatever process and a no
106:23
always some lanes through life and
106:25
because they were they were building I
106:27
could stuff it as a monopoly and not as
106:28
an efficient free market competitive
106:30
parent company and the same thing
106:32
happened all the others is will say and
106:34
what they had to do was this safe to do
106:36
to really compete they had a shift years
106:38
we will see the national blister company
106:40
think about two or three years I said
106:41
worth were through with us stopping was
106:42
good trying to compete it was not
106:44
working so even though they didn’t have
106:46
an internal cheating the external
106:48
pressure was enormous the permanent
106:49
they’ve been with the plants it was
106:52
steel plant for oil plant or refineries
106:54
and the rest of it but this is I’m just
106:56
giving you a sort of an indigent hint
106:57
indication of the future yeah oh that
107:04
would be a tough thing to do where they
107:05
try to merge and each one they know
107:08
where they they all pool their shares in
107:10
the one giant company it’s a family the
107:12
world did it’s a generous us deal with
107:13
you have like any company funny company
107:15
whatever it is they take their shares
107:17
they pool them they will become pro rata
107:20
share holders in the new company I would
107:22
one big company
107:23
what’s a lot of headaches to do it and
107:25
but I usually agrees I says you’re a
107:27
head of one company and your merger
107:29
become president of the division of that
107:32
company something like that they do that
107:33
now that’s nice you know you merge the
107:35
public eight publishers let’s say merge
107:37
the law of time
107:38
and the old publisher becomes bored out
107:40
they still remains president wants the
107:42
life of a division you know we retired
107:45
stuff like that so they do things like
107:46
that they have agreements to do that uh
107:52
well yeah they’ve done me Carnegie for
107:54
example the builders we’ll see later we
107:55
get the steel horny you build up a giant
107:57
Carnegie steel corporation is very good
108:00
entrepreneur great steel ma’am and then
108:02
he gets yeah I get a little old it
108:03
figures on a ready to retire he sells
108:05
out the Morgan he becomes part of US
108:07
Steel he gets this huge amount of money
108:09
and I suppose we’re piling over
108:10
statesmen that’s the way it’s done you
108:12
gets you know I get to the point we
108:13
figure that I’ve had it go to Europe or
108:16
something and you get but part of the
108:18
great Morgan Empire no but the key thing
108:22
is it didn’t work over the swapper room
108:25
and because it’s fantastic amount of new
108:27
competition coming in and we’ll see how
108:31
this was the same thing with Standard
108:32
Oil
108:34
but Standard Oil by the wives I’ll
108:36
repeat this detail later we’re having to
108:38
stand well Rockefeller never attempted
108:40
again a monopoly in crude oil or
108:41
distribution or anything like that could
108:43
never do it he tried for monopoly war
108:46
refining because we’re finding of no
108:48
clearly capitalized part of the industry
108:50
and he got at one point he did it by
108:53
buying them out by having mergers like
108:54
mine what’s your pricing my advice
108:58
biorefinery he got to the point where he
109:00
got about peaking about ninety percent
109:02
of them or refinery and then what began
109:07
to happen was that people began to sell
109:09
without this more detail later on a
109:11
little bit later but but if I happen is
109:13
this people would know in the industry
109:15
hey this is guy rockefeller was willing
109:16
to buy every refinery dope and then put
109:19
me I’ll not use it he became sort of a
109:21
sucker in other words people again as a
109:22
lender the business of building refinery
109:24
so the Rockefeller have to buy it didn’t
109:26
expect if you use it now this circle is
109:29
gonna buy my refinery and so they
109:31
started using awesome building fake
109:32
refineries like it looks like a
109:33
requirement there’s nothing as well
109:35
equipment okay but temps didn’t
109:37
refineries on a call that this is a
109:40
takeover the so-called Potemkin village
109:42
and Zara Russia
109:44
you have a big shot visitor the show the
109:47
peasants are happy and smiling I have a
109:49
big village
109:50
Megara leaves a Judas here’s a villager
109:53
happy peasants and they show the people
109:55
with doing six hours later when I go on
109:56
the village this would be a perfect
109:58
communist is something similar later on
110:00
anyway school was called a Potemkin
110:02
village so this is they had essentially
110:04
if the temp gun refiner looked over a
110:06
fire was no there’s no stuff in it the
110:08
finally Rockefeller one points was I’m
110:09
sick of this I’m losing money and blind
110:11
exam refineries had nothing to do with
110:12
them if he put I’m sick of same claim
110:14
blackmail these people I’m stopping an
110:16
old things he’s stopping trying to get
110:17
keep the monopoly refining well then
110:20
having one later on but when I are
110:22
really skipping a lot but what happened
110:23
and he was concentrated as we’ll see in
110:25
western Pennsylvania that was his oil
110:27
wells and as a refinery was in Cleveland
110:30
and so he had pipelines and
110:31
transportation software roads to get get
110:34
the oil his whole life was built on
110:36
Pennsylvania crude oil and they started
110:39
around 1900 or so they started oil
110:41
discovery Google occurs in Texas and
110:43
Oklahoma Rockefeller didn’t believe it
110:46
Santa would be back to flash in the pan
110:47
there was the whole life was geared
110:49
toward Pennsylvania as a result new firm
110:51
Lou young tiny firms popped out like
110:54
Texaco and Gulf to exploit the Texas oil
110:57
fields and then Rockefeller Standard Oil
110:59
the way behind on that this is what
111:00
happens when the knop elite companies
111:01
begin to lose that we’re gonna get less
111:03
innovative
111:04
you’re a cranek and they lose out on a
111:06
competitive framework the same thing
111:09
happened by the way to skip totally to
111:11
the current post-world War two period
111:14
and the photography industry anything
111:16
happen Eastman Kodak Eastern I used to
111:18
have a monopoly of America at least in
111:19
America and photography about fourth
111:21
world wide and so in two cases with two
111:25
of the most dramatic improvements in
111:27
photography when world war ii only
111:30
Polaroid and Xerox and both cases
111:34
doctor LAN the inventor of Polaroid
111:36
instant camera and whoever the guy
111:40
wasn’t invented Xerox I forget his name
111:41
eaten each case they went to me to
111:43
encode actress but he was the process
111:44
and all for the saltcellar film you know
111:46
they think hey the guy’s the expert they
111:48
said it won’t work won’t work it’s too
111:50
expensive blah blah blah they rejected
111:52
it they finally had to go to some Bank
111:54
or friends and get capital in the still
111:56
own company where sighs I wish I had
111:58
been in on the beginning first ten
112:00
shares of your hunts or polarized so
112:03
that
112:04
and both cakes over the both cases these
112:05
monopoly firms or coke men often turns
112:08
on close with to set an airway to
112:10
bureaucrat I just miss down on the top
112:11
noon you know top innovations event
112:15
photography so that’s one that’s what
112:17
happens any rate the another big a big
112:27
thing that comes in a late 19th century
112:28
forces electricity fantastic new thing
112:31
in power and and we’ll see by the way
112:34
has been well got courts short and sense
112:38
on that the great guy they’re like I’m
112:41
one of the guys who heroic figure
112:42
they’re a source of Thomas Edison great
112:45
event her and or lack the electric balls
112:47
and everything else can actually live it
112:48
the interesting thing about Edison was
112:50
and also Westinghouse the other great
112:52
nice to say what son Nikola Tesla and
112:57
both the case of Thomas Edison George
113:00
Westinghouse
113:01
both of neither of them went to college
113:03
either more scientifically trained
113:05
that’s not true that they were anti
113:07
science they had scientists working for
113:08
them but they were the genes they were
113:11
creative geniuses no question about that
113:13
they were also you just thinking about
113:15
Edison particularly is very cost
113:17
oriented in other words this whole
113:19
shtick was kind of white how do we get a
113:20
cheap electricity cheap electric lights
113:22
little masks
113:23
cheap electrical power the other
113:24
inventors who are competing with them
113:26
I’m electric mode of life front we’re
113:29
too entranced with the technology they
113:31
wanted elegant technologies and they
113:33
were like people like max them and other
113:34
very good inventors but they lost that
113:37
on the competitive rate so they were
113:38
interested in getting example of with a
113:39
light bulb questioning one of the
113:40
perfect Bowl that would last a long time
113:42
uh one of the high resistance or low
113:46
resistance I forget wishes
113:48
though is that they wanted low as this
113:50
as well with the lasting up twenty years
113:51
unfortunately of course the enormous
113:53
amount of money of course like a
113:54
thousand dollars a bowl that was the
113:56
sort of thing they were working on
113:57
Edison immediately saw in order to have
113:59
our cheap she you have a film of a high
114:05
resistance gonna have a cheap bulb and
114:07
he starts working on that even though
114:09
technologically he wasn’t as elegant Bob
114:11
which would blow out in a year at six
114:13
months of the week much cheaper and he
114:15
starts in on that
114:17
and he gets he gets a high resistance
114:18
wire copper wire separate anything which
114:20
is rate she can he get to cheaper yet he
114:22
start looking at but trying to reduce
114:23
the copper costs and yes it’s enormous
114:26
reductions in the court so he can get a
114:27
mask product the cheaper product and
114:29
they get the same thing with a dynamo
114:31
and they go through the power station
114:33
and the whole business and each step of
114:34
the way looks at where he can we cut the
114:36
cord so instead of having electricity is
114:38
sort of a toy for very rich people which
114:41
is me when I was beginning the
114:43
multi-millionaire to have one light bulb
114:45
but he’s got to sort of mass production
114:47
to get a lot of profits and so that’s
114:49
the way it went out it was a purely
114:50
economically oriented an inventor and
114:54
then he starts with a had a for example
114:55
him in 1883 Edison has a he has a light
114:59
bulb he has a three wire system couldn’t
115:03
figure out the course of copper was
115:05
school very high and of course in the
115:07
course of each bulb with twenty five
115:08
bucks
115:08
he’s not gonna work he’s looking around
115:10
for some way Mets a three wire system
115:12
which cut in the filament which cuts the
115:15
cost of copper lamp and twenty five
115:18
awful bucking a hand that’s the way
115:20
either don’t romantic and Norma’s
115:22
reductions in course he can have a mass
115:24
production system and that frees any
115:26
good works out transmission transmission
115:27
what network and dynamo and everything
115:29
else and finally he says how wait we got
115:31
a charge for this baby you’re not gonna
115:33
have to be electricity and you’ve got
115:34
the meter system no idea of metering and
115:36
hooks it up for the rest of it so a
115:40
metering per Union per kilowatt hour use
115:44
etc so so now his competitor is like
115:49
maximum Swami looking for Li get
115:51
technologically elegant there were very
115:52
durable bubble lowers this and he Amelie
115:54
Sonata we aren’t cheap father if the
115:55
high resistance filament it’s not
115:57
reducing the copper hopper cost still
116:03
these guys many people I gather some
116:04
wasn’t right about everything he have
116:06
tremendous genius type ideas pay ten of
116:09
them eight of which would be great two
116:10
of which were totally off the wall this
116:12
is the way inventors apparently operate
116:14
so for example and he was working at his
116:17
electric system here with direct current
116:18
and George Westinghouse another
116:21
brilliant young untrained unscientific
116:23
inventor customer says always with the
116:25
idea of alternating current wolven egg
116:28
with the red current your limit isn’t
116:29
like a penguin
116:30
Aereo thinker I didn’t go you know
116:31
forever effectively so so Edison says no
116:35
it won’t work
116:36
and what’s thing has to go when y’all
116:38
get capital somewhere and start the
116:41
Westinghouse Electric Corporation based
116:43
on alternating current again the local
116:45
much lower cost system
116:48
Westinghouse also had his own backyard
116:50
is by the way Edison’s insist on time
116:54
running everything himself every detail
116:56
of every area and with him it worked
116:58
doesn’t work with everybody what’s the
117:01
haps example trying to find an
117:03
atmospheric engine or whether you want
117:04
to get power out of the atmosphere and
117:06
insist that it could work they said it
117:09
couldn’t work I couldn’t in fact it
117:11
doesn’t work
117:12
Oh buddy they tell me my mind my
117:13
engineering colleagues say they’re now
117:15
beginning a quote by about again nothing
117:17
actually done I haven’t done it well
117:20
obviously if they ever do Matic yeah an
117:23
unlimited source of cheap power so to
117:26
say these guys were right most of the
117:28
time and very long other time that’s the
117:30
way the thing works you can’t win a
117:31
can’t win them all so with the electric
117:36
light without uh southern West thing
117:37
happen well like coming in as those who
117:40
see with oil again let’s pan add oil
117:42
except for kerosene was their big the
117:45
big oil product and kerosene used for a
117:47
collapse and so uh by 1890 1900 careth
117:52
kerosene the kerosene lamps are replaced
117:54
by electric lamps and once again rocket
117:58
power didn’t quite cotton as us it kept
118:00
insisting but kerosene is fill away to
118:02
the future when of course was dying at
118:03
didn’t realize that gasoline was going
118:05
to be a key as automobiles roads come in
118:07
I want to be able to genies come in and
118:08
trucks at supper
118:09
so again Standard Oil starting with a
118:11
virtual monopoly is refining against to
118:13
lose out to other firms newer ones like
118:16
Texaco and Gulf that separates a none
118:18
our we think gasoline is more important
118:19
I got a catch catch those you know the
118:21
new trends so the okay so with the
118:30
corporation’s coming in stock is
118:32
changing force comes in the New York
118:33
Stock Exchange began around eighteen
118:34
nineteen it was just a few few stocks
118:37
really government bonds and a couple of
118:40
bank
118:41
I’m company and then railroads come in
118:43
and by the late by this 1870s 1880s
118:45
stock exchange becomes a big thing and
118:48
those indoors by the way the American
118:51
Stock Exchange used to be calling New
118:52
York herb exchange until about the 1960s
118:54
the reason is called prefer Chinese
118:55
people used to sell stuff on the curb
118:57
and stand there on the street and they
118:58
trade and so eventually go indoors on
119:01
the other it’s too big and whether it
119:03
becomes unpleasant so we begin to have
119:10
the Edison sets up the Edison Electric
119:12
Light Company Westinghouse says of the
119:14
Westinghouse corporation should work to
119:15
school around Edison was not
119:18
impoverished it’s good to see somebody
119:19
with a great inventor that not dive
119:20
impoverished he died for us a
119:22
multimillionaire
119:23
and it’s an electric company then falls
119:26
into the Morgan and vetted by I think
119:27
forms General Electric by late nineties
119:30
the exact date somewhere this is an
119:32
attempt to have a monopoly which never
119:33
worked but he always had Westinghouse or
119:35
the fuse to go along with it so so what
119:44
the hand stood out Cyrus
119:46
refused to go into the Morgan ambit and
119:47
then let slugged it out and he got fun
119:52
from his own friends and salsa as we’ll
119:55
see you later the next time the
119:56
Rockefeller 50 got funds from themselves
119:58
with partners father that sort of
120:00
stalking so they accumulated a little
120:01
bit of money and store them in okay we
120:06
now get to oil and then for the next
120:09
time talking in depth about the oil
120:11
industry oil starts interesting enough
120:14
petroleum starts petroleum but you think
120:17
about usually charge the capitalist
120:19
development adjuster development waste
120:20
so use a lot of resources you have a lot
120:22
of natural resources and the industry
120:24
comes in the international resources
120:25
disappeared the case of petroleum Tony
120:28
was not a natural resource until
120:29
industry came along petroleum is just a
120:31
pain in the neck like a big waste
120:32
product just black ooze considered yeah
120:36
and because there’s nothing to deal with
120:37
it nobody know what to do with him
120:38
nothing to be done with petroleum
120:40
what happened was before the Civil War
120:43
the major
120:44
lighting source was whale oil whale oil
120:47
lamps you’ve probably seen it in old
120:49
movies every movie the sailing ship from
120:52
the whale lamp on a whale of a common
120:54
resource nice
120:55
we all unfortunately say with way out
120:58
communism in the sense that if you kill
121:01
a whale you own it like the whale
121:03
swimming around on the ocean nobody owns
121:05
their own own property
121:07
you couldn’t you can’t own a school of
121:08
whale it’s cocaine on the school of fish
121:11
as a result the incentive was to kill as
121:13
many whales as possible if you didn’t
121:14
kill the we heard your competitor would
121:15
kill a whale
121:16
there’s no incentive to conserve the
121:18
whale population because there’s no
121:19
there’s no private property in the way
121:21
own school or whale bed and let it be
121:24
holy God usually a different word for
121:27
collective group of fish as a result of
121:29
fish communism a whale communism and the
121:32
resource given over overuse of whales
121:34
and if we’re gonna have a big whale
121:38
shortage of whale scarcity so since
121:44
there was a free market and whale energy
121:46
sort of see what happened then is that
121:48
as a supply of whale we’re gonna go down
121:50
the price of whale oil went up and the
121:52
price of oil went up and they got more
121:55
and more expensive people began to look
121:57
after a little turnit of energy sort you
121:59
didn’t have it were an international
122:00
Energy Commission that’s how to plan
122:02
this truly free market sort of set up
122:04
its raw oil price was going on here we
122:05
got to do something about it where I’m
122:06
reading about lamps they thought of then
122:09
looking at a technology and maybe an
122:11
alternative source of lighting and I
122:12
came up with petroleum tear out the
122:14
kerosene lamp and they started using
122:17
petroleum this originally it started
122:19
with tolling which sort of hanging
122:20
around the surface of whatever I don’t
122:22
wear it in lakes with all of it
122:24
obviously it’s not much of it in the old
122:25
leis that nobody was using anything they
122:27
had surface patron and somebody using
122:29
that and they started the technology on
122:31
hey this looks good he can use kerosene
122:33
lamps or even better than we all they
122:35
smell less badly and other stuff it’s
122:37
cheaper and the result of that and the
122:39
end of drill for oil first oil well
122:43
Titusville Pennsylvania what’s in
122:44
Pennsylvanians my god they found lots of
122:46
oil they say what’s in Pennsylvania
122:49
becomes the big oil area okay and this
122:52
remains that way until after 1900 and so
122:58
and then you begin to get fineries the
123:01
first big wood fires in Cleveland they
123:03
weren’t very big at first they’re so
123:04
small refineries in using don’t even
123:07
commercial equipment or whatever
123:09
and john d rockefeller by the way it’s
123:11
the same so forth area type of hill and
123:14
do luckily short thin five two or
123:18
something five-foot started off and
123:20
fairly impoverished its father what sort
123:22
of a medicine salesman in winter when
123:26
these guys like in the movies said by
123:28
the following and cure paddock down
123:31
sciatica and cancer or whatever and so
123:34
he was born by the way again in western
123:37
New York
123:38
therefore forces a Republican if you’re
123:42
not a Calvinist or a Catholic you know
123:43
break up Catholic with New York of
123:45
course a Republican and move family
123:48
moved in family I think it’s family with
123:51
the Cleveland things in high school and
123:53
as with Morgan you’ll find out the key
123:56
Republican figures and figures anywhere
123:58
on the street turn out to be guys a new
123:59
Rockefeller in high school on grade
124:01
school your new Rocklin high school a
124:02
grammar school you’re in there okay well
124:04
we resume that on Thursday

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