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October, 1999


By Larry

Our focus this issue is again on a major industrial builder, one who has run afoul of the Attorney General's Office on antitrust charges, who made his fortune through development as a leading innovator in business, using the most advanced technologies, who achieved great fame and power before he was out of his forties, who was a renowned philanthropist, and who helped put Seattle on the map. I refer, of course, to James J. Hill, who, along with such giants as J. P. Morgan and John D. Rockefeller, helped transform this country into an eventually world-dominant power.

The current piece is inspired by an article in "Smithsonian," 10/99, pp.130-144; and I am indebted to Valerie for bringing this very interesting writing to my attention. All quotes are from this source.

Born in 1838 in Ontario, Canada, of Scots ancestry, at 17 he was on a train through the eastern U.S., intending to find a way to the Orient, to make his fortune. Discovering this not feasible at the time, he suddenly switched gears; and this young man decided to "go west." He wound up for a time in Saint Paul, in then Minnesota Territory, chosen because it seemed to him the center of trade for the whole region and for the frontier beyond. Here, at the head of the navigable Mississippi, a thriving steamship commerce was underway, though already in decline and soon to be replaced by the newest titan of technology for the period, the railroad. He was hired as a clerk for a steamship company. Though he volunteered for it, he was rejected for service in the Civil War because of blindness in one eye. But he was already becoming a master of business, with influence beyond St. Paul. At the war's end, he obtained shrewd, lucrative contracts between both major and local railroads. In the years that followed, he quickly learned the ways to crush his competition and gleefully took over from erstwhile magnate/financier Jay Cooke, who went bankrupt in 1873, after he had overextended his own company and resources, setting off the worst economic depression this nation had yet seen. At the heart of the panic, for ten days the N.Y. Stock Exchange was shut down. Hill thrived on the chaos.

He worked with some rather unscrupulous partners, including one John S. Kennedy, to drive down the price of his competitors' property, and bought the Saint Paul and Pacific railroad, and adjoining land, for a song. Then he marketed the new territory as the "Nile of the North," encouraging settling by thousands of Swedish and Norwegian emigrants, and also built and opened a new railroad line north to Canada. His emigré population was dependent on him for work and the transportation of their farm produce. To be brief, he continued to expand his power and influence as well as that of his company. By 1889, he had lines and territory opening in the Great Lakes and Montana regions. But he was just beginning, intent on completing a first line to the Pacific.

Along the way, he drove himself relentlessly, working well into the night, his wife sometimes going to fetch him from his office after 10 but winding up sleeping in one of its chairs until he might be ready to walk her home after 2 A.M. He was often at the head of a new line, helping to calculate the lowest, most even route to take for the new tracks or directing his employees in leveling great swaths of landscape to assure the lowest practicable ways for his railroads to run, permitting faster, less expensive movement of "more tonnage." His chief engineer found the lowest crossing of the Continental Divide at Marias Pass, now in Glacier National Park.

1893 saw his successful completion, at age 55, of his line to Seattle, making it the hub of trade activity in the Pacific Northwest. Like the modern tycoon, William Gates, he built for himself and his wife a mansion truly grand on the scale of the time, 36,000 square feet, of red sandstone, overlooking the Mississippi, with modern plumbing for its 13 bathrooms!

Hills' railroads helped to enrich the Pacific Northwest, through land development and extensive trade, especially in copper, lumber, iron ore, and other commodities required for the growing region to be carried by rail. In the process they helped make Hill a very powerful, wealthy man indeed. The nation's economy was being greatly stimulated by the railroad. The resulting industrial giants, like James J. Hill, had become huge in their influence. This worried the politicians, particularly as monopolistic practices led to high prices and thwarting of competition.

The Sherman Antitrust Act of 1890 was passed by the U.S. Congress. Public unrest had become virulent in its ire toward big business. The plan was to appease the masses with legislation. The Act passed almost unanimously. It was not actually anti-business, but sought to restore rivalry to industries that, because of the actions of a few controlling individuals, were no longer competitive.

Hill's Great Northern Railroad was the only major RR to survive a "devastating depression in 1893." In the process, he laid off thousands of workers and "slashed the pay of those who remained." These employees were in a disastrous fix. In the Pacific Northwest at that time, there were few alternatives to lost or reduced wages from the railroad. A letter sent to Hill through his wife exemplified the feeling running against him: 'It would be a fitting climax if you should be taken by your employees and hung by the neck till dead, from one of the triumphal arches so recently erected at the expense of the very people you are now defrauding of their hard earnings.'

To shorten this recounting, suffice to say that, although in the 1890s the antitrust act was used, ironically, against the labor unions rather than monopolistic enterprises, and the police and judges of the time almost always sided with big business, in September, 1901, President McKinley was shot, yielding leadership of the country to then Vice President Theodore Roosevelt, of whom it was said that he definitely had courage and convictions. He determined to end what he regarded as 'the total absence of government control' over dangerously large business enterprises. With Roosevelt's blessing, his Attorney General, Philander Know, in February, 1902, announced the imminent breakup of Hill's Northern Securities Company. Hill confidently sought relief from the courts, which led, in March, 1904, to the first U. S. Supreme Court ruling on antitrust legislation as applied to big business. The court "weighed in with its decision: 5 to 4 against" Hills' company. His mammoth conglomerate was smashed up into its component parts, though, arguably, the setback was only small and temporary for Hill himself, who went on to further empire building. But the die had been cast. After this, government would no longer be reluctant, on principle, to take on big business. Indeed, with its current suits against Microsoft and the tobacco industry, etc., some might say that the pendulum has swung in the other direction and that, between business and government, big government has become the greater burden on society. What do you think?

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