Capital Gains.

The Tycoons

Charles R. Morris

Times Books, $28, 384 pp.

You know," a fellow graduate student in history whispered to me in 1989, "the D. stands for DuPont." The remark came as we prepared for our general examinations by plowing through Alfred D. Chandler's magnum opus, The Visible Hand (1977), a history of big business in the late nineteenth and early twentieth centuries. The conspiratorial subtext derived from Chandler's focus on corporate middle managers, his interest in how late-nineteenth-century family-run businesses became colossal "vertically integrated" corporations such as the Pennsylvania Railroad, Standard Oil, and, yes, DuPont.

To graduate students in history, whose knowledge of the business world stopped at their (un)balanced checkbooks, Chandler's fascination with the "managerial revolution" reeked of toadyism. (Chandler did, after all, teach at the Harvard Business School.) Where were the workers? The disgruntled farmers? The Pullman strikers? More reflective of the guild's pre-occupations was a study by Princeton historian Nell Painter, set in the same period, with the title Standing at Armageddon.

Charles R. Morris has a different complaint. Chandler's title, The Visible Hand, explained his reversal of Adam Smith's maxim. Rather than an invisible marketplace, Chandler argued, the leading conglomerates of the early twentieth century coordinated and controlled economic production and distribution. Morris's title, The Tycoons, reflects another perspective: that the historically interesting story is how a group of entrepreneurs, including Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan, used "sheer intelligence," "ambition," and "forcefulness" to invent the "American Supereconomy."

To put it this way makes The Tycoons more intimidating than it is. Morris writes with an uncommonly light touch, even on complex financial matters, and his brisk summary of the achievements and chicaneries of his tycoons makes for, if not quite beach reading, a very rewarding evening.

And yet the stakes, as both Morris and Chandler realize, are considerable. The economic growth witnessed by the United States in the late nineteenth century was probably unprecedented in world history, at least until the equally rapid rise of the East Asian economies in the 1960s and 1970s. That farmers and workers perceived themselves as victimized by rapacious corporations such as the railroad is undeniable, but Morris persuasively demonstrates that such anxiety can best be explained by the increasing volatility of world agricultural markets (farmers in Iowa now exported corn not only to Illinois but to Brazil) and the generation-long decline in prices for staple goods. This decline in prices made workers and farmers feel more impoverished even if most of them also benefited from cheaper prices for the many goods now purchased through such new media as the Sears & Roebuck catalog.

Of course catalogs provided little comfort to the most indebted farmers or the many workers trapped in dangerous, dead-end jobs. And Morris chastises Andrew Carnegie's "breathtaking" mendacity during the worker revolt at his Homestead Steel Works outside Pittsburgh.

Still, the mood of Tycoons is celebratory. Morris admires his protagonists, and the last line of the book refers to the "inordinate length of time we have lived off their capital." Indeed, somewhat awkwardly, Morris saves his sharpest analytical punch for the end of the book, where he departs from his almost rollicking biographical sketches.

Here Morris derides the conventional business-school wisdom of the 1920s through the 1970s, the period following the era of his tycoons. In this universe the corporate organization with its many interlocking parts took center stage, with its accounting, marketing, legal, and personnel departments, all guided by those possessing scientific "management skills." Instead of learning how to make things, or better, to make them more efficiently, twenty-five-year-old business-school graduates skipped "right by gritty plant-level problems into the top management orbit." The villain here is Frederick Winslow Taylor, the early twentieth-century time-management expert who became enshrined in the business-school pantheon for his theories of "scientific management." (If only Morris had extended his critique to Steven Covey and other contemporary business gurus.)

The result was the American auto industry of the 1960s. There Ford executives like Robert McNamara preached management theory, but proved incapable of responding to the challenge posed by Honda and Toyota. In Japan, in contrast to Detroit, contact between top management and workers was sustained and direct. Leaders such as Toyota's Taiichi Ohno disdained "vertical integration" because it distracted top management, and focused instead on a relentless quest for zero inventory (today's "Just-in-Time") and zero defects (today's "Total Quality Management").

Chandler's Visible Hand, then, appearing in 1977 with its implicit message that corporate structure mattered more than technological innovation, becomes part of the problem, not the solution. Published at the historical moment when the corporate organization seemed most stable, it did not anticipate the tidal wave of competition that would soon engulf seemingly rock-solid business titans like General Motors, AT&T, General Electric, and IBM.

Morris does not dwell on the contemporary business scene, but his heroes are presumably those entrepreneurs who create new products and then attempt to dominate particular markets. (When assessing the tycoons, he is toughest on banker J. P. Morgan, who continually tried to moderate the dog-eat-dog competitive instincts of his clients.) Typing this review on my beloved Apple computer, I winced at Morris's off-hand assessment that Bill Gates and "his crew" at Microsoft brilliantly "executed their strategy" to dominate the world of desktop computing. (He concedes that Gates "skirt[ed] the edge of the law.") But better those jobs and that expertise in Redmond, Washington, than in Bangalore.

The question Morris does not address is more political than economic. The reaction against the excesses of the tycoons in the early twentieth century, the attempts to rein in Rockefeller and the Morgan Bank, stemmed not so much from actual violations of often vague laws but from outrage at such wealth and its display. Whatever the limitations of the corporate organization men of the 1950s, they did not feel entitled to annual salaries of over $1,000 per hour, the average salary for a CEO in 2002. And they did not have to listen to Wall Street analysts chide CEOs such as Costco's Jim Senegal for providing more health benefits and higher wages for his workers than those at WalMart.

As Morris has eloquently demonstrated in Commonweal, economic inequality in the United States is now reaching levels not seen since before World War II. With it has come the same greed that transformed Morris's tycoons into the robber barons of the popular imagination. (Headlines this summer reported that a banker at troubled Morgan Stanley, a descendant, in a sense, of J. P. Morgan himself, cashed a check for $32 million after precisely three months of work.) Our own gilded age now confronts the central question of its nineteenth-century predecessor: How can the United States sustain economic competitiveness along with some measure of the economic equality necessary for any democracy? I ended Morris's stimulating study sharing his fascination with Rockefeller, Carnegie, Gould, and Morgan. But I closed the book convinced that today's tycoons deserve much closer scrutiny.

John T. McGreevy, chairman of the History Department at the University of Notre Dame, is the author of Catholicism and American Freedom (Norton).