Chamberlain - A Business History of The United States (1991)
Chamberlain - A Business History of The United States (1991)
Chamberlain - A Business History of The United States (1991)
BY JOHN CHAMBERLAIN
,
PICTURE CREDITS
Painting of Sir William Pepperrell (1745) by John Smibert. Painting of Thomas
Hancock (c. 1746) by John Singleton Copley. Painting of Robert Morns (c. 1782)
by Charles Willson Peale. Painting of Crowninshiekl’s Wharf in Salem (1806) by
G. Ropes Junr., courtesy Peabody Museum of Salem, photograph John Peaty; the
vessels at the wharf represent the Crowninshield fleet and include the ships
America, Fame, John, President, and Belisarius. Engraving of Oliver Evans
(c. 1848) by W. G. Jackman. Painting of Samuel Slater by James Sullivan Lincoln.
Lithograph of the Erie Canal at Lockport by George Catlff from “Memoir Pre-
pared . . . at the Celebration of the New York Canals,” Cadwallader D. Golden,
1825, photograph New York Public Library. Painting of Peter Cooper, American
School (180 1-50), photograph Frick Art Reference Library. Drawing of the city
of Bangor (c. 1834) by A. H. Wallace, Pendleton’s Lithography, Boston. Photo-
graph of Samuel F. B. Morse by Mathew B. Brady. Painting of Elias Howe, Jr.,
by unknown artist, photograph Smithsonian Institution. Drawing of the du Pout
powder works on the Brandywine by Pieme Gentieu. Photograph of Jay Cooke
(1884) by William Curtis Taylor. Photograph of the meeting of the Central Pa-
cific and Union Pacific railroads at Promontory, Utah, May, 1869. Photograph of
Cornelius Vanderbilt by Mathew B. Brady. Photograph of Andrew Carnegie by
Mathew B. Brady. Drawing of the Standard Oil Works at Cleveland (1876).
Painting of J. P. Morgan by Carlos Baca-Flor, photograph by Peter A. Juley &
Son. Photograph of Elbert Henry Gary by Aime Dupont. Cartoon “The Cast-
away” by Frederick Opper, copyright 1903 by W. R. Hearst. Photograph of
Thomas A. Edison ( 1906) by Byron, New York, courtesy Edison Laboratory
National Monument, National Park Service. Photograph of Ransom E. Olds
(c. 1905) by Joseph Klima, Jr. Cartoon by Herbert Johnson, copyright 1936,
courtesy his daughters, Mrs. Herberta J. Muth and Mrs. Walter S. Evans. Photo-
graph of George W. Romney by Francis Miller, Life, copyright 1962 Time Inc.
Photograph of Thomas J. Watson, Jr., by John Loengard, Life, copyright 1962
Time Inc.
0
THE ENTERPRISING AMERICANS. Copyright 1961, 1962, 1963 by Time Inc. ~
Copyright o renewed 1991 by Institute for Christian Economics.
ISBN 0-930464-41-9
Introduction XVII
Bibliography 265
Index 273
VII
Author’s Preface (1991)
A Shift of Opinion
Their optimism was not shared by the intellectuals. In the late
nineteenth century, the attitude of American intellectuals became
much more hostile to business. A series of economic depressions,
beginning in the mid-1870’s and continuing until the late 1890’s,
brought sporadic financial and emotional misery to millions of
workers, despite the fact that national economic output nearly
quadrupled and output per capita nearly doubled, raising the standard
of living of most Americans. The disorienting shocks of temporary
unemployment and the threat of bankruptcy were what people wor-
ried about, deflecting their attention from the stead y increase of na-
tional and personal wealth for three decades, 1867-1897.
The visible excesses of the rich – the rich have, throughout man’s
history, exercised both their extraordinary bad taste and their finan-
cial capacity to indulge it – contrasted sharply with the daily life of
the average man. So, Mark Twain’s title for his novel, The Gilded
Age, stuck to the 1870’s and 1880’s, at least in the memories of sub-
sequent historians. But the critics, then and now, have conveniently
forgotten the obvious: it was the blessing of political freedom and
the resultant economic growth that made possible the cheap mass-
circulation novels, tracts, and tabloid newspapers that have called
PUBLISHER’S FOREWORD x111
the average person’s attention to these very excesses. The critics
have enjoyed a broad, potentially profitable market for their
criticisms only because of the existence of the free market social or-
der that has given the rich their opportunities to become excessive.
The critics have themselves tended toward excess. In a sense, Cham-
berlain’s Enterprising Anzericans called a later generation of critics
back to moderation.
Simultaneously with the growth of both immigration and eco-
nomic output, and basic to this whole process, was the ever increas-
ing competitiveness of American agriculture after the Civil War.
North America’s enormous agricultural output is still one of the
wonders of the modern world. It unquestionably made life difficult
for millions of farmers – and not just in the United States – who
found themselves unable to cut costs and increase output fast
enough to match the unprecedented productivity of a minority of
innovative producers. They sold out to their more efficient neigh-
bors and moved by the millions to the cities. They have been doing
this ever since.
Some economic historians would say that farmers were drawn to
the cities by the lure of new and better opportunities; others would
say they were pushed out by rural misery. The fact is, there was only
one way for a large rural nation to industrialize: to increase the out-
put of domestic agriculture. This is exactly what the North Ameri-
can agricultural revolution did. The growing output per farm of
those farms that survived and prospered made possible the feeding
of the great cities. Year after year, it took fewer farmers to feed the
two nations, the United States and Canada, as well as much of the
industrial world – a technological and economic achievement that
the Soviet Union has yet to match, but would dearly love to.
The academic, literary, and essentially elitist hostility to un-
regulated enterprise escalated in the period we call the Progressive
Era, beginning in the 1890’s. Public hostility to business waned in
the 1920’s, but not the attitudes of the intellectuals. Both public and
intellectual hostility escalated radically during the Great Depression
of the 1930’s, consolidated in the 1940’s, and slowly began to recede
in the late 1950’s. The public led the way; the intellectuals remained
skeptical. Their man was Adlai Stevenson, not Dwight D. Eisen-
hower, let alone Robert A. Taft.
XIV PUBLISHER’S FOREWORD
In 1961, two books appeared which announced a new view of the
American economic experiment: an academic history, Economic
Growth of the United States, 1790-1860, by economist Douglass C.
North (no relation), and John Chamberlain’s Enterprising Ameri-
cans. Both books told essentially the same story: the enormous pro-
ductivity of the free market. Chamberlain’s ability to tell a story
well is visible throughout the book. Here are the stories of vi-
sionaries who thought they saw new ways of meeting the needs of
consumers at prices the public would be ready and willing to pay.
Most of the visionaries in history have failed, including business-
men. But a few have succeeded and prospered. Businessmen chang-
ed the face of America and much of the Western world. They did it
for fame, for power, and for money. They did it “for the thrill of cre-
ativity. They’ did it because that was what they did best. But whether
they were fully conscious of it or not, they did it above all for the
consumer. It was the consumers – millions of them – who “held the
hammer.” It was their decisions, purchase by purchase, for or
against any particular invention or development, that determined
which of the enterprising Americans prospered and which went
bankrupt or sold out to the winners – in short, which got into this
book and which were forgotten.
Economic Freedom
The key to this story is economic freedom. It was this historically
unprecedented freedom which transferred to consumers the eco-
nomic power to make or break any entrepreneur. The free market,
with its system of competitive open entry, forced men of genius —
and other men who may have had only one revolutionary economic
idea in their lives – to serve the whims and desires of the buying
public. It is the magnificent freedom of one person to be able law-
fully to approach another and say, “Let’s make a deal,” that has
made possible the triumph of the consumer — what economist
WMiam H. Hutt in the 1930’s called “consumer sovereignty.”
This is the key fact that so few of the beneficiaries of business
have ever understood. The American economic system has pitted
entrepreneur against entrepreneur, each in quest of fame and for-
tune (or at least fortune); but all of them have been continually
pressured by the threat of competition to meet the demands of con-
PUBLISHER’S FOREWORD xv
sumers, except in those cases when a few of them could get a majority
of voters to create legal barriers to entry, thereby granting producers
a monopoly. The genius of free market competition is a simple one:
producers compete against producers, and consumers compete
against consumers. When men are allowed by civil government to
compete openly, without threats of physical retaliation from their
competitors or threats of violence from the civil government, most
businessmen lose, and most consumers win. Most “grand new
ideas” are flops, but those that survive by attracting capital and buy-
ers change history.
The written story of the enterprising Americans is the story of
those who succeeded. But those who failed also played a crucial
role. Any political system that does not allow most enterprises to
fail must at the same time place enormous constraints on those few
that succeed. Someone must pay for the subsidies to the losers.
Voters who support legislated “safety nets” for faltering businesses
do so because they believe that the successful businessmen are the
ones who should pay and do pay. This misses the point. Consumers
pay far more than successful businessmen pay. They lose because
they never get an opportunity to test the claims of all those vision-
aries who did not have the willingness or access to capital to launch
new products or services in a market politically rigged against suc-
cess. Vastly more important than the taxes collected from successful
entrepreneurs is the fact that those masses of consumers who might
otherwise have benefitted from major innovations inevitably lose.
In a world in which all the runners in all the races are forced to cross
the finish line at the same time, there will be few records broken and
few people cheering in the stands.
The willingness of entrepreneurs – forecasters of an economically
uncertain future — to bear risk, to put their own money and other
people’s invested money where their mouths and visions are, is the
heart and soul of economic growth. No one knows the future; in each
specialized area of knowledge, someone must bear this inescapable
uncertainty for us. Unlike a game of chance, this uncertainty is not
invented; it is inherent in the human condition. Entrepreneurship is
not a form of gambling; it is a way of planning for an uncertain future.
The entrepreneur spends money in certain ways in an attempt to
meet future consumer demand more cost-effectively than his compe-
XVI PUBLISHER’S FOREWORD
titers will. Then comes the day of reckoning. We consumers vote
“yes” or “no” with our money, assuming that the state allows us this
fundamental freedom. To make the free market work, whether in
our role as consumers or producers, we must be given the right – the
legal immunity from violent retaliation – to collect and then allocate
the fruits of our labor. As the employer in Jesus’ parable of the
workmen asked: “Is it not lawful for me to do what I will with mine
own?” (Matt. 20:15 a).
What we as consumers want for ourselves, we must also allow to
the businessman who seeks to serves us. Without this same liberty to
keep the money left over after expenses are met, the entrepreneur
cannot be enticed to serve us as we choose, rather than as some gov-
ernment bureaucrat chooses. The legal right to profit from the fruits
of one’s successful innovation, and the simultaneous threat of reap-
ing the expensive rewards of failure, are the heart of the great
American experiment in economic freedom. Without the latter, you
cannot attain the former. This is the lesson that Eastern Europe
needs to take to heart, not the temporary excesses of junk bond
speculation. So does the average American.
By reprinting John Chamberlain’s Enterprising Americans, I
hope to remind readers of this lesson.
(My thanks go to the late Alfred H. Darlow, whose generous
legacy to the Institute for Christian Economics has made possible
this book as part of a reprint series. May others with a similar vision
share the fruits of their labor with their fellow men: to keep liberty
alive in the land.)
Introduction
w HEN the first Americans faced the rocky woodlands and inter-
vals of New England and the humid valleys of the Delaware and
James rivers, they were already on the way toward becoming the
“new men” later celebrated by those visiting Frenchmen, Michel de
CrWecoeur and Alexis de Tocqueville. The “new man” was inher-
ently a self-starter. Religion was the main propelling urge behind
his trek across the seas and, as Tocqueville emphasized, cast a
lasting and indispensable influence over the development of free
American institutions. But the man of the seventeenth century saw
no opposition between faith and practical works. The high-pooped
ships that bore the colonists westward were launched, after all, by
joint stock companies, and carried the dreams of merchant adven-
turers no less than those of men seeking religious freedom.
Once here as colonizers, the first English invaders engaged the
extremes of summer heat and winter freezing with what shiftiness
they could muster. Inhospitable until the first tricks of adaptation
1
2. THE ENTERPRISING AMERICANS
had been learned (a dead fish to each cornhill, the early central
heating of chimneys offering fireplaces on more than one side), the
land tended to resist politically dominated enterprise. In Virginia,
Acting Governor Sir Thomas Dale discovered that “martial law did
not grow corn,” and turned the cultivatable plots over to individual
families. And in Plymouth, Governor Bradford followed suit, having
learned that communal planting of crops not only entailed “tiranie
and oppression” but also led to starvation.
It is not to be argued that “private enterprise” sprang full-
panoplied from the soil of the New World without a hundred checks
and much sidewise motion. The colonists were, after all, Europeans,
with a feudal heritage of a. “relational” society and a tradition of
church control, even to the setting of price ranges. But with man-
power at a premium, the stress almost from the start was on the
individual—and the individual tended to make his own decisions
if only because he could walk off into the forests if unsatisfied. If
not a full-fledged entrepreneurial society in the seventeenth and
eighteenth centuries, coastal North America was at least the em-
bryo of one.
The achievement of the Puritan and Quaker enterprises was
apparent to early observers. One of the shrewdest was a Dr. Alex-
ander Hamilton of Annapolis, Maryland (no kin to his more
famous namesake), who in 1744 made a 1,624-mile trip through
the colonies by horseback with his Negro servant. Though Dr.
Hamilton’s prime concern was with the entrepreneurship of the
innkeepers, he had an eye and an ear for other things. Philadelphia
looked to him like an English country market town, “the buildings
low and mean, streets unpaved. . . .“ But the doctor sensed more
than that in the city that had been settled by the solid burghers,
mechanics, and craftsmen imported by the Quaker William Penn.
“A few years hence,” so Dr. Hamilton predicted, Philadelphia
would be “a great and flourishing place and the chief city of North
America.” The Philadelphians, so the doctor noted, “apply them-
selves strenuously to business, having little or no turn to gayety.”
They had “that accomplishment peculiar to all our American
colonies: subtlety and craft in their dealings.”
New York, by contrast, suffered because the grip of the Dutch
on the Hudson Valley still persisted. The third generation of Ran-
FREE EN TERP RISERS BEFORE THE REVOLUTION . 3
slaer (Dr. Hamilton’s spelling) still held on to a manor forty-eight
miles long, twenty-four miles wide. Moving into Connecticut, Dr.
Hamilton noted the “large towns and navigable rivers . . . people
are chiefly husbandmen and farmers . . . the staples same as Mas-
sachusetts’ . . . horses are shipped to the West Indies, one town
is famous for its onions, a sloop is loaded with them.” But Con-
necticut oppressed him a bit with “its ragged money, rough roads,
and enthusiastic people.”
Boston was better, the Bostonians “more decent and polite in
their dress, tho more fanatical in their doctrine. . . .“ They gave
“indirect and dubious answers to the plainest questions . . . but
there is more hospitality shown to strangers than in New York and
Philadelphia . . .“ and an “abundance of learning and parts. . . .“
The local talk was “on commerce and trade,” the staples were
“shipping, lumber, and fish.” Salem, a “pretty town” with a long
street, had pleasing architecture; at Marblehead, just next door,
there was little but fish to talk about: fish flakes--or racks—spread
out to dry on 200 rocky acres around the town; ninety fishing
sloops employed out of the port; the yearly value of the fishing in-
dustry &.34,000 sterling for some 30,000 quintals (or three million
pounds) of dried and salted fish. At Portsmouth, New Hampshire,
where geese were kept in the fort to give alarm in case of a night
attack by the French from the north, the trade was in fish and in
masting for ships.
As Dr. Hamilton noted, the New Englanders had really to scrape
for their sustenance. They were the New World’s first real business
leaders because, with them, it was a case of root hog, or die. They
bulk larger than the Pennsylvania Quakers in the first commercial
annals of North America, partly because they made more noise
about their W&-s and partly because, in the words of the English-
man Edward Randolph, their lack of a rich hinterland compelled
them “to trye all ports to force a trade.” As early as 1713 the New
Englanders began building schooners for the nascent Grand Banks
fishing fleet; and it was in the first part of the eighteenth century
that their distilleries made rum into a ubiquitous medium of ex-
change that flowed to the Guinea coast of Africa (to pay for gold
dust and slaves), to the fishing stations off Newfoundlmd and Nova
Scotia (where, as grog, it kept the hardy suppliers of the fish mar-
FREE ENTERPRISES BEFORE THE REVOLUTION - 5
ketsfrom freezing to death), andtothe inland frontier only a few
miles from tidewater (where it bought beaver skins from the In-
didns and paid the bribe money that kept Deerfield massacres from
becoming everyday occurrences).
The curious thing about the invigorating uses of adversity is that
the hardiest and least likely clime, that of Massachusetts-owned
Maine, produced the greatest of the early colonial tycoons, William
Pepperrell. This merchant of the North Country (who lived at Kit-
tery Point in Maine, just across the river from Portsmouth, New
Hampshire) inherited from his pioneer father a thriving fishing
business that multiplied out in all directions. Kittery Point was just
“downriver” on the Piscataqua from the White Mountains and the
Maine woods, which made it the logical place for assembling the
“king’s masts” (cut from the straight pines marked with the “king’s
arrow” ), and for building ships for the fisheries and the West Indies
trade. The Pepperrells’ shop in Kittery dealt in lumber, in naval
stores, in fish, and in provisions (meaning rum); Pepperrell coasters
brought corn and tobacco from the southern colonies; and the
larger Pepperrell vessels voyaged to England, Spain, and Portugal
for sails, cordage, dry-goods, wines, and fruit and to the West
Indies for sugar. The Pepperrells frequently sold their ships and
cargoes as a unit, which led to more shipbuilding; their bankers
in London and Plymouth acted as clearing agents in their exchange
of New and Old World products and drew bills of exchange on
Boston merchants for goods the Pepperrells could not get in direct
trade for their own cargoes.
Whenever the Pepperrells did come by some hard money, they
plowed it into real estate, as was the fashion in those days. William
Jr. bought the land on which the cotton-mill town of Saco was to
grow (he was still a minor when he acquired it, and his father had
to sign for him). Later he managed the lottery that put a bridge
over the Saco River. He became the great public personage of his
frontier world—a justice of the peace, a member of the Massa-
chusetts province board of councilors, and, at the age of thirty,
commander of the Maine militia. As a tribute to his practical abili-
ties and experience with frontier weapons and levies, Pepperrell was
placed in charge of the 4,300 colonials who sailed in 1745 from
Boston to besiege the vaunted French fort of Louisburg on Cape
6. THE ENTERPRISING AMERICANS
Breton Island, which guarded the approach to the Grand Banks
fishing grounds. After forty-nine days of siege the supposedly im-
pregnable fortress fell. To the colonists’ distress, Louisburg was
returned to the French after the war. Nevertheless, the colonists
got something out of the Louisburg expedition, for the British Par-
liament refunded the expenses of it to the New Englanders in gold
-
specie, to help put the local currencies on a sound basis for the
first time in half a century.
Pepperrell himself did extremely well out of the whole show: he
was the first native-born New Englander to become a baronet. The
baronetcy tied him to the British Crown and made him a magnifico
beyond local compare. In 1747 he built four ships of war for Eng-
land. At the age of fifty-one, at the height of his resplendence, he
is not only a chief justice and a commander of militia; he is also a
president of the governor’s council, a colonel in the regular British
Army, a superintendent and accountant of the recruiting service,
a commissioner of Indian affairs (he has had a long experience in
patrol duty as a boy during the Indian wars), he is an owner of
sawmills, and he is still extensively engaged in the fisheries. He is
fond of gay plumage, appearing at his log landings along the Saco
River in bright scarlet. During this period he lives in a style befitting
his baronetcy; his house, as Hunt’s Lives of American Merchants
tells us, has “walls hung with costly mirrors and paintings, his side-
boards loaded with silver, his cellar filled with choice wines, his
park stocked with deer, a retinue of servants, costly equipage, and
a splendid barge with a black crew dressed in unifony.” His por-
trait is painted by John Smibert, who preceded Copley as the fash-
ionable portraitist of the colonial merchant aristocracy. The town
of Saco becomes Pepperrellboro-and between the Piscataqua and
Saco rivers, a distance of some thirty miles, Sir William can travel
through Maine entirely on his own soil.
While Sir William was expanding his Maine dynasty (which
petered out with the Revolution when Sir William’s Loyalist grand-
son fled to England) other and better known New Englanders were
extracting wealth from the sea. An effigy of the “sacred cod” hangs
suspended in the Massachusetts House of Representatives to this
day for a very good reason: as early as the 1740’s, a Salem or Bos-
ton ship carrying a load of cod from the Newfoundland banks to
FREE ENTERPRISES BEFORE THE REVOLUTION - -1
the West Indies or southern Europe could make a 200 per cent
profit-or $2,000—in a sjngle trip and this despite an insurance
rate that ran as high as 11 per cent on ship and cargo to Madeira,
14 per cent to Jamaica, and 23 per cent to Santo Domingo. Besides
ordinary shipwreck, a ship had to risk capture by privateem or
pirates, and since under the British rules of trade the voyages were
often fundamentally lawless in the first place, there was much ex-
cuse for British men-of-war to pick off a Salem sloop and detain it.
The nature of a voyage to the West Indies to pick up French
molasses or salt in exchange for fish is indicated by a letter of in-
struction given to Captain Richard Derby of Salem, who was about
to take the schooner Volante to the southern islands in 1741:
66 . . . and if you should fall so low as [the Dutch island of] Statia,
and any Frenchman should make you a good Offer with good
security, or by making your vessel a Dutch bottom, or by any
other means practicable in order to your getting among ye French-
men, embrace it . . . Also secure a permit so as for you to trade
there next voyage, which you may undoubtedly do through your
factor or by a little greasing some others.” In other words, sail
under Dutch colors to avoid the British Navigation Acts, and be
prepared to bribe the customs officials.
By 1765, so prosperous had the trade built on dried cod, mack-
erel, and haddock become that more than 31,000 men were en-
gaged on fishing boats putting out from Salem, Marblehead, and
other Massachusetts ports; and more than 350 ships were busy
carrying the fish to the markets of the West Indies and Catholic
Europe and bringing back molasses, Malaga grapes, salt, and
“pipes” of Madeira wine. Whaling, too, became a prosperous busi-
ness, especially after the conquest of Quebec in the French and
Indian War had opened the St. Lawrence and the Strait of Belle
Isle to the Yankees. Eighty or more Yankee whalers put into the
St. Lawrence in 1763—and in 1764 some 1,500 hundredweight of
whalebone were sent by the colonists to England duty free. And
4,000 tons of whale oil were being exported annually just before
the Revolution.
How did a man without capital (and there was practically no
liquid capital in the Colonies other than specie obtained from
pirates) become a well-to-do merchant in the days before the
FREE ENTERPRISES BEFORE THE REVOLUTION “ 9
Revolution? If he was the younger son of a minister, as was Thomas
Hancock of Lexington, he might be apprenticed to a bookbinder.
After seven years of indenture in Boston, Thomas Hancock scraped
together $100, probably with the help of his father, the famous
“Bishop of Lexington,” and set up in business for himself. By 1728
we find Thomas Hancock contracting to dispose of 3,000 volumes
for another book dealer. A few years later he begins pushing books
to his back shelves and offering tea, cloth, and cutlery to his patrons.
It is all very hit-or-miss. To barter for tea and cutlery, he exports
codfish, whale oil, whalebone, and lumber; possibly he deals in
bowls and buckets and ax handles made by the farmers in winter
evenings by the fire. But how did he get the wherewithal to buy
the codfish in the fist place? Perhaps he would take hogs from
farmers in exchange for Bibles, sending the pork on to Newfound-
land and picking up fish from there to go to England for knives.
Getting richer out of such huckstering, he might buy a “piece of a
ship” bound for Surinam (Dutch Guiana) to bring contraband
home to Boston. Taking precautions, Hancock writes to his ship-
master before one such trip to Surinam: “Closely observe, when
you come on our coasts, not to speak with any vessels nor let any
of your men write up to their wives when you arrive at our light-
house.” In other words, slip in without any Empire customs officer
seeing you.
By such devious and resourceful trafficking the House of Han-
cock grows with the century. Building a big two-story house of
Braintree granite on Boston’s Beacon Hill, Thomas Hancock asks
his merchant friend John Rowe, who is traveling in Europe, to pick
up an English wallpaper for him with a pattern of flowers, pea-
cocks, macaws, and squirrels. He sends for a chiming clock of black
walnut, he rifles Europe for yews and hollies for his lawn, and for
mulberry, nectron, peach, and apricot trees for his garden. He is
pleased with the “chariot” he has imported to drive out on the cob-
bled Boston streets amid the clamors of the fishmongers and ped-
dlers. When he goes forth he dresses in coats of lavender or
peachbloom, in satin waistcoats, with velvet smallclothes and silver
knee and shoe buckles.
In time, Thomas Hancock adopts his suddenly fatherless nephew
Johnny, sending him to Harvard and taking him into the business
10 . THE ENTERPRISING AMERICANS
to become his partner, his heir, and one of the merchant subsidizers
of the American Revolutionary cause. Johnny was never the equal
of his Uncle Thomas in jumping from one ice cake to another as
wars—usually profitable while they were being waged—begat de-
pressions. His sloop, the Liberty, was seized for smuggling when
the British finally applied the screws to those who flouted the Navi-
gation Acts. He missed out on an attempt to corner the whale-oil
market. In the days of the Stamp Act, the Boston Massacre, and
the Tea Party, Hancock was to blow hot on the subject of inde-
pendence from England, then cold, then hot again. (Eventually he
affixed his signature to the Declaration of Independence with such
a flourish that George III would need no glasses to see it. ) After
the war, he becomes Governor of Massachusetts, and stuffily insists
that President Washington should come to see him, not vice versa,
when the Father of Our Country is making a tour of New England.
Known to the end as th$ “Prince of Smugglers,” he died in 1793,
leaving g20,000 less than he had inherited from his Uncle Thomas
some twenty years before. His excuse for dipping into capital—
always a prime sin in Boston—might have been that the times had
not been good, and besides there were other things to do.
The exploits of the Hancocks by sea and land were endlessly
repeated by other pushing Boston families. Less self-made than
Thomas Hancock, Peter Faneuil inherited a merchant estate from
a Huguenot uncle. He grows richer by acting as a commission mer-
chant at the standard rate of 5 per cent; he too takes “pieces of
ships”; he gives credit to Boston merchants at a heavy discount,
even charging 350 per cent in .1732 to cover depreciation. His
legacy to the future is Faneuil Hall, the Hall of Markets, which
gives Boston merchants a place to congregate out of the rain.
(Much later the first economic historian of New England, Wil-
liam B. Weeden, lectures the shade of Peter Faneuil for having
built his hall out of the blood of Negroes bought on the coast of
Africa. ) Meanwhile, in nearby Salem, another tough breed of sea-
farers, the Derbys, are making their mark. Richard Derby, a repre-
sentative of the third generation of a family of notable seafarers,
sailed with his own small ships up to 1757, carrying the usual fish
and lumber to the West Indies and bringing home sugar, molasses,
cotton, and claret wine. When, after 1763, the British tried to stop
FREE ENTERPRISES BEFORE THE REVOLUTION o 11
his trade under the stiffened imperial attitude, he and his fellow
shipowners of Salem haughtily replied that “they were His Majesty’s
Vice Admirals . . . and would do that which seemed good to
them.” And when the British marched on Salem in February of
1775 to seize some stored cannon some two months before Paul
Revere’s ride and the Battle of Lexington, it was Captain Richard
Derby who refused the British the use of a drawbridge into town.
After all, he owned most of the cannon personally. “Find the can-
non if you can,” he roared across a stream. “Take them if you can.
They will never be surrendered.”
Down the coast, in Rhode Island, the Browns of Providence, a
family dynasty like the Hancocks of Boston and the Derbys of
Salem, had been doing business as merchants for a half-century
before the Revolution. Captain James Brown ran a general mer-
chandise shop, operated rum distilleries, owned a slaughterhouse
and ships, acted as a banker, and traded with South Carolina,
where he bartered for rice with Rhode Island cattle. His younger
brother, Obadiah, who took over the business when James died in
1739, built a mill to grind “chocklit.” Obadiah owned an early
business textbook, A Guide to Book Keepers According to the
ltalian Manner, and presumably inaugurated the art of double-
entry bookkeeping in America. It was Obadiah who undertook to
rear James Brown’s sons—and the quartet of “Nicky, Josey, John,
and Mosey” Brown was to dominate Rhode Island trade and com-
merce for a long generation.
In the 1760’s, Nicholas Brown & Co. (the business partnership
of the four brothers) is the leading candle-maker of the Colonies,
selling its product in New York and Philadelphia and as far away
as the Caribbean under the Brown copperplate label. At one point
the Browns try with other candle-makers to establish price control
through the “United Company of Spermaceti Chandlers,” one of
the earliest American “trusts.” The United Company set prices on
“head matter” from sperm whales and maintained the selling price
of completed candles. Within two years the “trust” collapsed, which
was only poetic justice. The Browns themselves hated the British
monopolies; it was brother John who led the seizure and burning
of the British schooner Gaspee when it pursued smugglers into shoal
water once too often.
.s
12 . THE ENTERPRISING AMERICANS
By 1765 the Browns are in the iron business, in which they
flounder until they hire a foundry master from Baron von Stiegel’s
Lancaster Furnace in Pennsylvania to put their own Hope Furnace
in Rhode Island on a paying basis. This iron business is part of a
growing complex of blast furnaces and forges in the Colonies—by
1775 there will be more furnaces and forges in America than in
England and Wales, and statisticians will shortly be estimating that
America is producing almost a seventh of the world’s output of
iron pigs and bars. The Browns’ ledger books begin in 1723; the
records kept by later son-in-law partners and their descendants
have continued in uninterrupted sequence until today, covering a
span of over two centuries. The estate still owns property in Ohio—
and keeps books pertaining thereto. And the name of Brown, of
course, is enshrined in a great Rhode Island university.
Newport, which flourished earlier than Providence as the first
commercial capital of Rhode Island, was a cosmopolitan center
with an atmosphere of great tolerance. Jews were free to worship
there in what is said to be the first synagogue in America, and both
Bishop Berkeley, the philosopher, and Ezra Stiles, an early Yale
president, found the place much to their liking. But in spite of its
tolerant charm Newport represents one of the darker strands of our
early business history. It was not alone in the development of the
slave trade with West Africa: ships from Massachusetts frequently
visited the Guinea coast, where they crammed black men into their
‘tween-deck spaces for export to the sugar lands of the West Indies
and the tobacco plantations of the South. Newport ships, however,
made a more or less regular thing of the traffic in human flesh. In
1770, Samuel Hopkins wrote in his reminiscences that “Rhode
Island has been more deeply interested in the slave trade, and
has enslaved more Africans than any other colony in New Eng-
land.” Later, Mr. Hopkins amplified his words to point specifically
to Newport, whose “trade in human species has been the first wheel
of commerce . . . on which every other movement in business
has depended.”
Why should it have been Newport that led in the development of
a grisly business? It will not do to accuse the early Newporters of
being less sensitive than other people of their time; they were not.
Newport moved into the slave-running vacuum for reasons that can
FREE ENTERPRISES BEFORE THE REV OLLJTION . 13
belargely deduced from its position. Lacking a hinterland to sup-
ply them with lumber and other trade goods, farther than the Boston
and Salem men from the cod fisheries, Newporters might have felt
more dependent than their competitors on a strictly triangular form
of trade. Once out to Africa, they would load slaves for the West
Indies. The next step would be to pick up a cargo of molasses in
Statia or St. Domingo for the many Rhode Island distilleries. Finally
it would be rum for shipment to Africa, and the cycle would start
up anew. In justice to Newport, its eighteenth-century captains—
such as the redoubtable David Lindsay, who prided himself on
landing his slave cargoes “in helth and fatt’’—abstained from the
barbarities $ that were to become the normal disgrace of middle-
passage voyages at a later date. Moreover, the American slave
traders of the early days did not customarily engage in violent
seizures: they bought their “human species” from black chiefs who
had already enslaved their brothers in the course of pursuing tribal
wars. In some cases the sale of a black man to a Newporter at
Anamaboe or Old Calabar was an improvement over the original
tribal way of celebrating a victory, which might have culminated in
the grand climax of a cannibal feast. The willingness of the whites
to buy slaves, however, caused the more enterprising chiefs to con-
duct raids on their fellow blacks for purely mercenary reasons.
While Boston and Newport flourished, the port of New York,
which had the best natural harbor on the coast, lagged for reasons
that were wholly political and social. Before it was seized by the
English from the Dutch, in 1664, New York (or New Amsterdam)
had been run as a port of entry to a land of feudal domains granted
to its members by the Dutch West India Co. Great land grants lined
the Hudson all the way to Albany—and the self-sufficient manors
of the Van Rensselaer, the Philipses, and the Van Cortlandts con-
tinued as the fundamental units of the New York economy long
after the Duke of York, later King James II of England, had taken
possession of his proprietary. The Dutch had done some trading
with the Indians at Albany for beaver skins (an article that sold
well in faraway Muscovy ) and with the “unrighteous, stubborn,
impudent and peiiinacious . . . English at Hartford” (it is Gov-
ernor Stuyvesant speaking ). But the “good grain country” that had
never contained more than 5,000 or 6,000 Dutchmen remained
14 . THE ENTERPRISING AMERICANS
relatively unpopulated under the English. Indeed, the slippery
Colonel Fletcher, who governed the province at the end of the
seventeenth century, continued the Dutch policy of feudal grants;
following the custom of the time in mixing public and private af-
fairs, he lined his pockets by selling great tracts along the Hudson
up to 804 square miles each. In 1691 a report to the King described
New York City as “a barren island which “bath nothing to sup-
port it but trade, which chiefly flows from flower and bread they
make of the come the west end of Long Island and Zopus pro-
duceth. . . .“
If Manhattan Island lacked an upriver hinterland that was pro-
ductive of other things than beaver skins and land rents, it had
neighbors to the east and the west that found its facilities useful.
New Jersey, under two proprietary lords, Carteret and Berkeley,
had welcomed freehold settlers who took land in small chunks and
on easy quit-rent terms. East Jerseyites naturally turned to New
York for trade, as did a Major Selleck of Stamford, Connecticut,
who kept a warehouse close to the Sound and took illicit goods
from deep-water vessels for transshipment into New York on small
boats. (Some of the goods from the proscribed sloop of the famous
Captain Kidd are supposed to have passed through Selleck’s hands. )
Pirate specie, “gold of Araby” coming into New York from distant
Madagascar, found a welcome— but for investment opportunities
New Yorkers would eventually turn to Dover and other places in
the “iron mountains of New Jersey,” where mines and foundries
became “thick as tombstones in Trinity Church graveyard.”
In time New York became quietly rich. It was a “nest of pri-
vateers” in the middle of the eighteenth century. Stephen De Lancey
had made his fortune partly by staking vessels in the “Madagascar
tiade,” asking no questions about piratical doings in a part of the
world supposedly monopolized by the British East India Co. His
son James, a young politician, married into the Heathcote family,
whose founder, Caleb, had combined New York merchandising
with being lord of the manor of Scarsdale. The Livingston family
got its start through progenitor Robert, who parlayed government
jobs into the possession of a manor and entered into a privateering
partnership with Captain Kidd, who may have been unjustly hanged
as a pirate.
FREE EN TERP RISERS BEFORE THE REVOLUTION . 15
If New York still lagged behind Boston in the years before the
Revolution, Philadelphia was already emerging as the leading
metropolis of what was shortly to become the American Republic.
The town had been planned by William Penn with sober Quaker
foresight; a practicing sociologist, Penn had recruited able artisans
and mechanics for his city as well as solid middle-class Quakers
whose Inner Light seemed to direct them to the main chance as
often as to heaven. When Penn himself had cleared his name with
King William of Orange some time after the deposition of the
Stuarts, he betook himself in person to his colony, where he found
things thriving. There was good grain land in back of Philadelphia;
there were grist mills along the creeks; the Germans of Germantown
had turned industriously to the manufacture of linen and paper;
there were ropewalks, breweries, and bakery shops.
Some twenty-five years after Penn’s sojourn in his proprietary
domain, the canny Benjamin Franklin chose Philadelphia in prefer-
ence to New York or Newport when, after running away from an
apprenticeship in Boston, he went looking for a job. ln ten years
Franklin had become master of his own Philadelphia printing estab-
lishment. As a printer of almanacs—his Poor Richard’s Almanac
collection of exhortations to order, frugality, and industry was a
colonial best-seller second only to the Bible-he made money out
of the sort of aphorisms that appealed to Yankees. He naturally
issued a newspaper, the Pennsylvania Gazette, from his printing
shop; and, as everybody knows, he indulged an experimental and
inventive faculty that led him to make a famous iron stove and to
trap electricity from a storm cloud with a kite, Long before the
middle of the eighteenth century Franklin had amassed enough
money out of business to indulge his scholarly and diplomatic bents;
he represented the colonial merchants in London, sending back
sage advice about the limits to which American importers could
go in flouting the mercantilist acts and get away with it.
The Quaker businessmen of Philadelphia made no such clamor
in the world as the Hancocks of Massachusetts; but their “peculiar
practices” —the truthful labeling of merchandise, the habit of offer-
ing goods at a single open price4id much to make them both
trusted and rich. Combining forces with the Germans (“Palatines”),
the Welsh, and the Scots who were attracted to Penn’s colony,
16 . THE ENTERPRISING AMERICANS
Quaker merchants provided capital for the earliest corporations. By
the time of the Revolution, Pennsylvania was taking the lead as
the iron manufacturer of the Colonies; a bloomery forge known as
the “Pool” was operating at Pottstown—and brewers and store-
keepers were putting their excess capital into sixteenth or fourteenth
shares of forges and ironworks. The Paschal furnace in Philadel-
phia, visited by General Washington, became “the largest and best
in America.” Meanwhile, the “Palatines” of Lancaster and the back
country produced more and more wheat to feed the suddenly vault-
ing colonial populations, floating some of their produce down the
Susquehanna to be shipped from Philadelphia’s rival port of Balti-
more. Newspaper advertisements in other colonies just prior to
the Revolution particularized Pennsylvania flour and iron, Phila-
delphia beer, potash kettles cast in Salisbury, Connecticut, Rhode
Island cheese, Virginia tobacco, and Carolina pitch—which indi-
cates Pennsylvania’s place in the scheme of things. In addition,
Philadelphia—the home of the Shippens, the Cadwaladers, and the
rich Quaker merchant Samuel Powel-evolved as a banking cen-
ter, producing such famous names as Thomas Willing, Robert
Morris, and Stephen Girard, the mean-tempered French shipper
whose complex of enterprises centering in a bank was to make him
the nation’s first multimillionaire. In Philadelphia industry and
finance developed in harness, with the result that when Washington
needed funds in the Revolution, the city was ready. When the
war was over, it was through Philadelphia’s leadership that the
North, not the South, became the nation’s money center.
In the South things were different from the start. Here the soil
lent itself to large plantations as contrasted to the small and strag-
gling New England farms where corn, peas, beans, and skimpy
grain provided a meager fare. Moreover, the products of the south-
ern soil were needed by Britain and fitted in nicely with prevailing
British economic theory. What irked the descendants of the first
planters was that in the process of trading with Britain they found
themselves accumulating enormous debts to London counting-
houses. Still, they might well have remained loyal British subjects
had not the British Crown finally cut off their access to free land in
the West. For the land was to the Southerners what the sea was to
New England—the fundamental generator of their wealth, their
way of life, and their culture.
FREE ENTERPRISES BEFORE THE REVOLUTION - 17
In South Carolina the profitable growing of indigo after 1742
brought profits of 33 to 50 per cent and led to the colonization of
the upland interior. Rice, the other staple of the region, became an-
other source of profit when a relaxation of trade restrictions after
1730 permitted the merchants of Charles Town to export some of
it directly to southern Europe-or “south of Cape Finisterre,” as
the charitable exemption read. And in all the southern colonies
the English Navy provided a ready market for naval stores (pro-
duced by “tar burners”) at times when the Baltic had been closed
as a prime source.
With the British trade restrictions resting lightly upon them, the
merchants of Charles Town had less scrabbling to do than their
brothers of the North. There was, to be sure, a stigma attached to
“trade” in a country where good livings were to be had from slave-
manned plantations— and the Draytons and the Middletons and
their descendants lived well on their Cooper and Ashley River
showplaces without demeaning themselves by entering the counting-
house. But plantations wer~r should have been—business en-
terprises in and by themselves. Though plantation owners frequently
lived beyond their means, the injunction to industry was taken
seriously even by colonial plantation women: it was the daughter
of a British Army officer, Miss Eliza Lucas (later Mrs. Charles
Pinckney), who first experimented with indigo when her family left
her alone in charge of the ancestral acres a few miles west of
Charles Town. In years to come, as Mrs. Pinckney, Eliza was inter-
rupted in her very knowledgeable pleasure-gardening by messages
from her overseer complaining about the indigo (it would not get
dry), the rice (it needed water), the barn (the Negro carpenter
was busy making barrels ), the indigo ladles (they were too short),
the chickens (they were being eaten by wildcats and foxes), and
the boat (it had not come upriver for the tar). These were details
of an exacting business that needed profits if slaves were to be
imported from Africa and if the lean seasons were to be endured.
To service the growing Carolina economy, at a time when
planters expected to double their capital every three years, a genera-
tion of canny French Huguenots, sons and grandsons of refugees,
led in making Charles Town the first port of consequence in the
southern colonies. Here the Manigaults and de Saussures outpaced
the English and Scotch-Irish Gadsdens and Rutledges as money-
18 . THE ENTERPRISING AMERICANS
makers. The boldest trader in the Huguenot community was Henry
Laurens, the son of a saddlery merchant. As a go-between who was
prepared to perform any service for a pyramiding economy, Laurens
found he could double his capital much faster than by raising crops
on land he himself owned. As a wholesale commission merchant,
factor, and independent trader, Laurens dealt in rum, sugar, Ma-
deira wine, coffee from Guadaloupe, indigo, slaves, indentured
servants, and such odd items as marble mantels. Sometimes he
sailed his own ships; sometimes he took pieces of cargo in ships
owned by others. As a banker for an economy that depended on
notes of hand and bills of exchange, Laurens frequently took his
pay from planters by accepting liens on next year’s crops of rice
and indigo, sometimes risking as much as ~1 0,000 on future
plantings.
At the age of forty, Laurens bought a Santee River plantation
and settled down to raise rice and indigo; he acquired more rice
lands on the Georgia coast; he created a 3,000-acre estate at Mep-
kin, on the Cooper River about thirty miles from Charles Town—
and, when King George III’s Townshend Act duties eventually bore
down heavily on Charles Town importers, he tongue-lashed the
colonial merchants from his retirement into a more zealous en-
dorsement of nonimportation of English goods. When the Revolu-
tion came, he acted as president of the Continental Congress. He
was captured by the British in 1780 (he was then fifty-six years
old), and returned as an exchange prisoner at the end of the
hostilities.
In contrast to Carolina rice, indigo, and naval stores, the tobacco
of Virginia, Maryland, and the Albemarle country of North Caro-
lina never received special consideration from the home country,
King James I wrote an angry screed against it; and under later kings
it was saddled with high import duties, which necessarily limited
its market even though duty was remitted on the proportion of the
crop that was re-exported from Britain to the European continent.
In addition to these man-made political drawbacks, tobacco
quickly exhausted the soil on which it was grown; the plots had
to be abandoned after four or five years, finding new use mainly
as “school lands.” When the price of slaves went up (owing to
competition for them in the rice and indigo country), the Virginians
FREE EN TERPRISERS BEFORE THE REVOLUTION . 19
were in real trouble, though they eventually found it profitable to
breed slaves for sale to the owners of new cotton lands on the Gulf.
Freight costs, insurance, commissions, merchants’ profits, and the
interest on borrowed funds, all of which were dominated by Eng-
lish companies, remained high for the tobacco growers—and with
Britain monopolizing the trade there was no way of seeking new
markets to meet shifts in the price.
Listen to Thomas Jefferson on the woes of the tobacco planter:
“It is a culture productive of infinite wretchedness.” (Jefferson was
not referring to what smoking or snuff-taking did to users of the
“sot weed.” ) Continuing his damnation, Jefferson said: “Those
employed in it are in a continual state of exertion beyond the
powers of nature to support. Little food of any kmd is raised by
them; so that the men and animals on these farms are illy fe~ and
the earth is rapidly impoverished.” As for the dependence of Vir-
ginia tobacco farmers on English merchants and Scottish factors,
which kept Virginia in hock to the suppliers of overseas credit, Jef-
ferson was equally contemptuous. “These debts,” he remarked, “had
become hereditary from father to son, for many generations, so
that the planters were a species of property, annexed to certain mer-
cantile houses in London.”
Yet if tobacco culture earned such opprobrium, it produced tine
houses as well as shanties with clay-lined chimneys, able men as
well as spendthrifts. The earlier eighteenth-century planters lived
well, if precariously, on the proceeds of their wasteful staple crop;
and throughout Virginia “tobacco notes”+r warehouse receipts
validated by inspectors—passed as money. This money, of course,
fluctuated in value with the state of the crops and markets, but it
nevertheless was an accepted medium of exchange. Local Anglican
clergymen, for instance, were regularly paid in tobacco notes; and
when the Virginia state legislature temporarily substituted depre-
ciated paper currency they raised a loud protest.
Tobacco also bred leaders for the Revolutionary period, because
it took qualities of command to run a ‘plantation. Supervisors and
overseers had to be watched; slave and indentured-servant labor
had to be stimulated to action. Cooperage for the hogsheads had
to be done at the plantation mills; the hogsheads themselves might
have to be rolled a mile or more to shipside. Since there were few
20 . THE ENTERPRISING AM ERJCANS
towns or ports in the Virginia and Maryland tidewater country,
plantation owners had to make their own diversions; hence the
drinking and the card playing, the minuets and the horse racing
and the endless entertainment of visitors, which were welcomed as
a relief from country monotony. The planters might be always in
debt, but money, to them, was a bookkeeping matter, and they lived
high on the credit that was carelessly renewed from season to
season. With the habits of Cavaliers, even such planters as came
from lower-middle-class English stock took on a mien of lordliness.
The more enterprising among them were stewards of large enter-
prises (some of them had many farms), and the plantation house,
surrounded as it was by kitchens, smokehouses, tobacco houses,
kitchen gardens, and Negro cabins, was necessarily the center of
a domain.
The palmy days of the tidewater produced the Fitzhughs, the
Byrds, and the Carters, whose names evoke a vision of “quality” in
Virginia to this day. William Fitzhugh’s Bedford estate, consisting
of 1,000 acres of which 700 were left in thicket for future use, had
2,500 apple trees, a water gristmill, a dairy, a dovecote, a henhouse,
and kept twenty-nine Negroes employed. The plantation house had
thirteen rooms, with a big library; a French Huguenot refugee min-
ister resided on the premises to teach Fitzhugh’s son, young Wil-
liam. A man of affairs, the elder Fitzhugh was a lawyer as well as
a planter; he acted as judge of the county court, as commander of
the militia, and he was a member of the House of Burgesses.
Along with Fitzhugh,’ the first William Byrd was born in England.
William Byrd II, born in Virginia, was sent to England by his
wealthy planter father to be educated in business matters in London.
Unlike some of the later planters whom Jefferson complained about,
the Byrds, father and son, believed in diversified interests. The first
Byrd had been a shopkeeper and fur trader before he became a
tobacco planter; he bought slaves in lots of 500 for resale as well
as for his own use; he purchased 1,000 gallons of rum at a time.
When he became the lord of Westover, William Byrd 11 grew all
types of vegetables and fruits, ran a tannery and a “one-man coal
mine,” and manufactured his own coarser textiles. He continued
his father’s fur trading in the Catawba Indian country, which gave
him a cash income denied to other planters.
In planting time, William Byrd II’s day was that of any planter
FREE ENTERPRISES BEFORE THE REVOLUTION - 21
who was concerned ‘for his crop. After a chilling May rain the field
hands would have to be rushed out to set 4,000 tobacco plants
before dark. Since there was an annual poll tax and an initial im-
portation tax on each Negro, the plantation owner had to make the
most of his men when he needed them. Both as a reward and as a
forestaller of bad colds, Byrd saw to it that each of his field hands
got a good sening of rum after the day’s labor. Byrd regularly in-
spected his plantations at the falls of the James and on the Appo-
mattox River, watched over the health of his slaves, and saw that
his tannery and coal mine were operating efficiently.
When he died in 1744 at the ripe age of seventy, the younger
Byrd left 180,000 acres. The city of Richmond, set up with “streets
sixty-five feet wide” on the site of his father’s trading house, was
Byrd’s own development. Life had not been a mere colonial version
of the rat race for William Byrd II. A cultivated man, he was in
the habit of starting his day by reading passages in Greek from
Homer or Thucydides, or something in Hebrew. His library at
Westover contained 3,600 volumes. He kept a “secret diary” (pub-
lished posthumously ), wrote a “Discourse Concerning the Plague”
commending tobacco as a therapeutic, and was always ready for
billiards or cards with his swarming visitors.
Tobacco provided the credit for London cutlery, chinaware,
four-poster beds, and serge suits; but it was the land itself, taken
up in ever larger quantities both as a hedge against soil exhaustion
and with a speculative eye to future sale, that provided the growth
of the big planters’ fortunes in a perennially inflationary age. At his
death Robert Carter, the famous “King Carter,” left an estate of
300,000 acres. A “miscellaneous agent” as well as a tobacco
grower, Carter bought and sold and shipped tobacco raised on
plantations other than his own, sending his sloop up and down the
James and Rappahannock rivers to make the collections. He had
more than 700 slaves—a huge number for the early part of the
eighteenth century. The inducement to buy a Negro was increased
by the property “headright” that went with him-an extra grant of
fifty acres of land per person, which could be measured against the
$10 poll tax levied on both whites and blacks alike and against the
small quit-rents that had to be paid on land in any proprietary or
royal colony.
As John Rolfe’s tobacco plant voraciously ate the nutriment out
22 . THE ENTERPRISING AMERICANS
of unmanured topsoil, the frontier lands to the west became more
and more of an obsession with the Virginia planters. With Peter
Jefferson, the father of Thomas, they pushed toward the Blue
Ridge; and throughout the middle years of the eighteenth century
caravans of slaves, overseers, horses, oxcarts, pigs, and kerchiefed
women moving to inland sites were a familiar sight in Virginia.
George Washington himself was part of the migration, as his father
Augustine and his half-brother Lawrence moved upriver to new
lands on the Potomac and the Rappahannock. As a young man
still in his teens, Washington earned up to $42 a day ( 1962 value)
by toting a surveyor’s chain through the Shenandoah country to
the headwaters of the Potomac to help lay out the still unbounded
acres granted to his employer, Lord Thomas Fairfax. With the
proceeds from surveying, Washington patented lands of his own
in Frederick County—”My Bullskin Plantation,” as he called them.
He already had a sizable domain when he inherited Mount Vernon
from his half-brother, along with his executor’s share in the Prin-
cipio Iron Works. To this he added shares in the Ohio Company,
which had extensive land rights “on the western waters of Virginia.”
Washington came to value his western possessions as his own
troubles with tobacco multiplied. Although his tobacco brought
the highest price in the Alexandria market, he was depressed by
the way it ate up the fertility of his lands in spite of everything he
could do. He tried alternating tobacco with grain to keep from
having to let his ground lie fallow; he made replenishing experi-
ments with mud from the Potomac, with black mold from his gul-
lies, with horse, sheep, and cow dung, and with the new “green
manure” crops of Iucerne (alfalfa) and clover. Eventually he de-
cided to get out of the tobacco business altogether, stipulating in
contracts with his tenants that only enough tobacco should be
raised to provide for “chewing and smoking in his own family.” He
was the first man in America to cultivate alfalfa; and his wheat
became famous as the source of a “superfine” flour produced by
his own milk and shipped in barrels made at his own cooperage
plant. He became the biggest flour producer in the Colonies, gain-
ing most of his cash income from three mills, which enabled him
to produce for markets as far away as the West Indies. But it was
good real estate, increasing in value against the constantly depre-
FREE ENTERPRISES BEFORE THE REVOLUTION - 23
ciating colonial currencies, that made Washington one of the rich-
est men in eighteenth-century America. Washington’s shrewdness
in conducting continual hedging operations against inflation is
clearly reflected in a letter to his stepson, John Parke Custis, that is
dated October 10, 1778. “A Moment’s reflection,” so the embat-
tled colonial commander-in-chief wrote, “must convince you of two
things: first that Lands are of permanent value, that there is scarce
a possibility of their falling in price, but almost a Moral certainty
of their rising exceedingly in value; and secondly, that our Paper
Currency is fluctuating; that it has depreciated considerably, and
that, no human foresight can, with precision, tell how low it may
get as the rise or fall of it depends on contingencies which the ut-
most stretch of human sagacity can neither foresee, nor prevent.”
Though he always retained the predilections of landed gentry in
his mode of living, Washington had the instincts of a modern busi-
ness developer. With twenty other Southerners he organized a com-
pany in 1763 to drain the Great Dismal Swamp south of the Vir-
ginia port of Norfolk. He ran the company himself as managing
director from 1763 to 1768, and eventually his executors collected
dividends of $18,800 from 1810 to 1825 on the Great Dismal
Swamp project; they finally sold the Washington share in it for
$12,000.
Working on the Dismal Swamp drainage canals had set Washing-
ton to thinking about an all-water route into the Ohio country. But
such ideas were rudely shoved aside by the onrush of political
events. With the end of the French and Indian War in 1763, and
the removal of old threats, Britain came to the conclusion that
there was no further reason for allowing the colonists to expand
westward. A buffer zone was no longer needed. This was not only
a blow to the dreams of a young Washington; it was one more
signal that before Americans could further expand their own enter-
prises they must provide themselves with a new political framework
in which business could operate. And as Washington himself was
to discover one day in 1775, the frame had to wait the issue of war.
2 Businessmen Join
in an Unbusinesslike War
Robert Morris
tion, maste~inding many of the deals with the West Indies. He
also continued to grow rich by carrying on his own private trans-
actions in tobacco and other commodities. Though Thomas Paine
attacked Morris for this kind of “conflict of interest,” Washington
as well as most other people was willing to overlook his habit of
mingling private and public business.
Toward the end of the war Morris was made Superintendent of
Finances. As such he gave America its first lessons in practical
banking when he founded the Bank of North America–-described
BUSINESSMEN JOIN IN AN UNBUSINESSLIKE WAR . 33
as the “first commercial bank in the U. S.’’—and made his old
partner, Thomas Willing, head of it. When “gentlemen of monied
interest” refused to invest in the bank, Morris arranged that the
government should subscribe $254,000 of hard money that it
had received from France. The remainder of the $400,000 needed
for incorporation followed from private sources. With this capital
in hand, the bank, under Morris’ direction, proceeded to make
large loans to the government-$1,200,000 in all. It also dis-
counted commercial paper and issued its own bank notes, which
were readily accepted as a medium of exchange because of the
bank’s reputation for redemption and Morris’ own financial stand-
ing. Indeed, Morris’ personal notes were readily accepted at par
around Philadelphia and in the middle states. When he severed
his official connection with the government in 1784 he had not
restored its credit, but he had more than earned hk sobriquet as
“financier of finances.”
Morris’ later years proved unhappy ones. Always flamboyant
in his operations, he finally overreached himself in real-estate
speculation and actually was sent to debtors’ prison in Philadelphia
in 1798. Despite this disgrace, Washington remained loyal to his
wartime financier to the end, and indeed invited Mrs. Morris to
spend time at Mount Vernon while her husband was in jail. For
Washington correctly sensed that America owed an extraordinary
debt to this man. Not only did Morris help the Colonies finance
the war, but he also grasped the need for strong and centrally
directed finance, which was to prove essential for the revival of
business. In and out of office he kept urging the Continental
Congress to revise its own powers, to levy more taxes, and to
maintain a sound currency system. He also undoubtedly forestalled
repudiation of the country’s wartime obligations. Thus he set the
stage for the great funding operations of Alexander Hamilton,
the first U.S. Secretary of the Treasury. Indeed, it was at Morris’
behest that Washington chose Hamilton for that office.
Before Hamilton got his opportunity to put Morris’ ideas into
effect, however, the American people had to discover by sad
experience that they needed a stronger form of government than
the one supplied by the Continental Congress and the Articles of
Confederation. For the war, while successful in a military sense,
34 . THE ENTERPRISING AMERICANS
had taken an enormous economic toll. Despite much privateering,
external trade had been completely disrupted, and in Nantucket
grass had grown in the streets as the whaling vessels rotted at the
piers. Privateering profits, save with the Derbys of Salem, Girard
of Philadelphia, and a few others, disappeared as the British Royal
Navy swept the small, inadequately armed American vessels from
the seas. The New England fisheries needed new ships before
the “sacred cod” could move again in commerce—and then there
would be the troublesome matter of finding new markets for
fish and lumber to replace British Caribbean island ports that had
been placed out of bounds by King George’s Parliament. As for
the southern states, which might have paid for imports with
shipments of tobacco, rice, and indigo, their plantations had either
deteriorated during the war or been overrun and devastated by
the British. The fields could not be revived overnight.
Meanwhile internal domestic commerce was falling to pieces
for want of a strong central authority. Every state tried to get
the drop on its neighbors—for example, New Jersey, “a cask
tapped at both ends,” found itself squeezed between the trade
discriminations practiced at its expense by Pennsylvania and New
York. Connecticut levied duties on imports from Massachusetts
and, in turn, discovered that New York had no intention of letting
firewood from Stamford and New Haven move through Hell Gate
into the East River free. New Yorkers and New Hampshiremen
started quarreling over the rights to Vermont maple-sugar-bush
country. Even state boundaries were matters of dispute. Connecti-
cut, for instance, claimed that certain land between the Susque-
hama and Delaware rivers had been granted to it by the British
Crown and tried to enforce this claim against an outraged Penn-
sylvania.
The whole chaos was compounded by a spotty paper-money
inflation in every state save Connecticut (“the land of steady
habits”) and Delaware. The inflation was kept within reasonable
limits in the middle states, but Rhode Island, an old offender in
the matter of paper money, went hog-wild. When the merchants of
Newport and Providence closed their stores in 1786 rather than
sell goods to Rhode Island farmers for worthless paper, the farmers
retaliated by burning their corn, pouring their milk on the ground,
BUSINESSMEN JOIN IN AN UNBUSINESSLIKE WAR . 35
and letting their apples rot in the orchards. The year 1786 might,
with pardonable exaggeration, be called the year in which no
business was done.
This is not to say that the American people starved in the post-
Revolutionary period; after all, 90 per cent of the population still
lived close to the soil. The farmer had his beans, his peas, and his
Indian corn; he let his lean pigs forage in the woods for acorns;
and when he added to his farm buildings he generally used wooden
dowels instead of costly nails to fasten his beams together. The
spinning wheel provided him with clothes, which he stained with
sumac or butternut dyes—and if his sheep were too poor to supply
much wool, such woolen yarn as was available could be mixed
with linen fibers from flax to provide the rough cloth known to
our ancestors as “linsey-woolsey.” People ate out of wooden trench-
ers shaped by the fireside during long winter evenings; homemade
moccasins were used for shoes—and when cash was needed for
such things as sewing needles or for salt, or to pay the land tax, the
farmer burned some wood and leached the ashes to make pot ashes
or potash, an article that usually commanded a good price.
But while life went on, the means of economic expansion were,
to say the least, limited. In the 1780’s the roads were still so
abominable that most travel was by water, though horses and
stages clopped and jolted at four or five miles an hour in good
weather over the sketchy highways from Portsmouth, New Hamp-
shire, to Baltimore. In the South, land travel was even more diffi-
cult. Though Kentucky and Tennessee were attracting settlers, a
general movement to the West must wait upon something better
than canoes, pack horses, and even broad-horn flatboats. There
was, too, the matter of the Indians, who were being egged on
against American settlers by British commanders who had not
yet departed from U.S. soil at Detroit and Niagara. As for would-be
manufacturers, if they had capital they couldn’t transport their
goods. And a people used to farming in the crudest conventional
ways hardly helped improve things by regarding the inventor
in quest of a mechanical short cut as an “indolent” and “God-less”
man.
The rundown condition of the country after the Revolution—
and the inadequacy of the Confederation to deal with it—was well
36 . THE ENTERPRISING AMERICANS
known to the men who became the federal republic’s “Founding
Fathers.” As a member of a Continental Congress that was
unceremoniously shufied about between Princeton, New Jersey, and
Annapolis, Maryland, Jefferson experienced at firsthand the make-
shift character of a government that could not levy taxes to pay for
a permanent capital. To pay his way during his term in a Congress
that would not pay him, Madison had to borrow money from a
Philadelphia banker, Haym Solomon, who refused to charge in-
terest when he learned of the young Congressman’s predicament.
Washington himself had plenty of opportunity to see conditions
at firsthand. In 1784, after fighting to get paper notes for his
veterans, which were cashed at anywhere from 20 to 50 per cent
discount, he returned to Mount Vernon. But he was soon off to
the West, where he found squatters on his lands—and he offered
the de facto claimants a settlement at 25 shillings per acre or leases
for ninety-nine years. Over the years he investigated all possible
routes to the West. At the end of the war he made a horseback
trip up the Mohawk Valley, the future route of the’ Erie Canal,
and even bought over 5,000 acres of New York State land. He
also explored the middle and southern approaches and, as the
young nation’s “first expansionist,” pushed for the formation of
the Potomac Co. to dig a westward canal from the Potomac’s
upper reaches to the Monongahela.
The idea never came to much because the terrain proved too
difficult. But Washington’s activities on behalf of the Potomac Co.
gave the young states their first lessons in co-operation. In 1786,
Maryland formally agreed to let Delaware construct a canal con-
necting the Delaware River and Chesapeake Bay. More important,
it met with New Jersey and New York in conference at Annapolis
to consider “such additions to the powers of Congress as might
conduce to a better regulation of trade.”
The Annapolis Convention was the first effort to stir the states
out of their postwar lethargy. In itself it accomplished little, but
it did succeed in setting the stage for the Constitutional Convention
at Philadelphia in 1787. The fifty-five delegates from the thirteen
sovereign states met at Philadelphia ostensibly to “amend” the
Articles of Confederation. Boldly, however, they chose to exceed
their powers and sought to form a “more perfect union.” Quite
BUSINESSMEN JOIN IN AN UNBUSINESSLIKE WAR - 37
aside from the necessity of squaring this action with the folks back
home, the delegates had to solve a unique problem in social physics:
how to create a stronger central government-a “power of the
whole’’—without infringing on the individual’s rights to life, liberty,
and property, and without weakening the ability of the states to
conduct their own affairs.
The historic solution was to create a federal structure of dele-
gated authority, with all non-delegated powers reserved under
the Tenth Amendment “to the States respectively, or to the people.”
In good part the Founders trusted to the states to preserve the
liberties of their own citizens. But in two critical economic areas
pertaining to business they drew the line. As practical men of
affairs, the delegates had seen the evils of multiple state currencies,
and in 1786 they had witnessed Shays’s Rebellion, in which Captain
Daniel Shays had attempted to rouse inflationary-minded Massa-
chusetts farmers against the hard-money interests of maritime
Boston. Congress, in reaction to this, was given exclusive power
to coin money and the states were forbidden to do so. Similarly,
the states were expressly forbidden to levy tariffs or embargoes
against one another.
This was about all the economic planning there was, but the
results were profound. For when the last necessary ratifying vote
on the Constitution came through in 1788, merchants and business-
men from the Kennebec to the Savannah River could look forward
to moving out into a world of internal free trade that was to become
the greatest “common market” in history. And with the “power of
the border” secure, Americans could look out on the outside world
with confidence that they would no longer be pawns of contending
European empires. The great business boon of the Constitution was
that it created a legal instrument that permitted individual forward
planning without fear of ex post facto interruptions by government
or undue molestation from mercantilists of any sort, whether home-
grown or foreign.
Even so, the Constitution was at best a prospectus, and the job
of putting its economic insights into effect still remained to be done.
The man who rose to this challenge was Alexander Hamilton.
Born in the West Indies, an artillery officer during the war, an
able lawyer and negotiator, Hamilton would have preferred a far
38 . THE ENTERPRISING AMERICANS
more centralized government than emerged from the Constitutional
Convention. Failing that, however, he set to work as Secretary of
the Treasury on three enormous tasks: the funding of the national
and state debts; the creation of a viable credit system; and the
stimulation of domestic manufacturing.
In the matter of debt Hamilton took on an extraordinarily
complex and politically delicate job. During the war and postwar
years the old Continental Congress not only borrowed abroad but
had also piled up a domestic debt with a face value of some $40
million (not counting the issue of paper currency, which was
clearly beyond redemption). In addition, the states had incurred
or assumed debts amounting to $25 million. A more timid man
might have counseled the scaling down of these obligations, letting
the states in particular meet their creditors any way they chose.
But to Hamilton such a course seemed neither honorable nor
expedient. The new Republic had to restore its credit, and the
state debts had, after all, been incurred in fighting a common
enemy. It seemed unjust that the states which had been trampled
by war should pay more than those which had, so to speak, come
home free.
In his great “Report on Public Credit,” therefore, Hamilton
proposed that the old Continental debt and most of the state debts
be bundled together and paid off at par. The proposal met with
a storm of opposition in and out of Congress. Madison, for one,
was suspicious of the whole scheme, arguing among other things
that many of the original holders of state and Continental obliga-
tions had sold them off at cut-rate prices to speculators who would
be the ultimate gainers. Many other Southerners invoked the doc-
trine of “states’ rights” and opposed the plan. Unable to joust
with his opponents on the floor of Congress, Hamilton had to rely
on his lucidity as a writer to carry his point. Eventually he won
over the votes of Virginia and Maryland by the political deal under
which the administration agreed to remove the national capital
from New York and locate it on the Potomac River at a site to be
chosen by President Washington.
In the final outcome Congress agreed to fund a total of $42
million of debt with the biggest portion of the new obligations
drawing 6 per cent interest and a smaller portion at 3 per cent.
BUSINESSMEN JOIN IN AN UNBUSINESSLIKE WAR - 39
In the process, speculators certainly made money, and some
latter-day historians have even accused the Founding Fathers of
conspiring to feather their own nests by anticipating all along a
-
rise in the value of Continental paper. But in writing the Con-
stitution the Founders made no recommendation about the debt,
leaving the matter to the discretion of Congress; and Congress in
its turn finally decided that something had to be risked if the public
credit were to be re-established. Actually, as Hamilton correctly
foresaw, much more than the public credit was at issue. For the
assumption of the state debts in particular proved a powerful
instrument for drawing the states together and giving their citizens
a vital stake in the whole federal experiment.
The funding of the debt was also essential to and interlocked
with Hamilton’s design for giving the country an efficient monetary
and credit system. At his urging Congress defined the U.S. dollar
in terms of gold and silver and set up the mint for coining both.
Specie of all kinds, however, remained desperately short for a good
many years, and the more immediate problem was how to regulate
the issue of paper money, in which most business transactions had
to be done. Here Hamilton improvised boldly. In 1791 Congress
set up the first Bank of the United States with an initial capital of
$10 million. Most of this capital came from private investors who
purchased bank stock with bonds they had recently acquired under
Hamilton’s funding plan. With these bonds and a smaller amount
of specie as assets, the bank in turn issued its own bank notes,
which became a reliable and much-needed medium of exchange.
To head the bank Hamilton recommended Robert Morris’
old partner Thomas Willing, commonly called “Square Toes”
from the conservative cut of his shoes. A reticent and prudent man
with a horror of speculation, Willing helped set the tone of
anonymity that bankers have generally cultivated to this day,
Scarcely had Square Toes assumed office than the bank, along
with Hamilton’s whole design for the future, was put to the test
by the short-lived panic of 1792. A drop in the money market
coincided with the collapse of various land-company schemes
of the New York speculator, William Duer. An ex-Assistant Secre-
tary of the Treasury, Duer had sought to enlist European capital
for the settlement of lands in the Ohio Valley. When the bubble
40 . THE ENTERPRISING AMERICANS
burst, he was sent to prison for debt, and it looked as if the young
nation were in for a long depression. Indeed, Jefferson computed
that New York investors and speculators lost some $5 million
(equal to the value of all the buildings in the city), and that
Philadelphia and Boston losses ran to $1 million each. The National
Gazette pointed to New York’s “languishing condition—vessels
lying at the wharves without anyone to receive their cargoes—the
speculators either in jail ruminating over bushels of loose papers,
locked up in garretts, or fled into remote and desolate parts of New
Jersey.” Characteristically, Hamilton met the situation by directing
the government to support the market for U.S. 6 per cents at par,
and within two months the country’s banks were discounting as
usual. By June, 1792, confidence in the economy was so far
restored that 5,000 persons met at the state house in Philadelphia
“with $30 in every man’s hand” for subscribing to the Lancaster
Road, the iirst big enterprise of its kind.
Despite this initial success, Hamilton’s general philosophy never
proved popular. When the charter of the first Bank of the United
States lapsed in 1811, it was not renewed. A second Bank of the
United States was set up after the War of 1812, but was in turn
killed off by Andrew Jackson. Thereafter for many years the
country rode along with a highly decentralized banking system,
suffered many a bank failure and some disastrous panics, and
learned to its cost that it is one thing to specify that a central
government shall “regulate” the value of money, and another thing
to do so. Indeed, even the modern Federal Reserve System-estab-
lished a hundred and nine years after Hamilton was killed by Burr
in their famous duel under the cliff at Weehawken—has scarcely
found a magic formula. Nevertheless, Hamilton set a standard
to emulate. He was not, as some latter-day agrarians have charged,
a skinfint hard-money man. He was that rare phenomenon—an
expansionist who knew that growth and good money go together.
Hamilton also sought to encourage manufacturing, though here
his ideas leaped far ahead of his time and the country’s resources.
In his “Report on Manufactures,” written in 1791 with the able
assistance of a young Philadelphian called Tenth Coxe, Hamilton
drew heavily on Adam Smith’s Wealth of Nations and, indeed,
as historian Louis Hacker has noted, paraphrased it in a number
BUSINESSMEN JOIN IN AN UNBUSINESSLIKE WAR - 41
of places. In one respect, to be sure, he deviated from the principles
of free trade and the market economy. With his eyes on the predatory
powers of Europe, Hamilton noted that a young and struggling r
nation needed a certain amount of self-sufficiency lest it be vulner-
able in case of embargo and war. The report, therefore, favored
a protective tariff to encourage new industries. Yet Hamilton also
hedged this proposal. In his view an open bounty, or subsidy, was
better than a tariff, and even a bounty should not be continued
too long.
The second part of Hamilton’s report consisted largely of a
census of U.S. manufactures as they existed in the summer of 1791.
Aside from household fabrication such as weaving and spinning,
Hamilton listed seventeen separate industries that were already
flourishing to some extent. These included ironworking, the tanning
of hides, the softening of flax fibers for linen, the making of hemp,
sugar refining, the many developments of the lumber industry
(ships, cabinet wares, etc. ), tinware, copper and brass work, and
hat-making. Oddly, Hamilton did not count milling of wheat as
a “considerable” manufacture, though since colonial times it had
contributed substantially to exports.
Here was a beginning, but as Hamilton and Tenth Coxe looked
around them, they also found much room for improvement. There
was, first, the sad state of the “mechanick arts”: workers were
lazy and untutored; the machinery in use was a ramshackle col-
lection of minor aids to handicraft; and as for capital, it was not
to be had without paying exorbitant interest rates. The biggest
shortage of all was manpower, since there were at the time fewer
than a million white adult males to “shoulder the burden of a
continent.” Hamilton’s answer here was more machinery, which
would reduce the need for many hands; and women and children
could take over some of the repetitive tasks of factory production.
In an attempt to give point to his report, Hamilton formed what
was probably the first true corporation in the United States, the
“Society for Establishing Useful Manufactures,” chartered by the
New Jersey legislature on November 22, 1791. According to the
proposed plans for the society, the proprietors hoped to manu-
facture paper and paper products, heavy linen for sails, women’s
shoes, brass and iron ware, carpets and print cottons. A “new city”
42 . THE ENTERPRISING AMERICANS
was projected and in time the textile town of Paterson, New
Jersey, was to grow up on the site. The society raised $625,000
and actually built a cotton-print mill. But alas for Hamilton’s
hopes, it could find neither skillful managers nor competent machine
designers and @saris; nor could it lure young men away from
the farms at costs commensurate with the operation. In 1796 the
plant closed down. Hamilton, foreseeing the difficulties of the
society, had resigned from it in 1793. -
The uncomfortable truth was that the U.S. had few resources
on which to erect a “holding company” for “useful manufactures”
in the early 1790’s. What Hamilton only fitfully grasped was that
the manufacturing nation of his dreams had to be born out of
long travail and pain. Although the young nation had a going
money system, it was short in both investment capital and techni-
cal know-how. To be sure, some inspired tinkerers, such as Oliver
Evans, Samuel Slater, and Eli Whitney, were already at work on
inventions that presently would revolutionize business enterprise.
But the fruits of their tinkering lay ahead, and neither Hamilton
nor the other Founding Fathers could hurry things. Their glory
was that they provided some ideas which freed man as a producer—
and the ideas would find their way. .
3 The Quest for Capital and
the Sprouting of Invention
Samuel Slater
to both, and we can agree. I am, for myself and Almy and Brown,
thy friend, Moses Brown.”
Slater at first tried dutifully to make the old Almy & Brown
spinning frames work but soon had to inform his employers that
they must begin all over again, if they wished to catch up with the
THE QUEST FOR CAPITAL - 55
British Arkwright machines. Using leather and wood for parts
wherever possible, and even making shift with corncobs for spin-
dles, Slater and an ironmaster named David Wilkinson set up an
entirely new mill for Almy & Brown in an old clothing shop at the
falls of the Blackstone River in what is now downtown Pawtucket.
At first the new machinery worked no better than the old: a mass
of wadded cotton fibers jammed up against the teeth of the finisher
carding device. It was not until Slater and master mechanic Syl-
vanus Brown, another kinsman of Moses, had inspected the slope
of the wires used in a hand carder belonging to Sylvanus’ wife that
a correction could be made. As it turned out, the angle of the
carder teeth was the single thing Slater had failed to memorize cor-
rectly. A simple but tedious resetting of thousands of wires got the
equipment going—and America had its first successful cotton-
spinning machine.
Slater built his first mill in 1790, the year in which Rhode Island
as the thirteenth ratifying state made the adoption of the Federal
Constitution unanimous. Four years later I Eli Whitney patented
the cotton gin, which was to supply the textile trade with a plentiful
supply of clean raw cotton. For a long time Slater-spun thread went
out to cottage weavers for transformation into cloth. Then, in 1814,
another remarkable memorizer of English methods, Francis Cabot
Lowell of the already famous Boston and Newburyport Lowell
family, started weaving cotton threads into finished fabrics by ma-
chine processes at Waltham, Massachusetts, where the Charles
River moves swiftly enough to provide waterpower. A mathemati-
cian without experience in the cotton business, this son of “Old
Judge” Lowell and Susanna Cabot had taken himself and his wife
(of the old Jackson shipping clan of Newburyport) to Europe in
1810 for a rest. But no Lowells have ever been known to rest for
very long, and Francis Cabot’s brain remained as busy as ever.
For a time his letters to his brother-in-law, Patrick Tracy Jackson,
were all about real estate, trading in India, and foreign exchange;
but soon the correspondence became concerned with the making
of cotton cloth. Abetted by Nathan Appleton, who joined him in
Europe in 1811, Francis Lowell forsook art galleries and cathedrals
to wander for long hours through the cotton mills of Manchester.
He asked questions, took mental notes—and back in Boston, after
56 . THE ENTERPRISING AMERICANS
being captured and detained by a British frigate in the first weeks
of the War of 1812, he joined with Patrick Jackson in chartering
a company to make cotton fabrics.
This was the beginning of the famous Boston Associates, a group
that came to include most of the Lowell clan and their connections
(Amorys, Cabots, Higginsons, Jacksons, Russells, Lees, and others
of the old trading aristocracy), as well as the new merchant tribe
of Lawrences, who were eventually to intermarry with the Lowells
to produce a Harvard president, an astronomer, and a cigar-smok-
ing free-verse poetess. But before the “clan” was willing to put
much money into the venture, Francis Cabot Lowell had to prove
to its cagey members that he was not mad. After raising $100,000
and buying an old paper mill at Waltham, Lowell put his mathe-
matical abilities to work to reproduce—and improve upon—the
spinning and weaving processes he had watched in England. Na-
thaniel Bowditch paid his own mathematician’s tribute to Lowell’s
intricate calculations for the so-called “double speeder,” which was
mechanically fleshed out at the Waltham mill by the brilliant Paul
Moody of Amesbury.
By 1814, at a time when all America was hungry for the cloth
it had imported from England before the period of embargoes, non-
intercourse, and war, Lowell and Patrick Jackson were ready to
card and spin thread and weave cloth all under one roof. Soon the
Waltham mill was turning out some thirty miles of cotton cloth
in a day and paying 10 to 20 per cent in dividends, and at this
point the members of the “clan” started buying shares with a mad-
ness all their own. After Francis Cabot Lowell’s early death, Jack-
son, who became the new soul of the enterprise, spent long hours
in the acquisition of Merrimack River mill sites as the need for
waterpower grew. Out of these sprang the cities of Lowell and
Lawrence, and when Slater, too, expanded his operations to include
cloth making (he built plants at the Amoskeag development in
Manchester, New Hampshire), the U.S. was soon deep iri the first
textile phase of the industrial revolution.
The pay was at least relatively good at the beginning as the
Lowells and Patrick Jackson brought in farm girls to their company-
town structures on the Merrimack to work for dowry money; in-
deed, the English novelist, Anthony Trollope, spoke of Lowell as
THE QUEST FOR CAPITAL . 57
“the realization of a commercial Utopia” even as late as the 1860’s,
which was some time after complaints had begun to be uttered
against overcrowding and paternalism. Those complaints were to
increase as the farm girls were replaced by Irish immigrants. But
regardless of arguments over the humanity of employing children
and boarding six young farm women to a room, the young U. S.,
through the remarkable memory feats of Samuel Slater and Fran-
cis Cabot Lowell, had caught up with the English in textiles. By
1834 there were six corporations at Lowell operating nineteen
‘mills with 4,000 looms and more than 100,000 spindles. As V. S.
Clark says in his History of Manufactures in the U.S., the decade
of the 18 30’s in Lowell was the “most remarkable decade of prog-
ress, in a single place and industry, as yet achieved in our manu-
facturing history.”
Meanwhile, other industries were sprouting. Wherever a wheel
could be turned or charcoal could be had to fire a forge, some
Yankee or Pennsylvania German or Welshman was certain to be
at work hammering out machine parts for an entirely new breed of
factory designers. Ironworking itself tended to remain a black-
smith’s craft, though there were indeed some small iron-rolling
mills in America at the beginning of the nineteenth century. The
reason for the continued rule of the blacksmith went back to pro-
revolutionary times, when the British had prohibited the flatten-
ing and forging of iron for tools and hardware. But the art of metal
rolling could hardly be denied for very long to Yankees who were
demanding new sinews for new industry.
Curiously, the first impetus to large-scale metalworking in Amer-
ica came not from the blacksmith’s shop but from people who had
learned their craft in the small world of silversmithing, tinworking,
and the alloying of copper with zinc to make brass. It was a silver-
smith, Paul Revere, famous alike as a “Liberty Boy” patriot and a
fashioner of severely beautiful urns and pitchers, who first had the
idea of rolling copper in sheets that would be big enough to stretch
over roofs and the hulls of ships. Dreaming in his little shop on
Boston’s Charter Street, Revere—then in his sixties-decided that
somebody must provide barnacle-resisting copper bottoms for the
young Republic’s Navy if the frigates were to be kept sufficiently
speedy to catch the Barbary pirates at their insulting work of
58 . THE ENTERPRISING AMERICANS
enslaving U.S. sailormen. Accordingly, the old Liberty Boy put
aside his work of making silverware and bought an old powder mill
at Canton, not far from Boston on the Neponset River.
To get the proper rolls from England, Revere put up $25,000 of
his own savings plus $10,000 the federal government lent him on
a promise that he would resheathe the Constitution’s bottom.
Revere learned how to use his new rolls in the course of turning
out six thousand feet of sheathing for the dome of Bulfinch’s new
Massachusetts State House. Copper for the hull of “Old Ironsides”
followed in due course.
The venture so pleased the old patriot courier and silversmith
that he wrote a poem about it:
The italics are Revere’s own—and the exultation that runs through
the poem is a far cry from the dry irony of Revere’s own descrip-
tion of his famous ride on April 18, 1775. Revere never thought
his ride amounted to much (his own account of it, stressing his
stupidity, is utterly unlike Longfellow’s later poetic version) but
he was sure his copper “roleing mill” was a truly patriotic contnbu-
tion. His assessment of the comparative value of the ride and the
ability of the Canton mill to provide sheet metal in large quantities
may be correct. Ride or no ride, the Minute Men would have as-
sembled anyway. But if it hadn’t been for Revere’s decision to
become America’s first big industrialist in metal, the U.S. Navy
would not have been ready to take on the British in the War of
1812.
Revere’s mill led the way in an industrial breakthrough. In Con-
necticut, other men contributed to this same development. Well
before the Revolution two Irishmen, William Pattison and his
brother Edward, had set up as manufacturers of tin kitchenware in
a small shop in Berlin, a village a few miles south of Hartford.
THE QUEST FOR CAPITAL . 59
Lacking raw materials, the Pattisons imported their tin sheet from
Europe. To sell their pots and pans they hired peddlers-the fore-
runners of a famous breed that was to make “Yankee notions”
known far and wide throughout the American backwoods. In time,
Connecticut’s pioneer tinworkers became pewter workers and
“Britannia ware” workers, alloying the tin variously with lead and
antimony. Then, one day in 1802, the Grilley brothers and the
Porter brothers of Waterbury on the Naugatuck River took the
jump from pewter buttons to brass buttons-and the U.S. brass
industry was born.
Though Connecticut had some small copper deposits at Granby
and Cheshire, the new Waterbu~ brass makers had to import most
of the copper and zinc for what was soon to become the first in-
dustry with an organized system for selling its wares nationally.
The Scovills of Waterbury were early experts in annealing copper
and zinc to get the proper orange tint that made brass the preferred
metal for all sorts of consumer items. They, along with their com-
petitors, got their knowledge by paying virtual bribe money to lure
British brassworkers to America. It is a Waterbury tradition that
British workers were sealed in casks and smuggled out of England.
By the 1840’s, the Naugatuck Valley brass makers were turning
out vast quantities of pins by new automatic devices and sticking
them into papers by use of an automatic sticking machine. Coins
for South American governments were struck by Naugatuck Valley
dies. When the daguerreotype process was developed, the “valley”
made the first U.S. photographic plates; when whale-oil lighting
came into fashion, it had a virtual comer on brass lamps. It satis-
fied the hunger for hooks and eyes and needles at one extreme, and
for huge “spun” brass kettles at the other. Brassware was so profita-
ble in those early-nineteenth-century years that Anson G. Phelps, a
New York importer of raw copper, betook himself to the Nauga-
tuck Valley, founded the town of Ansonia, and started the manu-
facturing end of a business that is still with us under the name of
Phelps Dodge.
The greatest of all the Connecticut innovators, however, was Eli
Whitney, whose exploits in many fields helped shape an entire age.
As already noted, his invention of the cotton-cleaning engine, or
gin, in the early 1790’s was critical to the development of northern
60 . THE ENTERPRISING AMERICANS
textiles. It also turned the American South to the furious exploita-
tion of cotton, and so probably kept the “peculiar institution” of
slavery from dying a natural death. But Whitney’s towering influ-
ence goes well beyond this. He is a key figure in the development
of jigs and dies and other machine tools for metalworking. And it
was Whitney who started making guns from interchangeable parts
and in the process laid the foundation for what was to become the
“American system” of mass production.
Whitney was born in 1765 on a small farm in Massachusetts’
straggly and sandy Worcester County, which lies between Boston
and the fat lowlands of the Connecticut Valley. Hating farm work
because of the endless and meagerly productive chores, the young
Eli set up a forge in his father’s workshop to make penknife blades,
nails, and small items for personal use, and presently branched out
into making hatpins by drawing steel into fine wire. His youthful
fingers knew from the beginning that they had a vocation, but his
mind, distracted by provincial ideas of success, did ,not. For several
years Whitney taught school in Massachusetts and Connecticut,
and then entered Yale, thinking to become a lawyer. Running out
of money after his graduation at the advanced age of twenty-seven,
he went south to take on a tutoring job. In Georgia he stopped off
at a plantation run by the capable and cultivated Catherine Greene,
widow of one of Washington’s foremost generals, and heard talk
of the difficulty of separating short-staple cotton from its tenacious
green seed. (A Negro slave could clean only a pound a day. )
Within a few days Whitney’s amazing fingers had devised a rough
mechanism for forcing the cotton through a series of narrow slits,
thus effectively cleaning it. With the gin in mind, Whitney then
picked up a business partner, Phineas Miller, a fellow Yale man
who was manager of the Greene plantation, and the two set out to
make and market the new machine.
Luckily for his own future, Whitney had an endlessly frustrating
experience trying to collect royalties on the use of his patent. Every-
where in the South the gin was pirated as cotton production jumped
from five million pounds to thirty-five million in seven years; and
to pursue the pirates proved more than the effort was worth. The
result was a black period in Whitney’s life. But after months of
terrible strain during which he lost his New Haven machine shop
-
THE QUEST FOR CAPITAL 61
through fire, Whitney came up with another idea that saved his
sanity and salved his pride. He had learned something about the
construction of machine tools in his efforts to produce cotton gins,
and had, presumably, watched the New Haven mint of Abel Buell
stamp out identical copper coins. Now Whitney decided to make
muskets by constructing in advance a full line of accurately guided
tools, and stamping out full mill runs of interchangeable parts.
The idea was epoch-making, though actually it had been antici-
pated (and dropped) in France by a gunsmith named Le Blanc.
In 1798, Whitney got a hearing with U.S. Army officials and ob-
tained a sizable contract. It took him a year to tool his factory, and
when the time for delivery of the first 4,000 muskets and equipment
came, Whitney had only 500 on hand. At this critical point he put
on a demonstration before President John Adams and Thomas
Jefferson, then Vice President, in which he disassembled the guns,
scrambled all the parts, and put a new batch of weapons together.
The demonstration gained him a needed reprieve and the government
advanced him most of the $134,000 needed to fulfill his contract.
In 1812, Whitney’s success was assured by a second agreement,
for 15,000 muskets; and visitors from all over the world began to
come to Hamden, Connecticut, to goggle at his tiny factory at the
Lake Whitney fall line of the Mill River. Other gunmakers-Sim-
eon North of Middletown and Berlin and, eventually, Sam Colt
of Hartford—picked up Whitney’s manufacturing ideas. The
clockmakers of New Haven and the nearby Naugatuck Valley,
seeking mass methods for punching out clock faces, also came to
listen and to learn. Whitney’s first crude milling machines for chip-
ping and planing metals caught the eye of toolmakers for the tex-
tile business. And, presently, a new generation of machinists and
inventors emerges in Windsor, Vermont, and in Providence, Rhode
Island (home of Brown & Sharpe), to create the machine-tool in-
dustry—the “industry that is behind all industry’’-which today
makes the multiple drills and presses and automated monsters of
the modern age.
Thus the vital seed corn of ideas was sown. Yet the pioneer
mass-production methods, which appear in startling if primitive
clarity in the cotton mills of Slater and Francis Cabot Lowell, the
flour mills of Oliver Evans, the brass factories of the Naugatuck,
62 . THE ENTERPRISING AMERICANS
and the gunshops of Eli Whitney and Simeon North, were fated to
remain “sleepers” in most manufacturing businesses for some time
to come. The industrial revolution in America was still waiting for
the national market that had been guaranteed, in legal form at
least, by the Constitution. And the market itself was waiting for
the magic wand of easy transportation to touch it to life, as Samuel
Slater knew when he put $40,000 earned from cotton-thread pro-
duction into turnpike stock.
The task of the next generation of enterprises was to break
through to the West, to tie America together with roads, canals,
and river transportation, and even, perhaps, with the high-pressure
steam carriage that Oliver Evans had tinkered with in his later
years. Eli Whitney’s most important invention—which was nothing
less than the invention of a method-could wait its day.
4 / Arnerica Goes Places
Earl,
Peter Cooper
$17,000 per mile, they had thirteen miles of track laid for horse or
even sail-car operation.
At this point Peter Cooper, a New York enterprise, merchant,
and philanthropist, came up with a better idea. Working in the
B. & 0.’s shops, he managed in 1829 to build a small engine, the
76 . THE ENTERPRISING AMERICANS
Tom Thumb, out of scraps of iron that included pipes adapted from
musket barrels, and he was anxious to try it out. He raced the Tom
Thumb against a stagecoach horse over the track between Balti-
more and Ellicott’s Mills, losing out at the last minute because of
a slipping pulley belt. Even in defeat the demonstration had been
made: the Tom Thumb had proved that steam could pull a single
car around a sharp curve. A year later a New York watchmaker,
Phineas Davis, won a $4,000 prize from the B. & O. for an engine
capable of pulling fifteen tons at a fifteen-mile-an-hour speed.
The citizens of Baltimore had a truly exalted confidence in their
Mr. Thomas, a God-fearing Quaker, and their Mr. Brown. Capital
for the new railroad was quickly subscribed. “Public excitement,”
wrote John Latrobe, the railroad’s counsel, whose famous engineer-
brother Benjamin was to design the road’s viaducts between Balti-
more and Washington, “has gone far beyond fever heat and reached
the boiling point . . . the possession of stock in any quantity was
regarded as provision for old age . . . the excitement in Baltimore
roused public attention elsewhere and a railroad mania began to
pervade the land.”
The B. & O. did well for those who had faith in it. Though the
road took four years to reach the Potomac and much longer to
cross the Alleghenies, Peter Cooper’s investment in shore-front land
near the Baltimore terminal eventually brought him a small fortune
to add to money he made in glue and gelatin. Taking pay for the
land in stock from two Bostonians who formed a company to ex-
ploit it, Cooper lived to see the stock rise from $44 to $225 a share.
(Some of his money he invested in an iron business that was to
make even more fabulous profits by serving the railroads. ) It took
more than twenty years for the B. & O. to reach Wheeling on the
Ohio, but the Chesapeake & Ohio Canal, beaten by railroad effi-
ciency, never got there at all.
Down South, the businessmen of Charleston, South Carolina,
were troubled by the fact that Savannah, which had river connec-
tion with the West, seemed to be cornering the upcountry trade.
Accordingly, they got a charter from the South Carolina legislature
for the Charleston & Hamburg Railroad, the first U.S. road actually
to be planned from the beginning for the use of steam cars. The
Best Friend of Charleston, a locomotive made by the West Point
-
EARLY AMERICA GOES PLACES 77
Foundry in New York State, pulled four loaded passenger cars over
six miles of completed Charleston & Hamburg track in late 1830.
It attained a speed of twenty-one miles an hour. On a subsequent
trip the locomotive was buttressed, in its rear, with a flatcar loaded
with cotton bales to quell the passengers’ fear of an explosion.
The Tom Thumb and The Best Friend oj Charleston were the
forerunners of a mighty host. The West Point Foundry went on
from its success with The Best Friend to make the De Witt Clinton
and other locomotives for the Mohawk & Hudson Railroad Co.,
whose line from Albany to Schenectady formed one of the links
that were later to be joined into the New York Central. After many
disappointments, Colonel John Stevens finally started to build his
Camden & Amboy Railroad across New Jersey. He had the luck
to use modern-type “T” rails with flanges at the bottom. The flanges
were fastened to wooden blocks by hook-headed spikes. The spiked
“T” rail was the invention of the Colonel’s ingenious son, Robert
L. Stevens, who, in default of local rail-rolling mills, had to go to
England to have his product made. In the beginning the spike-
bearing wooden blocks were laboriously inserted into niches drilled
in granite roadbed. Then, suddenly, a cold winter closed the quar-
ries upon which the Camden & Amboy depended. Making the best
of the shortage in stone, the Stevenses started spiking the “T” rails
directly to wooden crossties. They were surprised when this “tem-
porary” method of tracklaying proved more steady and durable
than any other then in use in England or America. The “tempo-
rary” method has lasted to the present day.
For a considerable period New York City let other coastal towns
take the initiative in railroad building, for it was already linked
to the West by the Hudson River, along which Daniel Drew and
Commodore Vanderbilt ran their profitable steam packets, and by
the Erie Canal. The Erie Canal lobby endeavored to create legisla-
tive difficulties for New York State railroad enterprises, even spon-
soring a plan to force railways to pay tolls as they passed the canal
toll points. When citizens of the upstate cities of Albany, Troy, and
Schenectady decided to cut forty miles out of the Erie Canal and
Mohawk River routes by building the Mohawk& Hudson Railroad,
they were actually forbidden by the first charter to carry freight.
Even after seven separate railroads had established the physical
78 . THE ENTERPRISING AMERICANS
basis for a through line from Albany to Buffalo, no attempt was
made to compete with the Erie Canal for long-haul business. The
seven roads had different equipment, did not sell through tickets,
made no effort to dovetail their schedules, and refused to use com-
mon stations. The situation approximated the French economist
Bastiat’s sarcastic description of a discontinuous railroad, organ-
ized to provide superior livings for porters, not to give service to
shippers and passengers. The dilatoriness of New York State busi-
nessmen in bringing railroads into New York City helped Boston
to become one of the more successful railroad terminals. Three
different lines made Boston the “hub” of a wheel by linking it with
Lowell, Worcester, and Providence; and by throwing an early line
over the Berkshire, Bostonians made their own connection with
the West.
Despite the anti-railroad propaganda floated by the canal com-
panies, which solemnly warned Congress about the menace to life
and limb represented by the spark-belching iron horse, the railroads
were soon carrying the more perishable parts of the cargo that had
once been entrusted to the waterways. There were still people who
questioned the superiority of the rails, and there was, to be sure,
plenty of business to be shared by both types of carrier for a long
time to come. But eventually the canals were to be relegated to an
inferior position, doomed to a mule-gaited trade of hauling such
proletarian substances as ice, granite, gravel, limestone, coal, and
brick. The iron horse proved itself not only a useful carrier but a
profitable one, and money poured into the roads from the eastern
cities. Textile and shipping profits went into the early lines radiating
out from Boston. In Pennsylvania the Scrantons, owners of iron
foundries, invested in the Delaware, Lackawanna & Western, and
the anthracite roads were financed by coal-mine owners. The Mo-
hawk & Hudson was financed by New Yorkers, who listed it on the
Stock Exchange as early as 1830. The New York money market
was utilized by the New Jersey railroad builders; and the Second
U.S. Bank took one-quarter of the stock of the Philadelphia &
Reading.
The huge wonder of the railroad to our ancestors is summed up
in Squire Hawkins’ ecstatic outburst to his wife in Mark” Twain’s
and Charles Dudley Warner’s The Gilded Age. Speaking of the
EARLY .4 ME RICA GOES PLACES -
79
Tennessee land he is holding for a “speculation” in the pre-Civil
Wartime, the Squire says: “Even you and I will see the day that
steamboats will come up that little Turkey River to within twenty
miles of this land of ours-and in high water they’ll come right to
it! And this is not all, Nancy—it isn’t even half! There’s a bigger
wonder—the railroad! These worms here have never even heard of it
—and when they do they’ll not believe in it. But it’s another fact.
Coaches that fly over the ground twenty miles an hour—heavens
and earth, think of that, Nancy! Twenty miles an hour. It makes a
man’s brain whirl. Some day, when you and I are in our graves,
there’ll be a railroad stretching hundreds of miles-all the way
down from the cities of the Northern States to New Orleans . . .
Well, do you know, they’ve quit burning wood in some places in
the Eastern States? And what do you suppose they burn? Coal!”
By 1840, as if to justify Squire Hawkins’ ecstasy, there were
more than three hundred railway companies in the U.S. and track
mileage had risen to about 3,330 miles, drawing abreast of the
canals. ‘The rail companies were still a motley collection of enter-
prises using all manner of gauges. The Erie, which was the first
American railroad to provide trunk service from the East to the
lakes, had a six-foot gauge; the Camden & Amboy, four feet eleven
inches; the South Carolina Railroad, five feet; the B. & O., the
standard English gauge based on the old carriage-track width of
four feet eight and a half inches. Brakes were still manually oper-
ated; and George Pullman had yet to devise his famous “Pioneer
A“ sleeping car. But even as short lines, the railroads added might-
ily to what canals and steamboats had done to boost the growth of
the western cities. Buffalo, a farm-produce assembly point as early
as 1825, and Rochester, which had begun to mill Ohio grain in
1830, benefited from the short lines that preceded the creation of
the New York Central. When the Pennsylvania reached Pittsburgh
in 1854, almost in a dead heat with the B. & 0.’s entry into Wheel-
ing, it helped boom all the Ohio River towns.
As for Chicago, the railroads, coming to it from all points of the
compass after 1847, really made it the capital of the new West.
Collecting cash in small amounts from farm housewives, William
B. Ogden, Chicago’s richest booster, built a grain railroad from
western Illinois into the city—and within the space of a few years
80 . THE ENTERPRISING AMERICANS
Chicago had become a world distributing center for western farm
mops of all kinds. From the lumber towns of Michigan and Wis-
consin, Chicago drew boards and planks and shingles for redis-
tribution to southern Illinois and Indiana; from Missouri and Iowa,
it drew beef and pork; from Minnesota, it garnered more grain.
The St. Mary’s River Ship Canal, built by young Charles T. Harvey
(with capital from St. Johnsbury, Vermont, and New York State,
as well as Chicago), connected Lake Superior with Lake Huron
and gave Chicago access to northern Michigan’s iron-ore deposits.
And as the city used and transformed and forwarded the raw prod-
uce of the frontier, it also drew the finished goods of the East for
shipment to the farms. The drummers went out from Chicago,
bound for plain and prairie and forest hamlets to the south, the
west, and the northwest.
The railroads, which made Chicago, also made the American
iron industry, which, besides turning out rails, eventually was to
provide the material for such pioneer necessities as the ax, the
plow, and the revolver. But even before the U.S. had an iron in-
dustry, the western pioneer was necessarily drawing on American
factory products made from imported steel. In the seamless web
of history, the American frontier and the American factory, with
Chicago as the prime binding point, were destined for a time to the
closest of working alliances. The East, committed more and more
to factory specialization as the years wore on, needed the pioneers’
agricultural products. But like so many Huck Finns pursued by the
Widow Douglas with the hairbrush, the pioneers couldn’t escape
the counter-reach of civilization. And business, which moved fast
on the heels of the woodsman and the plainsman to the West, was
the agent for combing every man’s hair.
5 Frontier and Factory
Mr. Astor makes his first fortune in jurs for beaver hats.
Down-Easters become the country’s first lumber kings.
And the Coilinses of Connecticut supply the axes.
Sam Colt mass-produces th great “equalizers” of the A meri-
can plains.
John Deere’s plow and McCormick’s reaper put the farmer
in business.
Brown Brothers
the basis for his fortune by making himself a focus of energies that
supplied a commodity in high demand. To a people who regarded
the savages, the wild animals, and the very forest itself as things
that had to be pushed back if civilized people were to have space
for expansion and fields for crops, the fact that the American Fur
Co. had fought the British on the northwest frontier as monopoly
to monopoly in order to get its way could not have seemed of very
great moralistic moment.
Forest and plain had to be conquered—and, luckily, the spoilage
of the wilderness that so horrifies modern conservationists was of
use to people back home. The hunger for lumber in a period in
which the population was almost doubling every twenty years was
virtually insatiable. Even before the War of 1812, in places like
86 . THE ENTERPRISING AMERICANS
Massachusetts, New Jersey, and Maryland, the good close-to-sea-
board timber was petering out. But to the north, in Maine (the only
place where the American pioneer moved east ), there were mil-
lions of acres of virgin white pine. The riches on the upper stretches
of the Penobscot River attracted the eager attention of William
Bingham of Philadelphia, who snapped up two million acres of
Maine timberland at a cut-rate price of 12.5 cents an acre. Stewart
Holbrook, the historian of the lumber industry, reports that loggers
hacked for a century at the Bingham purchase without exhausting
it. The land rush in Maine centered on Bangor, which, in the
1830’s, became the first of our sawmill boom towns. With saloons
on every corner to keep the men from the woods happy at the end
of a log drive, Bangor was an anomaly in God-fearing New Eng-
land. But it became the prototype of a hundred different lumber
towns, reaching all the way from Maine to Aberdeen, Washington.
Moving west with the various migrations of the timber kings,
Maine men helped staff the logging crews that cut wide swathes
through the lake states of Michigan, Wisconsin, and Minnesota and
made the leap to the early-twentieth-century empire of Douglas
fir in the far Northwest. New men came to the business from time
to time—the Shevlins and the Weyerhaeuser of Minnesota being
notable examples—but the down-Easters, whether they were
Canucks, Swedes, Irish, or Yankees, pioneered all the more difficult
arts involved in riding the white-water rivers and breaking the log
jams. It was a harum-scarum life in which death was the normal
penalty for a single slip-and the business of supplying release (in
women, dance halls, and liquor) for lonely loggers who had just
come in after a winter in the woods was in itself the source of many
a sawmill-town fortune.
To lighten the danger of riding the rivers in the days before the
Civil War, a Maine blacksmith named Joseph Peavey invented the
lumberman’s cant hook, which still bears his name. Character-
istically, Joe Peavey disclosed the nature of his invention to a fellow
blacksmith during an evening session over a bottle of Medford
rum—and soon discovered that someone had stolen his secret and
beaten him to Washington with a patent application. Such a minor
disillusion couldn’t keep the Peavey family out of lumber; at the end
of the nineteenth century an Ira Peavey bossed the construction of
F R O N T I E R A N D F A C T O R Y - 87
a conveyer system that was to dump a hundred million feet of
Penobscot logs for the Bradstreets of south Gardiner, Maine, into
a sluice leading to the Kennebec River, and a Gary Peavey, born
and raised to lumbering know-how on the Penobscot, ended his
crew-bossing days on Puget Sound after cutting timber in Penn-
sylvania, another big logging area, and fighting off the Indians who
molested his loggers in Minnesota.
In the fullness of time in the 1890’s, the elder Robert La Follette,
the first Progressive governor of Wisconsin, was to make great
political capital assailing the timber barons of Wisconsin for skul-
duggery in exploiting the state’s public domain. But without loggers
such as Cadwallader C. Washburn of Maine, who himself became
a governor of Wisconsin, the prairie towns and the farm buildings
to the south of the lake states would never have been built; and
pioneers farther to the west would have gone on living in sod huts.
Logging money was to make the school system of Menomonie, in
northern Wisconsin, a showpiece for educators who visited it from
all over the nation. The loggers’ cry was “Let a little light into the
swamp!” Slashing a thousand and more miles of white pine with-
out thinking of a replacement, the lumbermen thought they were
makkg new lands available for farms. They could hardly foresee
that the acid soil of the cutover lake states was not destined to make
good farming country for anyone other than those frugal Northmen,
the Swedes and the Finns. To their own generations, lumber kings
like Charles Merrill of Maine, who bought his first western forest
land along the St. Clair River in Michigan in 1836, or like Charles
H. Hackley, who came to Muskegon in 1856 without money and
died in 1905 leaving $6 million to his adopted town for culture
(including oil paintings), were giants in the same earth that bred
the legend of Paul Bunyan’s blue ox Babe, whose footprints made
the Great Lakes.
Along with the peavey the lumber industry found other ingenious
ways to solve its problems. The log boom, a Maine invention
designed to channel river-borne timber into the pens of its rightful
owners, was still being used in river regions of Michigan in the
late 1880’s and 1890’s by the Tittabawassee Boom Co., a joint
concern backed by Saginaw and Bay City lumbermen. In the Far
West, lumber had to be dragged to mills over toteroads by “bull-
88 . THE ENTERPRISING AMERICANS
whacking” oxen, or by skidding machines attached to aerial pulleys
set high in commanding trees, or by sleds run by donkey engines.
Oddly enough, the woodsmen out in the bush, who were quite used
to watching the circular saw chew up timber in the mills and who
employed two-men Disston crosscuts themselves to cut fallen trunks
into pieces, went on using the trusty ax to hew standing timber
until the 18 80’s. It seemed against nature to use a crosscut saw
horizontally. For a full half-century some 40,000 axes were needed
at any given moment in America to keep the white pine falling—
and these axes ordinarily had to be replaced after a month of
repeated sharpening. (The woodsmen actually kept the blades
honed to the point where they could shave with them on Sundays. )
So, by the law of reciprocity that linked the frontier with the
mechanical East in that pre-Civil War period, a little company in
Connecticut—the Collins Co. of Collinsville on the Farmington
River, which still makes machetes for use on banana and coffee
plantations in Central America—grew fat in supplying axes to
voracious loggers all the way from Maine to Minnesota. The com-
pany was started by Samuel and David Collins, two young brothers
who, as storekeepers in Hartford, Connecticut, had been selling
British=imported steel to blacksmiths who forged it into ax blades.
In an inspired moment David Collins decided that country smithies
could not provide enough axes to keep a good store going, either
as a supplier of steel or a retailer of finished ware. Accordingly,
the Collinses bought an old gristmill on the Farmington and rigged
up some machinery to blow air to the forges and to turn the grind-
stones. This was in 1826, just before the big Maine lumber boom
got under way. Two years after the Collinses had turned out their
first sharp axes, they were using triphammers to pound the metal
into shape. Soon, with the use of huge grindstones from Nova
Scotia, they were producing ten axes a day—which was mass pro-
duction by the standards of those times.
But ten axes a day, or three thousand a year, were not enough
to keep the sawmills of Bangor fed with logs, to say nothing of the
mills of Williamsport, Pennsylvania, and Saginaw and Bay City,
Michigan. The practical physics and chemistry of providing early
tool steel that was neither too hard nor too soft resisted short cuts,
and the processes never would have been speeded up to the point
-
FRONTIER AND FACTORY 89
of supplying the loggers with 40,000 new axes a month if a
mechanical genius named Elisha King Root had not appeared at
the Collins gates. An ex-bobbin boy from Massachusetts, Root had
had some experience with mill machinery. Root devised dies for
shaping the hot ax metal and forging machines to supply the groove
for inserting the sharp cutting bit into the ax head. Following the
ideas of Eli Whitney, Root soon had ax-making fined down to a
precision basis, with jigs guiding the ax heads as they were moved
into position against the grinding stones. Because of the standardi-
zation of their product, the Collinses were able to out-distance all
rival ax-makers; they put a trademark on their axes that made them
one of the first of our national brands. Collins cutting-edge steel,
which had been imported at a cost from Sheffield in England to be
fitted into ax heads made out of local New England ores from
Salisbury in Connecticut and Great Barrington, Massachusetts,
eventually gave way to American Bessemer-made metal, with the
iron ore coming all the way from Lake Superior. Up to the time
when the crosscut saw, made at the Disston plant in Pennsylvania,
began to replace the ax in the woods in the 1880’s, the Collins com-
pany flourished as ax-maker to a nation. Then, with demand for its
pioneer product falling off, it switched to other products. Mean-
while its technological genius, Mr. Root, had moved on to work
for another enterprise, who responded to the law of reciprocity
that bound the frontier to the emergent industrial Northeast. We
shall meet Mr. Root again, in the Hartford shops of Samuel Colt,
whose revolver—the so-called “great equalker” of the frontier—
enabled the American people to conquer the western plains as the
Collins ax had helped them conquer the forest.
The story of the push to the Great Plains proper, beyond the 98th
meridian which separates watered prairie and woodland from the
dry lands that once appeared on the maps as the Great American
Desert, is mainly a post-Civil War story. But within the southern
limits where the plains curve down through Texas to approach the
Gulf of Mexico, Americans were moving out into natural cattle
country in the 1830’s and the early 1840’s.
They were Texans then, living under the Lone Star of the Texas
Republic. The “Texians,” or “TexicanS,” had a navy of sorts, ~d
they were also defended by the Rangers, a tough band of men. In
90 . THE ENTERPRISING AMERICANS
the language of a contemporary, the Ranger could “ride like a
Mexican, trail like an Indian, shoot like a Tennessean, and fight
like a very devil.” With headquarters at San Antonio, the Rangers
had the twofold job of fighting off the Mexicans, who had never
recognized the right of the Texas Republic to secession, and the
Comanche Indians. Mounted on horses whose sires had originally
been stolen from the Spanish conquistadors, the Comanches were
a fearful lot. Where the Rangers would have to dismount to fire
their old single-shot flintlocks, which were muzzle-loaded, the
Comanches fought with bows and arrows, which they could handle
at a full gallop.
Though the Texans had little money to pay for anything (the
Rangers sometimes collected their wages in land scrip), they man-
aged, somehow, to get credit for arms in the East. Representatives
of several U.S. gunmakers appeared on the Texas scene, among
them a salesman named John Fuller who carried a small consign-
ment of weapons from the Patent Arms Manufacturing Co. of
Paterson, New Jersey. Fuller had a new type of gun to sell, a breech-
loader that carried in a revolving chamber several bullets which
might be fired at a clip. Although the Chief Ordnance Officer of
the Lone Star Republic turned Fuller down, preferring flintlocks
from W. K. Tryon & Co. of Philadelphia, Fuller did get a small
order for the revolvers from the Texas navy.
Soon this new kind of weapon was making a name for itself. A
Ranger band under the command of John Coffee Hays, for instance,
carried the new revolver when it went in search of a Comanche war
party in the spring of 1844. The story of what happened has been
succinctly told by an eyewitness: “CO]. J. C. Hays with fifteen men,
fought about 80 Comanche Indians, boldly attacking them upon
their own ground, killing and wounding half their number . . .
the result of this engagement was such as to intimidate them and
enable us to treat with them.” The Indians had tried their usual
tactics of drawing the Texans’ fire before charging them, thinking
to catch the palefaces in the interval normally required to reload.
They were vastly surprised when each Ranger fired again and again
without pause. Years later, when an old Comanche who had been
wounded was shown one of the magic revolvers, he said: “Him
no good.”
FRONTIER AND FACTORY o 91
The gun the Rangers were using was the Colt revolver in its
first primitive guise, the brain child of a remarkable man. Born in
Hartford, Connecticut, in 1814, Sam Colt had persistently annoyed
the neighbors wherever he lived as a boy by his harum-scarum
experiments with black powder. In Ware, Massachusetts, he blew
a raft out of a pond during a Fourth of July celebration, and had
to be shielded from a soaked and angry crowd by young Elisha
King Root, who was one day to become his production genius. On
another occasion he blew the windows out of a school building.
The proper place for such a boy seemed to be at sea, so Sam was
packed off at the age of sixteen on a brig bound for Calcutta. In
the Indian Ocean, while watching the helmsman’s wheel spin over
and catch when a spoke came into line with the desired shift in the
brig’s direetion, the mysterious cross-education that makes for new
inventions sparked something in Colt’s mind. A whittler, the young
Colt soon had a wooden model of a pistol with a revolving cartridge
cylinder ready for practice whirls at lining up bullets with a station-
ary barrel. He got his first patent in England in 1835 (the year
before the birth of the Texas Republic), and a year later a Wash-
ington patent followed. With a promise of $230,000 in capital,
some of which never materialized, Colt founded the Patent Arms
Manufacturing Co. in Paterson, New Jersey, the town that had
been projected by Alexander Hamilton. Despite the early orders
for revolvers from the Texans, the company soon fell into bank-
ruptcy.
What saved Colt was the coming of the Mexican War in 1846
and a hurried trip to New York by Captain Samuel Walker of the
Texas Rangers to look for arms. Together the slight, taciturn Texas
Ranger and the flamboyantly genial Colt set out on a tour of the
New York City gunshops. Everywhere they got the same answer:
military volunteers had cleaned the shelves out. Whereupon Walker
remarked cryptically that it was just as well. What the Texas Ranger
captain wanted from the charming Mr. Colt was a newly designed
gun, with a trigger guard and loading attachments that wouldn’t
come loose in the middle of a fight. The lack of a factory bothered
Colt less than the criticism, which he swallowed because he knew
that Walker’s interest meant his rehabilitation as a manufacturer.
To get around a recalcitrant War Department, Walker appealed
92 . THE ENTERPRISING AMERICANS
directly to President Polk. Colt, who had developed a lordly and
convincing manner while lecturing on the “moral” aspects of science
as “Dr. Coult of New York, London and Calcutta,” promised a ‘
thousand “armes” at less than $25 each, a second thousand at
$17.50, and “any number thereafter in lots of 1,000 at $15 each.”
He had no assurance that he could provide the equipment to make
the gun, but he had heard of Eli Whitney. And in Whitneyville in
Connecticut he found the son of the inventor, Eli Whitney Jr., still
in business. Though hesitant at first, the junior Whitney finally
agreed to make the guns on a contract basis more favorable to him
than to Colt. Colt shrugged off the hard bargain in the best “Dr.
Coult” tradition, for in the course of observing the Whitney pro-
duction methods he had absorbed the information that was soon
to make him a millionaire. Within five years he ended his associa-
tion with Whitney and had his own flourishing establishment in
Hartford, where he built the greatest mid-nineteenth-century arms
plant in the world. He took his old boyhood friend Elisha King
Root away from the nearby Collins ax factory, and together with
Root he brought the mass production of interchangeable parts to
such perfection that the Colt shop became known far and wide as
the school for U.S. manufacturing everywhere. Colt himself was
invited to appear in London before a Parliamentary Committee on
Small Arms; his machines were adapted by the British to the manu-
facture of the Enfield rifle; and many years later it was an ex-Colt
employee, Henry Leland, who first adapted the Colt mass-produc-
tion techniques to the making of automobiles (the Cadillac) in
Michigan.
Everything conspired to make the Colt venture the first truly
great modern manufacturing success. Inventions such as the per-
cussion cap had made the cylinder-firing pistol possible; the condi-
tions of mounted plains warfare rendered a fast-shooting weapon
an absolute necessity on the first frontier beyond the tree line.
Then, too, the time had come for a quick-on-the-draw personal fire-
arm all through the American West. It was not merely that Cali-
fornia and Oregon-bound settlers needed protection against the
mounted Plains Indians who lived off the buffalo herds all the way
to Canada. Even in mountainous and wooded California itself,
where the Gold Rush of ’49 had attracted lawless characters from
FRONTIER AND FACTORY . 93
all over the world, there was a seemingly endless market for Hart-
ford-made pistols. The profit entries in the accounts of Major Amos
Beebe Eaton, a cousin of the Hartford Colts who had an agency
for the pistol in California, waxed and waned with the records of
gold dust shipped from San Francisco to the East. Between Janua~
24, 1851, and August of 1853, Major Eaton had sold pistols to
the value of some $71,000 at a profit of $16,000, half of which
went to himself, the rest to his dealers. The market ran out as the
mining of western ores became more civilized, but by then Colt had
made such a reputation that armies everywhere, including the
Yankee army that would shortly be mobilized to fight the Civil War,
were clamoring for Colt-manufactured firearms. And the post-Civil
War market resulting from the spread of the cattle kingdom was
still waiting in the womb of time.
A pioneer in modern employee relations, Colt reduced the work
day in his factory from fourteen to ten hours, built one of the first
employees’ social centers in America, and provided his men with
hot water, soap, and towels. Behind this remarkable factory stood
the New England machine-tool industry, which had come a long
way from Eli Whitney’s first dies and jigs. In a dozen small valleys
where the streams ran swiftly to supply mill power, Yankee tinkers
had been busy devising the light, accurate machine tools that were
needed for small precision manufacture. Old England might keep
the lead in the invention and development of great boring and shap-
ing devices that were necessary for such things as steam engines.
But the Yankees were faced with demands for tiny clock parts, for
gun components, and for pieces for the new sewing machine; and
all this called forth an amazing versatility.
Elisha Root, for instance, not only helped design tools and fix-
tures for making the Colt revolver but also added a drop hammer
and a horizontal turret lathe to the list. Up the valley of the Con-
necticut River, in Windsor, Vermont, F. W. Howe designed vertical
and horizontal lathes for the firm of Robbins & Lawrence; and in
1850 this company had the first multi-purpose milling machine
ready for sale. Guns machined by Robbins & Lawrence tools cap-
tivated the British at the 1851 Crystal Palace Exhibition in London,
leading to a British expedition to “Darkest America” to inspect
what was then just becoming known as the “American System” in
,
94 . THE ENTERPRISING AMERICANS
the factories. The, British came, saw, were conquered—and when
they sailed for home they left an order for 150 machine tools.
Behind the new breed of frontier plainsmen came the farmers,
sometimes before the railroads, sometimes after the extension of a
railhead into “nowhere.” Used to small clearings, the westward-
faring .husbandmen were often ill equipped both mentally and
physically to handle the huge acreage of tough and sticky sods that
covered the prairie states, where grass had been growing since the
Ice Age. It was not that plows had not already been invented: it
was now quite a long time since the New Jersey farmers of Bur-
lington County had rejected neighbor Charles Newbold’s cast-iron
plow (patented in 1797) out of fear that it would “poison the soil.”
Thomas Jefferson had worked out the mathematical dimensions of
the moldboard plow, but this protean man was so interested in a
thousand different things (he also invented the swivel chair and he
made what may have been the first American dumb-waiter) that
he never got around to manufacturing it. After the War of 1812
Jethro Wood of New York State devised and patented a cast-iron
plow that came in three parts, any one of which could be replaced
without forcing the farmer to buy a whole new instrument. The
Wood plow worked in eastern soils—but cast iron could not be
brought to the proper pitch of strength and polish to break and
handle the matted prairie grass roots and clinging loams of the
West.
Enter, at this time, John Deere, a Vermont-born blacksmith who
moved from Grand Detour, Illinois, to Moline in the 1840’s, and
whose name still graces one of the great agricultural-machinery
companies. Deere had noticed that plows improvised by John Lane,
a Chicago blacksmith, out of steel saws cchdd cut and turn the
toughest earth. (Lane had made the first American steel plow in
Rockport, Illinois, as early as 1833. ) As scientifically inclined as
Thomas Jefferson, Deere worked on the problem of the best mold-
board curve for the soils of Illinois and Iowa, and as fast as the
problem of getting good steels could be solved, his manufacturing
business grew. Later came “soft-center” plows, devised by John
Lane’s son, in which the ordinary brittle steels were supported by
more malleable metals; and in 1855, James Oliver of South Bend,
Indiana, came up with a method for chilling the working surface
96 . THE ENTERPRISING AMERICANS
of a steel casting more quickly than the back supporting sections.
The chilled-steel plow had an extraordinarily smooth surface that
was not achieved at the cost of excessive brittleness-and on the
basis of Mr. Oliver’s improvement another great agricultural-
machinery company was born to carry its original name far forward
into the twentieth century. By the time of the mid- 1840’s western
farmers were hitching two or three plows together and riding them
sulky fashion, which took much of the backbreaking tedium out
of the job of getting ready for spring sowing. And the sowing itself
was made easier when mechanical drills for the planting of wheat
came on the market contemporaneously with the sulky plow.
None of this solved the problem of the harvest, which was always
a nightmare as the farmers raced against time to cut the wheat
before it fell, overripe, to rot in the field. Mower reapers had actu-
ally been invented in England and Scotland as early as 1822, but
they had run afoul of farm-laborer prejudice and had never come
to much. In the early 1830’s two Americans, Obed Hussey, a one-
eyed Maine Quaker who had gone to live in Cincinnati, and Cyrus
Hall McCormick of Rockbridge County in Virginia, were each
separately engaged in working on the idea of a reaper. Completing
their models virtually neck and neck, the two men got patents em-
bodying somewhat differing principles. The Hussey machine was
sturdy and did a good mowing job, and its manufacturing origin
in Cincinnati gave its maker an advantage over McCormick’s loca-
tion in Virginia because of the proximity to wheat country. For a
while Hussey did better than McCormick, who could find no buyers
in his own hilly neighborhood. At this point, however, Hussey made
the mistake of moving his production to Baltimore. McCormick,
a Scots-Irishman who combined inventive ability with a superb
business sense, had meanwhile made a trip through the Middle
West, where he saw grain growing in fields that made the Virginia
farmsteads of the Shenandoah look like peasants’ holdings. Accord-
ingly, as Hussey moved away from the country that most needed
the reaper, McCormick pulled up his strong Virginia roots and
moved into the territory Hussey had deserted.
Some of McCormick’s machines had already preceded him,
traveling from Richmond by way of the Atlantic Ocean to New
Orleans, and then up the Mississippi. This long haul made the price
FRONTIER AND FACTORY . 97
far too steep for most farmers. The canny McCormick looked over
Cleveland, Cincinnati, St. Louis, and Milwaukee for factory sites,
and for a time he licensed his production to several manufacturers
in Missouri, Illinois, Ohio, and New York. Eventually he took the
whole business back into his own hands, narrowing his factory-
site choice to Chicago, which he picked because it was at the hub of
the new Northwest growing area. Not only was Chicago close to
grain country, but it had water access to steel from England and
pig iron from Cleveland and to wood from the forests of the lake
states. Needing capital to back up his choice of an ugly, mud-
streaked frontier village, McCormick tackled Chicago’s biggest
real-estate operator and former mayor, William Ogden. Ogden put
up $25,000 for a half-interest in a partnership, and McCormick
was in business in time to manufacture 500 horse-drawn mechani-
cal reapers for the 1848 wheat harvest. Two years later he bought
Ogden out for twice the original $25,000.
The time and the place could hardly have been better matched
to make McCormick the first great industrialist of the coming
“Queen City of the Lakes.” In 1848, Chicago was a swamp-it
was not until 1855 that engineers started to dredge the malodorous
Chicago River and create the fill on which to build a modem city.
But even before the big upgrading of the city, the incoming torrents
of wheat, entering Chicago by William Ogden’s new Galena & Chi-
cago Union Railroad, were already making the swamp the grain-
elevator capital of the nation. Into Chicago came young men on
their way to farm country—and even while the street levels were
being lifted the hotels went on doing business.
To lift the Tremont Hotel to the newly created street level, for
example, a bright young man named George M. Pullman assem-
bled 5,000 jackscrews and 1,200 men in the basement and ordered
each man to give four jackscrews a half turn on signal. The hotel
went up without disturbing the guests in their rooms—a premoni-
tion, perhaps, of Mr. Pullman’s later career in making it possible
for passengers to sleep in comfortable berths while jolting over the
rails that led in and out of the many Chicago depots.
While the city was being raised out of the mud of the prairie, the
wealth of the whole Northwest kept jumping. But though the popu-
lation of the new states grew, there were never enough men. When
98 . THE ENTERPRISING AMERICANS
the Gold Rush of ’49 was stripping the midwest farms of young
workers, the farmers hurried to get the McCormick machines if
only to make do without their harvest hands. With a reaper, one
man could do the work of ten. By this time McCormick had ware-
houses throughout the upper Mississippi Valley, ready to trundle
out a machine whenever a farmer, facing a harvest without field
help, gave a frantic last-minute order for a reaper.
During all this period the reaper kept the farmer in business. In
1853 it enabled McCormick’s chosen city to ship some 6 million
bushels of wheat; in 1855 the figure had jumped to 16 million. The
panic of 1857 barely checked Chicago’s development as a wheat
market, for in 1859 it was still shipping 16 million bushels. In
1860, on the eve of the Civil War, the figure virtually doubled to
31 million—and in the first year of the war it hit 50 million. The
last great jump was accomplished at a time when the sons of Illinois,
Wisconsin, Iowa, and Minnesota were marching off to the battle-
fields, denuding the Northwest of labor as the Gold Rush had never
done. Small wonder that Lincoln’s Secretary of War Edwin M.
Stanton said in 1861 that “without McCormick’s invention, I feel
the North could not win and that the Union would be dismem-
bered.”
Though the really great development of the McCormick com-
pany came after the Civil War, McCormick pioneered many mod-
ern business practices even before the war had enlarged the market
for his machines. He guaranteed his product and allowed farmers
to pay on an installment plan that was gaited to harvest conditions.
Like the Quakers, he believed in set prices, take it or leave it. The
established price for a reaper was $120, $30 down and the re-
mainder within six months. But if the harvest proved disappointing
and the farmer lacked the final payment of $90, McCormick would
extend the time. By refusing ever to sue a farmer for payment,
McCormick built up a great reputation as the farmer’s friend
throughout the wheat country. Later on, through years of cut-
throat battling with his Johnny-come-lately rivals, this reputation
was to stand him in good stead. He went on to make binders as well
as reapers—and International Harvester, the lineal descendant of
the company he founded, still leads in the farm-equipment field
today.
FRONTIER AND FACTORY . 99
As America moved West the McCormick reaper yielded abun-
dant food; the Collins ax contributed to shelter; the Colt revolver
was for self-preservation; and the new railroads and steamboats
matched the customer with the product or took the pioneering pro-
ducer where he wanted to go. But these inventions, which shaped
life along the frontier, were only a part of the pre-Civil War busi-
ness story of a Thousand-and-One Beginnings. It was a time and a
climate propitious for the small man—and, increasingly, small men
were starting things that were to beeome great.
6 ~e,pr.-civil War Speedup
Samuel F. B. Morse
military cupboard. Before the war was over the du Ponts had made
four million pounds of powder for the government, selling the
whole at a price of nearly $1 million.
The interrelated gun and iron industries were less well prepared
than the du Ponts in powder and curiously enough made less prog-
ress during the fighting than might have been expected. At the out-
set of the war old weapons such as the discarded Hall carbine were
hauled out of storage and sold to the Army, thus giving rise to the
legend that the young financier J. P. Morgan (who put up some
money to finance one small deal) had consciously unloaded “defec-
tive” rifles on the government. But the carbines that figured in the
128 . . THE EN T~RPRISING AMERICANS
Morgan-financed episode were probably as good as any to be had
in the pinch. Though Colt had already popularized his breech-
loading six-cylinder revolver, which was used throughout the war
as a side arm, the War Department refused to sanction the new
Spencer breech-loading “magazine gun” for more than limited use
until the very last year of the war. The hand-cranked Gatling gun,
which could fire hundreds of shots a minute, did not find its way
into battle until 1864. Fortunately for the North, the South was no
more enterprising in its use of the available new ordnance: if Lee
had had a breechloader at Gettysburg, the result might have been
different.
In iron, the standoff in the Bessemer-Kelly patent situation made
it impossible for the northern armies to avail themselves of weapons
made out of steel. To get the secrets of good gun metal, Abram
Hewitt of the Trenton mills was sent to England, where he met
with official rebuffs. But, presumably by good detective work among
Staffordshire workmen who favored the Union cause, Hewitt came
home with the needed knowledge. His company did well enough
by the government throughout the war to enable the northern forces
to win once Lincoln had found some able generals. On one hurry
call from President Lincoln, the Trenton mills, aided by a consider-
able amount of what would now be termed subcontracting, pro-
duced thirty mortar beds-or heavy gun carriages-within three
weeks. The mortar beds served Grant well in his campaign to open
the Mississippi. When the War Department delayed in reimbursing
Hewitt for the expenditure of $21,000 on the mortar contract, Lin-
coln remarked to Secretary of War Stanton, “Do you suppose that
if I should write on that bill, ‘Pay this bill now,’ the Treasury would
make settlement?” The bill was paid with Lincoln’s request at the
bottom of it.
War production involved the Trenton mills and their subcon-
tractors-E. Abbott & Son of Baltimore, Cornell of New York, the
Phoenix Iron Works of Phoenixville, Pennsylvania—in a produc-
tion battle with the Tredegar Iron Works of Richmond, Virginia,
where a West Pointer; Joseph Reid Anderson, operated locomotive
shops, a cannon foundry, and a rolling mill. It was to protect the
Tredegar Works as much as anything else that Lee and Jackson
based all their strategy on the defense of Richmond. With the use
THE CIVIL WAR AND ITS AFTERMATH . 129
of slave labor, Tredegar produced the plates that the Confederate
government used on the first ironclad, the Mezrimac, which struck
terror into the North when she made her first depredations against
Union shipping off Hampton Roads, Virginia. The answer to the
Merrinzac was John Ericsson’s cheesebox-on-a-raft, the Monitor,
financed by J. W. Griswold and J. A. Winslow, crucible-steel
makers of Troy, New York, and armored by a consortium consist-
ing of the Griswold & Winslow Co. and the Canton Rolling Mill
of Horace Abbott in Baltimore. After the Monitor, using a power-
ful new du Pent powder, had dispelled the threat of the Merrimac,
northern ironclads continued to play a part in blockading southern
ports and forcing southern harbors. But the Bethlehem Iron Co.,
which was to become the nation’s leading specialist in rolling armor,
got under way barely in time to become a Civil War producer.
Bethlehem’s energetic ironmaster John Fritz did his bit for the
Union cause by providing for the restoration of iron rails that the
retreating Confederate soldiers had twisted around trees as they
fell back toward Atlanta. Beyond the railheads’ the Union armies
used the heavy-wheeled wagons that were making the Studebaker
brothers of South Bend, Indiana, into “big business.”
In its over-all effect the war vastly changed the nature of Amer-
ican industry, bringing forward new men and new methods of
organization. It also profoundly changed the ground rules under
which business operated, inevitably strengthening the role of the
federal government. The change was most noticeable in finance,
where the Administration faced problems that made those of the
War of 1812 seem picayune. At the beginning the North had no
idea of the expenses that were to be involved in four long years of
bloody destruction, and Lincoln’s Secretary of the Treasury Salmon
P. Chase felt his way somewhat cautiously, turning first to the
banks of New York, Boston, and Philadelphia for the $320 million
initially needed to transform a nucleus of 20,000 Indian fighters
into a national army. The banks had enough for a one-shot loan—
but since there had not been a national banking system since Jack-
son’s day, and since depreciating “wildcat” state bank notes were
still the main source of funds in many places, Chase couldn’t look
indefinitely for help from professional money marts. It took a once
amended National Bank Act, and a prohibitive 10 per cent tax on
130 . THE ENTERPRISING AMERICANS
state-chartered bank-note issues, to create a real national banking
system—and this was not finally achieved until 1866, too late to
help Chase in his predicament.
The cost of the war and its immediate aftermath came to some
$4 billion by 1869, not including interest on the debt and pensions.
To meet the bill the government turned hopefully to taxation. The
Merrill Tarill of 1861 lifted average rates to 25 per cent (increased
to 47 per cent by 1864); a tax on incomes was levied at 3 per cent
in 1861 and raised to 10 per cent on incomes over $5,000 at the
war’s end; and a tax on sales of industrial products in all stages
of manufacture was instituted at rates running up to 6 per cent of
value. The tariff proved disappointing (its tendency was to shut
out goods completely); the income tax was to yield only $347 mil-
lion before it was dropped in 1872; and the industrial-sales levy
was minimized by businessmen by the simple device of putting
separate manufacturing processes (spinning, weaving, dyeing, and
so on) under one corporate roof, which left only a final product
to be taxed.
Unable to pay for the war out of taxation and borrowing at the ,
banks, the government resorted to two other expedients. The first
was the issue of some $400 million in greenbacks—federal “wild-
cat” money, which had only the printing press behind it; the second
was the sale of government bonds directly to the people-the “five-’
twenties,“ “ten-forties,” and so on. The greenbacks stimulated trade
at the cost of inflation, and their value fluctuated in accordance with
the progress of the military campaigns (a greenback dollar was
worth as little as 39 cents in gold after the failure of Grant’s drive
on Richmond in 1864). Eventually the greenbacks were to pay
out at 100 cents on the gold dollar with the resumption of specie
payments in 1879.
As for the bond issues, the government hired a handsome, bearded
man, Jay Cooke of Philadelphia, to put them over in two great
loan drives. Just looking at him people believed in Cooke; they
willingly parted with their greenbacks for bonds (thus counter-
acting some of the inflation), and they dug deep into hidden
stocks of hard coin to help the government in its extremity. A
person of infinite resource, Cooke reached into every nook and
cranny of the North and West to uncover buyers. His sub-agents
THE CIVIL WAR AND ITS AFTERMATH o 131
the Gilded Age, so-called in the satirical novel that Mark Twain
and his Hartford neighbor, Charles Dudley Warner (known as
Deadly Warning to some of his contemporaries), wrote in collabora-
tion. The Twain-Warner story, which catches a period in the clear
aspic of comic overstatement, is a compendium of all the more
dubious business practices of its time: it tells how a hilariously
fantastic booster, Colonel Beriah Sellers, puts his best brains
to work luring a railroad into laying tracks from “nowhere to
i
nowhere” in order to make a real-estate killing out of the Missour
mudhole of Stone’s Landing; and the scene of its Washington
chapters is scarcely changed at all from the reality of stock-
distribution scandals that in the Cr4dit Mobilier case reached as
high as the vice presidency.
True enough, The Gilded Age is not wholly devoted to satirizing
business; it has for its hero a quite legitimate enterprise, a sound
and honorable young engineer named Philip Sterling who ensures
140
THE G I L D E D A G E - 141
himself a fortune by mastering the subject of geology and actually
mining Pennsylvania coal without benefit of lobby or subsidy. But
who is Sterling to compete for attention against the flamboyance of
Colonel Sellers? What could he do to build an image of industrial
probity in the “~eneral Grant” period of scroll-saw architecture,
convoluted walnut furniture, flickering gas jets, and brass spittoons?
The very atmosphere of the Gilded Age-built on smoky coal and
disfigured by the first fumbling attempts of architects to learn the
true uses and limitations of strange new building materials (the
country was departing from the age of wood) —makes us all
too willing to believe the worst of the period that has been variously
referred to as “the era of brass knuckles” and “the time of the great
barbecue.” So ingrained has the folklore become that William
Allen White has suggested in all solemnity that the men of the
seventies cultivated beards for no better reason than to hide their
naked shame.
And, indeed, the age had its shameful aspects. There was nothing
very secret, however, about the contemptuous piracy practiced by
the stock gamblers of the late sixties and seventies. Giving no
quarter to each other, the rascals of the stock market conducted
their raids with such brazen humor (“Nothing is lost save honor,”
said one of them) that the backward-looking writer in a more
circumspect age is stopped in his tracks and looks for nothing
else. So it is that we know far more today about the picturesque
skulduggeries of Daniel Drew, Jim Fisk, Jay Gould, and other
market highbinders of that type than we do about the creative
accomplishments of men to whom these stock gamblers were
anathema. One forgets, if one ever knew, that the vampirish Jay
Gould, who made money by sucking many an enterprise dry,
was too much even for the parvenu Vanderbilt, who refused to
invite him to their social affairs. This despite the fact that Gould
was a builder in Cornelius Vanderbilt’s own image in at least a
few of the enterprises he bought into, such as Western Union and
the Union Pacific Railroad.
That the age had its pushing qualities was admitted by a brother
novelist of Mark Twain, William Dean Howells. ,But Howells, as
a social historian, forebore to be comic about what he glimpsed
around him; he knew that “push” was an inevitable part of a life of
142 . THE ENTERPRISING AMERICANS
lusty change. Speaking of the Boston business scene, which he knew
at first hand, he wrote: “Before ‘Appomattox’ the banker and
merchant appeared upon State Street, the business center, about
ten in the morning, conventionally dressed, precise in movement
and habituated to archaic methods. Within six months after the
fall of the Confederacy the financial centers of the ‘Hub,’ vitalized ,
by the inflow of new and very red blood, had taken on the aspect
which is familiar to this generation. Everything that interfered
with serviceable activity was set aside. Tall hats and long coats
disappeared. . . . New names appeared at the head of great
industrial enterprises. Boys who had gone to the War as junior
officers had brought back honorable titles which vouched for
responsibility, character, and daring. . . . You can’t, if you will,
hold down a Captain, a Colonel . . . who has earned and won
the admiration of the public, and who has tested his worth.” As
for Howells’ own fictional businessman and colonel, the self-made
paint manufacturer Silas Lapham, he is, though a trifle coarse by
Brahmin standards, a thoroughly likable and honest fellow. Since
Howells was not an inventive novelist, somebody must have sat
for the portrait.
If Howells had been writing of post–Civil War New York City,
the center of the new Kingdom of Push, he might have mused
upon the fading of such old families as Beekmans, Rhinelanders,
and Brevoorts from the active business scene. As Burton J. Hen-
drick, our pioneer historian of the Age of Big Business, has pointed
out, the U.S. was to hear less and less henceforward from landlord
millionaires like William B. Astor (worth $6 million), or James
Lenox ($3 million). The old New York merchant aristocracy—
William Aspinwall ($4 million from shipping), John Haggerty
($1 million from auctioneering), Japhet Bishop ($600,000 in
hardware), William L. Coggeswell ($500,000 as a wine importer)
—was on its way to superannuated respectability. A. T. Stewart,
who had made $2 million in dry goods, and Phineas T. Barnum
($800,000 from exhibiting Jumbo and Tom Thumb and acting as
impresario for singer Jenny Lind ) would still manage to ‘stir
others to emulation, but in the coming age the word “merchant
prince” had an increasingly archaic ring.
In the swift change from old to new, one representative of the
THE GILDED AGE - 143
pre-Civil War order managed not only to survive the shift but to
dominate it. Quite in line with the ethics of his age, the New York
Central’s Cornelius Vanderbilt dld not scruple to use even the
most outright trickery to get control of properties he wanted.
Legislators, to him, were holdup men who had to be bribed to
keep them from selling out to his opponents, who in most cases hap-
Cornelius Vanderbilt
pened to be Fisk, Drew and Gould, the pirates of the Erie Rail-
road “ring.” But the old Commodore was no vulture; and when
he owned something he worked relentlessly at its physical improve
ment, provided, of course, that he intended to keep it.
Way back in 1833, when he was a young steamboat man, the
Commodore had been injured in a railroad accident in New Jersey.
He disliked railroads, and thought to have little to do with them.
At the age of sixty-nine, however, sensing that his beloved river
steamboats had seen their best days, the Commodore swallowed his
distaste for the Iron Horse and decided to become a railroad man.
144 . THE ENTERPRISING AMERICANS
Taking some of tie $20 million he had made on the rivers ad
oceans, he quietly bought up the shares of the Harlem Railroad
running out of New York City and the Hudson River Railroad
leading north to East Albany. This gave him a right-of-way all
along the east bank of the Hudson, with terminal facilities right
in the heart of Manhattan Island. Later, using guile to depress
the shares of the New York Central, which ran between Albany
and Butlalo (the wily Commodore had publicly announced his
discovery of an ancient law on the statute books that made it
illegal to deliver his own Hudson River Railroad passengers to
the Central’s depot across a bridge at Albany), the old ex-ferryman
from Staten Island got control of the Central at a price he could
afford. Stock control of the Canada Southern, the Lake Shore,
and the Michigan Central eventually followed-and the first im-
portant integration of east-west systems was thereby accomplished.
A lusty and superstitious fellow, Vanderbilt took a thirty-year-
old second wife at the age of seventy-five, bickered with his children
(ten out of thirteen survived both his tempers and his death), sum-
moned up the ghost of the dead Jim Fisk to get advice on stock
manipulation (it must have been good, for when Vanderbilt him-
self died in 1877 he was worth some $100 million), and proposed
that a large monument should be reared in New York’s Central
Park to commemorate the two greatest Americans, George Wash-
ington and Cornelius Vanderbilt. But amid all his egotistical
cavorting the Commodore relaid the Central’s tracks from New
York to Chicago with new steel rails, built strong steel bridges,
threw away the picturesque pre-Civil War Iron Horses in favor of
a drabber but more efficient type of locomotive, and cut the time
of the New York-Chicago run from fifty hours to twenty-four.
Whether the Commodore’s son, William H. Vanderbilt, ever actually
said, “The public be damned!” is a point still disputed by historians.
But on one thing there can be no dispute: the public was served
by the new trains on the Commodore’s New York–Chicago tracks.
If Cornelius was a robber baron, the country needed more like
him. Old “Corneel” may have watered the Central’s stock. But as
fast as he watered it he solidified it—and the worst that can be
said about him is that he was a shrewd capitalizer of future earnings.
Meanwhile, to the south of the territory covered by the ring-rid-
THE G I L D E D A G E -
145
den Erie and the well-managed New York Central, the Pennsylvania
system was built up in the sixties and the seventies under the wise
and circumspect direction of J. Edgar Thomson. If Thomson was
not averse to turning a quick deal to his own private advantage
on occasion, he kept this aspect of his character quite apart from
his rigorously ethical concern for the Pennsylvania’s economic
health. In 1859 the Pennsylvania consisted largely of the Main
Line from Philadelphia to Pittsburgh—but within ten short years
Thomson had expanded the system until it comprised nearly a
thousand miles in the state of Pennsylvania itself and (by virtue
of leasing the Pittsburgh, Fort Wayne & Chicago line) had reached
the shores of Lake Michigan. Not satisfied with the single terminus
of Chicago in the West, Thomson formed a holding company
to acquire other lines, notably the Cleveland & Pittsburgh Railroad
and the so-called “Pan Handle” route, which linked Pittsburgh with
both Cincinnati and St. Louis. Thomson’s management ended
in 1874, but he passed on to his successor, Thomas A. Scott (who
was, incidentally, Andrew Carnegie’s friend and boss), a property
quite capable of weathering the long depression that began in 1873.
To quote John Moody, the Pennsylvania “was the first American
railroad to lay steel rails and the first to lay Bessemer rails; it was the
first to put the steel firebox under the locomotive boiler; it was
the first to use the air brake and the block signal system; it was
the first to use in its shops the overhead crane’’—and from 1859
to the end of the nineteenth century (and after) it never skipped
a dividend. Moreover, unlike its great competitor for freight origi-
nating in the new Pittsburgh area, the Baltimore & Ohio Railroad
(which in times of stress paid dividends out of capital), the Penn-
sylvania paid all its dividends out of earnings, with the stockholders
themselves keeping a tight rein on management.
The records of both the New York Central and the Pennsylvania
were in marked contrast to that of the Erie, whose mulcting by
Drew, Fisk, and Gould is often cited as “typical” of Gilded Age
railroading. And few post-Civil War railroads were as badly served
as the pre-Civil War New York and New Haven Railroad, whose
president-Robert Schuyler—issued 17,752 shares of unauthorized
stock and sold them to his own brokerage house before skipping
the country.
146 . THE ENTERPRISING AMERICANS
For decades after the Civil War the railroads were to remain the
greatest business of the nation, and even as late as 1898, as Bernard
M. Baruch was to note, “something like 60 per cent of the securities
listed on the Big Board were of railroads.” (By 1914 they had
declined to less than 40 per cent of the Stock Exchange listings,
by 1925 to 17 per cent, and by 1957 to 13 per cent.) For better or
worse, the railroads became implicated with the pioneer giant
Andrew Carnegie
Brown Brothers
ing Co. ($145 million), the Consolidated Tobacco Co. ( 150 plants
and $502-million capitalization, which included Duke’s American
Tobacco Co. ), and the International Mercantile Marine Co. ($170
million). These were in addition to Morgan’s U.S. Steel and Rocke-
feller’s Standard Oil. Moreover, there were lesser “trusts” every-
where—the American Hide & Leather Co. controlled $32 million
in assets, the Atlas Portland Cement Co. dominated a Pennsylvania
T H E R I S E O F THE M O N E Y P O W E R -
181
area in cement, du Pent (with forty plants and $50-million capi-
talization ) was the transcendent power in manufacturing explosives,
Otis represented $12 million in elevator factories, and so it went.
The Pullman Palace Car Co. had 85 per cent of its market; the
“bobbin and shuttle trust” made 90 per cent of its type of product.
And there were the so-called “natural monopoly” trusts-the
American Telephone & Telegraph Co., the street-traction com-
panies, and the new gas and electricity companies, all of which
depended on politically granted franchises.
The coalescing of power was further intensified by the phenome-
non of “interlocking directorates.” As spread on the record by cru-
sading lawyer-authors such as Louis Brandeis (later a Supreme
Court Justice) and by the muckraking magazines, the Morgan–
Rockefeller-George F. Baker crisscross was everywhere. Morgan,
of course, ran his own private bank—but he was also a big stock-
holder and director in Baker’s First National Bank. Two of the
newest Morgan partners-Thomas F. Lament and H. P. Davison—
had been First National vice presidents, and they remained as First
National directors. The First National, in turn, was associated with
Morgan in the control of the Guaranty Trust Co. Baker and Baker
men appeared with Morgan or with Morgan men on the direc-
torates of the New York, New Haven & Hartford Railroad Co., the
Pullman company, the new International Harvester Co., the Read-
ing Railroad, the Baldwin Locomotive Works, the American Tele-
phone & Telegraph Co., the Mutual Life Insurance Co., and so
forth and so on. The National City Bank-Rockefeller interests got
in on the crisscross by being associated with Morgan and/or Baker
in the Bankers Trust, the Guaranty Trust, the Astor Trust, the
National Bank of Commerce, the Chase National Bank, the Equi-
table Life, the Adams Express Co., numerous anthracite-coal car-
riers of Pennsylvarna and New Jersey, the International Mercantile
Marine Co., and a whole host of railroads. As for Jacob Schiff of
Kuhn, Loeb, he too was represented on a number of Morgan-
Baker-Rockefeller boards.
To fears that all this interlocking control would snuff out com-
petition was added long-standing popular discontent with the coun-
try’s whole monetary system, which Wall Street also seemed to
control to its own interest. After the 1870’s the country’s gold sup-
182 . THE ENTERPRISING AMERICANS
ply failed to keep pace with the growth of industry, thus leading to
periods of extreme monetary stringency that benefited the bankers
but all too often forced the little businessman to the wall. The pas-
sage of the Bland-Allison Act of 1878 and the succeeding Sherman
Silver Purchase Act of 1890 put the U.S. temporarily on a limited
hi-metallic standard, to the joy of the Populists, but this in turn gave
rise to a new problem: how to keep the market ratio of gold and
silver from disastrous fluctuation. The fortuitous discovery of new
sources of gold in Alaska and Australia and the introduction in
South Africa of a cheap, more efficient method of extraction (the
famous cyanide process) expanded the gold supply in the late nine-
ties and, with an enlarged gold base, McKinley finally put the nation
on the full gold standard in 1900 despite the outcries of the silverites
and Bryan. But the U.S. was not yet out of the woods, and in 1907
there occurred a disastrous panic with widespread bank failures.
Morgan met this situation by forming an impromptu committee
of New York bankers and, working from his Madison Avenue
library, hastily assembled a central pool of capital to stem the tide.
His cool nerve in the crisis—and his famous order to his banker
associates to sign on the dotted line no matter what their over-
trained commitments—saved the country from disaster, but his
bold act simply raised the further question: how come that a private
banker and not the government itself should be the arbiter of na-
tional solvency or insolvency? This question, plus the allied one of
“trustification,” boiled to a head in the famous Pujo Committee
investigation of 19 12–13. Through endless hours on the congres-
sional stand the aging Morgan glared at inquisitive government
counsel and defended both the powers of the bankers and their
manifold activities.
In the matter of money and credit he had a far better case than
his critics at the time assumed. It was all very well. to charge that
in the panic years of 1895 and 1907 the bankers had overstepped
their normal functions. But if they had not held the money system
together, who would have? The fact was that ever since Jacksonian
times the U.S. government had lacked the authority to mobilize
the country’s monetary reserves in adequate fashion. And the fur-
ther fact was that the centralization of credit, begun privately by
men like Morgan, set a precedent for a more rational solution of
THE RISE OF THE MONEY POWER - 183
the problem by the passage of the Federal Reserve Act in 1913.
This act (which set up” twelve private regional Reserve banks,
heading up in a politically appointed Reserve board in Washington)
gave the country the liquidity it needed—perhaps in retrospect too
much liquidity—and was a vast improvement over Morgan’s ad
hoc credit pools. It is notable, however, that private bankers played
a large role in the Fed’s formation. First proposed in embryo by
Paul M. Warburg of Kuhn, Loeb, it received powerful support
from Morgan’s partner, Henry P. Davison, as well as Frank A.
Vanderlip of Stillman’s National City Bank. And Morgan himself,
who died just nine months before the creation of the new structure,
would hardly have contested its desirability.
What of the other charge of the Pujo investigators that Morgan
and his associates had ruined the country through trustification?
Certainly it could not be laughed off, for the record showed that
policy-making decisions in 100 leading U.S. companies were
strongly influenced by a tight group of commercial, trust, and in-
vestment banks, which, in turn, depended on Standard Oil and
Morgan resources of $2 billion in capital. Yet when all is said, the
Pujo Committee claimed too much in its attacks on the “old order.”
Nobody could gainsay the fact that the Morgan and Rockefeller
banking interests had enormous power, or that the trusts and the
new giant corporations replaced so-called “perfect competition” in
many industries with the “workable” competition we know today.
Yet, as noted in the previous chapter, Standard Oil was unable to
prevent the rise of Gulf, Sun Oil, and Texaco, and U.S. Steel’s domi-
nant position was likewise to give way to the inroads of Bethlehem,
Republic, and Jones & Laughlin, to say nothing of smaller but com-
petitively important companies like Inland Steel, Armco, and Na-
tional Steel. Moreover, if the country, in 1913, had been truly in
the grip of the New York “money power,” such industries as auto-
mobiles, aluminum, the moving pictures, chemicals, rubber, sulfur
extraction, and the western oils would never have been born. A
Morgan partner, George Perkins, advised against putting money
into automobiles—but Ford as well as Durant of General Motors
got the money they needed from other sources. The Mellons of
Pittsburgh financed Charles Martin Hall’s ingenious electrolytic
method of obtaining aluminum from an oxide existing in a common
184 . THE ~NTERPRISING AMERICANS
form of clay. A lone speculator, Bernard Baruch, lured the Gug-
genheim into backing the Jackling method for processing low-
grade copper ores. Baruch also offered Morgan a part of the sulfur
industry-and when Morgan turned him down with the statement
that he “never gambled,” the cagey Baruch went ahead successfully
on his own.
Ideas were to remain as important as money—and ideas had a
way of generating their own funds from a combination of regional
capital and internal expansion. Though the banker needed the in-
ventor, the inventor could—and frequently did-manage to make
do without the banker. Indeed, a single inventor alone, Thomas A,
Edison, was enough to give the lie to the more inllated claims of the
Pujo Committee. Edison used banking money at times-but he
generated far greater aggregates of capital than he ever borrowed.
Money was money— but even amid all the clamor about “trusts”
the free lance with the idea and the determination was still supreme.
10 The Age of Edison
for whom the phrase “live wire” seems specifically to have been in-
vented, was approaching forty when the twentieth century opened.
The grandson of a lumber tycoon who had been the Civil War gov-
ernor of Michigan, Billy Durant made his first million dollars in
the carriage business in Flint. Thoroughly bored with the success
of his Durant-Dort Carriage Co., he went off to New York to study
the stock market, but a hurry call brought him racing back in 1904
to save his home town from a threatened business catastrophe. The
automobile company started by David Dunbar Buick, a plumbing-
supply man, was on the rocks—and Durant, as the wealthiest man
in Flint, was asked to take it over.
Billy Durant knew nothing about automobiles. But he had been
making a study of the trust movement, and he had big ideas: he
wanted to become a Napoleon in some line of work. Getting himself
one of the fifty-three Buicks that had been made in two years of
the company’s existence, he took off through the sand and mud of
Michigan’s cutover forest region to assure himself that he had a
salable product. The Buick was probably no better and no worse
than cars that were already being made in Detroit by Henry Ford,
202
F. O.B. D E T R O I T
-
203
or in the state capital of Lansing by Ransom Eli Olds, or by the
precursors of the Willys-Overland company in Indianapolis, or by
Alexander Winton in Cleveland, or by Thomas B. Jeffery in Keno-
sha, Wisconsin, who had already made money from the Rambler
bicycle. It was the standing vaudeville joke of the times that for
every hour devoted to coaxing speed from a primitive carburetor
over bone-rattling roads at least two hours must be spent flat on
one’s back underneath the machine. The vaudevillians couldn’t
decide whether “get out and get under” or “get a horse” represented
the utmost in derision as rubes seated on roadside fence rails tossed
their taunts at the city slickers who had begun invading the coun-
tryside in their snorting devil wagons.
But Durant, an incorrigible optimist, was oblivious to irony. He
decided that the Buick, which boasted a valve-in-head engine, was
good enough to support his ambitions, and he poured enough money
into the staggering company to buy personal control of it. Within
two years he had raised Buick production from the sixteen or
twenty-eight cars of 1904 (the accounts of the year differ) to the
2,295 of 1906. And he really began to make the Buick into a
superior car. In a day when most automobiles were afllicted with
broken rear axles with monotonous regularity because nobody in
the Middle West understood automobile axle making, Durant en-
ticed Charles Stewart Mott’s Weston-Mott Axle Company to move
to Flint from Utica, New York.
Mott, who in later years became the largest individual stock-
holder in General Motors, really knew how to make strong axles—
and with Mott parts the Buick soon became known as the car that
was superior to jarring bumps. In another shrewd move Durant
made a deal with Albert Champion, the French racing driver, to
manufacture his new AC porcelain spark plug for Buick. Mean-
while the capitalization of Buick had been increased from $75,000
to $1,500,000 by Durant’s daring stock salesmanship, with Flint
citizens subscribing half a million in a single day. The town of
course boomed: to house the influx of Buick workers, Flint room-
inghouse proprietors began renting their beds in two shifts as the
population proceeded to double in five years.
Intoxicated with his success, Billy Durant moved ahead in 1908
with his idea of creating an automobile trust. Lacking sufficient
204 . THE ENTERPRISING AMERICANS
resources to buy out Henry Ford or Ransom Olds, each of whom
asked for $3 million in cash, he journeyed east with Benjamin Bris-
coe of the Maxwell-Briscoe Co., and announced himself at J. P.
Morgan & Co. with a boast that the time would come “when half a
million automobiles a year will be running on the roads of this coun-
try.” Curiously, this raised the hackles of Morgan partner George
W. Perkins, the apostle of the “good trust” who was soon to bank-
roll Teddy Roosevelt’s Progressive Party. Perkins promptly left the
room. “If that fellow has any sense,” he said, “he’ll keep those
observations to himself. ” But Perkins was wrong and Billy Durant
was right in his analysis of the future of America. Unable to raise
capital in Wall Street, the irrepressible Billy went back home and
put together the combination of General Motors anyway, mostly
by exchanges of stock.
G. M., which in 1960 boasted sales of over $12 billion, wasn’t
much in 1908 when its total capital amounted to only $2,000.
Shortly, however, it swallowed up the Oldsmobile, the Oakland
(now the Pontiac), and the Cadillac companies in addition to
Durant’s own Buick. (It also swallowed a lot of cats and dogs
whose names are now forgotten. ) Eventually it added Chevrolet to
its empire—and with the relatively low-priced Chevy it finally out-
stripped Henry Ford. To harmonize its bulky components G.M. was
forced to experiment with new managerial techniques in the realm
of manufacturing. It was not the progenitor of “bigness” as such—
that accolade, as we have seen, goes to Standard Oil and the Car-
negie Steel Co. But in its ability to reconcile decentralized diversity
of product (it was also to go into electric refrigerators and diesel
engines in a later phase) with management control from the top,
and to combine manufacturing skills with a scientific approach to
marketing, G.M. set a new style and tone in American enterprise.
By the late twenties it had begun to symbolize the automobile and
automotive age itself.
The history of U.S. business from the turn of the century through
the twenties cannot, of course, simply be tagged f .o.b. Detroit. The
U.S. had its heavy industries well before the coming of the car, and
Edison’s breakthroughs in electricity were bound to transform
American life in any case. Nevertheless, the automobile ballooned
payrolls in steel, rubber, flat glass, and aluminum and helped turn
F. O.B. D E T R O I T - 205
places like Akron, Ohio, from small towns into burgeoning indus-
trial cities. The car changed the whole pattern of the real-estate
market, sparked new methods of consumer finance, obliterated old
landmarks, and created new ones. World War I gave a powerful
push forward to production, but in the unfolding drama of the cen-
tury’s economic development it at first appears as a kind of episode
that is not nearly as important as the advent of the car. The war’s
effects were not to be fully apparent until the crash of 1929 and
the coming of the Great Depression, when American business-by
then committed to Detroit’s mass-production methods-came up
against new social and political challenges.
These developments lay some distance ahead when in 1908 Billy
Durant was cold-shouldered by the House of Morgan because of
Perkins’ distrust of the automobile’s potential and also because the
Morgan “attorney general,” Francis Stetson, didn’t like the fact
that Durant had been buying up Buick shares without telling his
stockholders that a merger was contemplated. Durant, of course,
had not presided at the birth of the automobile itself. Credit for
making the first U.S. gasoline-driven car has generally been ac-
corded to the Duryea brothers, Charles E. and J. Frank, of Spring-
field, Massachusetts, whose “buggyaut” made its first public street
run in September of 1893. The second American car was made in
1894 by Elwood Haynes of Kokomo, Indiana. In his book My Life
and Work, written with Samuel Crowther, Henry Ford challenges
these claims by saying that his first successful car was rolled out of
a brick shed in back of his home on Bagley Avenue, Detroit, in
the spring of 1893; but historians, who have had access to Ford
family papers and company records, are certain that Ford’s initial
breakthrough actually came some three years later. The first
Detroit-made car was undoubtedly that of Charles Brady King, who
beat Ford to the Detroit streets by some ninety days in 1896. King,
incidentally, was one of Ford’s early advisers and helpers. Actually,
the whole argument about the “first” American car is a bit aca-
demic, for Europe led the way in making the automobile. In 1885,
Gottlieb Daimler of Germany, adapting the principles of the Otto
gas engine, designed a light-weight internal-combustion engine
driven by gasoline fuel on which the modern automobile was to
depend. And another German, Carl Benz, developed his car neck
206 . THE ENTERPRISING AMERICANS
and neck with Daimler. Early European car-makefi included the
French firm of Panhard and Levassor, who took over German pat-
ents in France. French cars in particular were initially popular with
the rich of Newport, and their import helped domesticate words like
“chauffeur” and “garage,“ “tonneau” and “automobile” “itself in the
American language.
The reputedly idle rich, led by Winy K. Vanderbilt, also financed
automobile racing, which led to improvements in engine compres-
sion and the durability of tires, and they helped organize the first
U.S. automobile show at Madison Square Garden in 1900. Other
things besides a rising “moneyed” and middle class were favorable
as the century opened. The gasoline engine was to prove a compact
and efficient power plant, which soon dominated the field despite
the early vogue of electrically propelled vehicles and the formidable
Stanley and White and Winton “steamers.” Gasoline itself, for years
an unused by-product of kerosene, became cheap and plentiful.
Carriage-makers like Studebaker and the Fisher brothers and Billy
Durant’s own Durant-Dort of Flint readily reapplied their skills in
the new horseless age. Perhaps most important, America was blessed
with an inspired generation of mechanics who had put some 12 mil-
lion bicycles on the road between 1880 and 1900. It was, in fact,
two of these bicycle mechanics, Orville and Wilbur Wright, who
showed the world in 1903 that a gasoline engine could lift a “flying
machine” into the air. Taking off on December 17 at Kitty Hawk
on the dunes of the North Carolina coast, with Orville Wright at
the controls, the pioneer Wright machine actually flew under its
own power for twelve seconds. Later in the day Wilbur Wright flew
for almost a second longer; and before the day was done the plane
managed to stay aloft on a fourth flight for fifty-nine seconds under
Wilbur’s control before careening to the ground and breaking the
front rudder. These flights went virtually unreported at the time
(only three papers in the United States deigned to mention them
the next morning, and the Wright brothers’ own home-town paper
in Dayton, Ohio, the Journal, refused to give the story any space at
all). Nevertheless, the power of the internal combustion engine had
been demonstrated under the most exacting conditions.
But if the times were propitious for technological change in
transportation, there remained the disconcerting fact that the U.S.,
F. O.B. D E T R O I T - 207
even well into the 1900-10 decade, consisted of two civilizations,
each of which seemed permanently walled off from the other. The
towns were railroad-connected, but the American highway system
had undergone a marked retrogression since the days of the first
toll roads. Everywhere in eastern and middle America the country
roads were impossible quagmires in early spring; in summer there
were dust and deep ruts to contend with; in winter ice and snow
frustrated the smooth tires of the time. Rich townsfolk, hankering
for the nostalgic pleasures of the countryside, might dare these
inconveniences first on bicycles and then in the early cars, equipping
themselves with goggles and dusters for Sunday afternoon jaunts
or for longer AAA-sponsored “Glidden tours” into the wilds of
New Hampshire or Maine. Farmers, who couldn’t tiord the first
cars anyway, were not disposed to vote a nickel for surfaced roads
to help the pioneering Detroit and New England automobile “crack-
pots.” (The first rural mile of concrete pavement in the United
States was not destined to be laid down until 1908, by the Road
Commission of Wayne County, Michigan.) Yet paradoxically it
was rural America that needed cars far’ more than the city slickers
who bought the first models.
The diiliculties of bridging rural and urban America are well
illustrated by the early career of Ransom Eli Olds, who, without
disparagement to Henry Ford, was the first man to try to give the
farmer what he needed. A machinist who had built a three-wheeled,
steam-driven road vehicle as early as 1893, “Ranny” Olds had per-
suaded a Michigan copper-and-lumber millionaire, Samuel L.
Smith, to finance the Olds Motor Works in Detroit in 1899. (Of
$200,000 in paid-in capital, Olds himself contributed $400 and
Smith the remainder. ) Smith looked to make most of his money
from marine engines, but Olds had it in mind to produce a one-
cylinder buggy to retail for less than $700. Just as he was ready to
begin its manufacture, the Olds factory in Detroit burned down;
but the single completed model of the “curved dash” runabout—
the “Merry Oldsmobile” of the popular song—was saved from the
flames by a brave timekeeper. Without factory resources at his com-
mand, Olds proceeded to farm out the manufacture of his engines
and parts to various Iirms in Detroit (the Dodge brothers, Horace
and John, and Henry Leland of later Cadillac fame were among
208 . THE ENTERPRISING AMERICANS
Ransom E. Olds
CourteO’ his &K8hterS. Mrs. Herberta J. hfuth and Mrs. Walter S. Evans
The first important domestic creation of the New Deal, the NRA,
was a total abnegations of the competitive market economy. A
peacetime adaptation of Bernard Baruch’s old War Industries Board
of World War I days, the NRA appealed to some businessmen
who preferred the cartel system of Europe to doing business com-
petitively under the Sherman Act. Under General Hugh (Iron
Pants) Johnson the new experiment made a tremendous noise.
But with its price-fixing and market-allocating codes the NRA
232 . THE ENTERPRISING AMERICANS
was a denial of the free system, and before it was thrown out by
the Supreme Court its critics were referring to it as “Chamber
of Commerce Fascism.” Its inherent contradictions were later freely
admitted by Administration intellectuals themselves when in Roose-
velt’s second term they set up the Temporary National Economic
Committee to restore competitive pricing, while at the same time
embracing the doctrine of Keynesian spending to restore purchasing
power.
The difficulty with this new palliative was that its success de-
pended uniquely on the restoration of profitability in the system.
The Keynesians remembered that their master had argued against
wage cuts; labor, he said, is seldom in a mood to take a cut-back.
But he had certainly not called for money wage increases in a time
of deflation when real wages were going up every time a retail
price fell. To restore both profitability and purchasing power, the
Keynesian formula called for a turn-about in prices through gov-
ernment spending as existing wage rates were maintained. Per-
versely, however, the American disciples of Keynes paid no heed
to the role which profitability via rising prices pays in luring
investment money from hiding. They overlooked the fact that money
~ wage rates in manufacturing advanced some 43 per cent between
1933 and 1939 and real wages by an extraordinary 34 per cent,
which, on Keynes’s own theory, was detrimental to curing the
surplus of labor. Some of this rise was no doubt to be expected
in a period of partial recovery, but much of it flowed out of
government-blessed wage boosts from an unprecedented surge of
union organization. When NRA was buried, the provisions of its
Section 7a were incorporated into the lopsided Wagner Act,
which gave John L. Lewis, Walter Reuther, and others a free
hunting license to push industrial unionism in the basic mass-pro-
duction industries. In a free system labor has the incontestable
right to organize and to bargain collectively; and it had exercised
this right long before the New Deal. But the very rapidity of the
spread of unionism in the thirties, beyond pushing up costs, was
scarcely conducive to restoring business confidence. And the tactics
of the sitdown strike, however effective in bringing companies like
General Motors to heel, did nothing to encourage private investment
in new industrial plant.
THE DEPRESSED THIRTIES - 233
The pay-off story, indeed, is suggested by the figures for in-
dustrial profits and private investment-the key to industrial ad-
vance in a capitalist system. From their inflated peak of $8.3
billion in 1929, corporate profits after taxes plunged to minus $3.4
billion in 1932, recovered to $4.7 billion in 1937, and then col-
lapsed again in 1938. Domestic investment followed the same
pattern, falling from $16 billion in 1929 to a bare $900 million
in 1932, rising to an $11.7-billion temporary peak in 1937, and
then dropping back to $6.7 billion in the 1938 slide. Under such
circumstances it is little wonder that the economy failed to pick up
the huge pools of unemployed left by the crash and open new
job opportunities for the growing labor force. To uncertainties
at home must be added the facts that despite Cordell Hull’s drive
for a reciprocal lowering of tariffs the Roosevelt regime remained
highly nationalistic in its orientation, that autarkic governments
were everywhere sprouting in Europe, and that expanding world
trade, based on freely convertible currencies, was hardly compatible
with European and Asiatic preparations for coming military show-
downs. Indeed, it was not until war orders from Europe broke the
pattern that the famous Keynesian “multiplier” took hold.
Yet the magnitude of the response of U.S. business to the war
is in itself refutation of the thesis that in the thirties businessmen
simply sat on their hands and the economy reached “maturity.”
The really surprising thing about the decade, in fact, is that
while investment was quantitatively lower than needed to restore
full employment, it was qualitatively impressive. While many men
were lamenting the disappearance of the old western frontier and
the lack of a new “ladder” industry such as automobiles, techno-
logical advance continued without abatement, and the scientific
revolution took hold. In time this revolution, gathering a momentum
of its own, would produce frontier after frontier and ladder after
ladder at a pace almost too dizzy to follow.
The big sleeper of the thirties was the chemical industry, which
began its march toward making “anything out of anything.” To
use the term “sleeper” for the chemical thirties is to speak relatively,
of course, for important companies had already begun to wheel
themselves into place as far back as 1920. The first forward step
came during World War I, when the British blockade of the
234 . THE ENTERPRISING AMERICANS
central European powers cut America off from all sorts of German
dyes, drugs, and synthetics. In early 1916, Lammot du Pent,
whose M.I.T. degree was in mechanical engineering, took charge
of a new “miscellaneous” department of his company that was
destined to manufacture dyes, paints, lacquers, pyralin, and
plastics. Included in the “miscellany” was synthetic indigo, for
which $600,000 in powder profits was set aside to build a plant.
Allied Chemical moved’ out from bulk inorganic into coke by-
products and dyestuffs in addition to the older acids and alkalies;
Union Carbide, whose newest division was busy with automobile
antifreeze as early as 1920, took the leadership in the development
of petrochemicals, a division of organic chemis~ that is based
on a straight-line chain of carbon atoms instead of the famous
six-carbon benzene ring from which coal-tar products are derived.
The “Big Three” of du Pent, Allied Chemical, and Union Car-
bide all had to meet terrific development expenses throughout the
twenties, but forged steadily ahead. Du Pent, an early rayon
producer, took a pioneer position as a supplier of synthetic and
semi-synthetic materials for both the textile and the container and
wrapper industries. Because of its work in rayon the company
had formed a tie with the French Comptoir de Textiles Artificiels,
which had financed a Swiss-born French chemist, Jacques Edwin
Brandenberger, in the development of cellophane. In 1926 two
du Pent chemists, William Hale Charch and Karl Edwin Prindle,
found a way to waterproof cellophan+and with the new water-
proofed magical wrapper the company really went to town. ( “You’re
the tops, you’re cellophane,” sang Cole Porter. ) By 1933 the
demand for cellophane was so heavy that du Pent, not wishing
to tie up too much capital in any single product, licensed the Syl-
vania Industrial Corp. to produce the stuff.
The du Pent triumph in waterproofed cellophane was merely
one of a number of accomplishments that took the company pretty
much out of the munitions business long before Senator Gerald
Nye and his war-profits investigating committee of the thirties
traduced the big Wilmington concern as a “merchant of death.”
Its tie with General Motors strengthened this tendency, providing
an additional outlet and a stimulus for its new chemical skills.
Early in the twenties a General Motors research team headed by
THE DEPRESSED THIRTIES - 235
Thomas Midgley and Charles Kettering, neither of whom was a
chemist, discovered that tetraethyl lead would eliminate the “knock”
from gasoline. The practical process of safely distilling tetraethyl
lead in commercial quantities was developed by a Clark University
professor, Dr. Charles A. Kraus, and his assistant, Dr. Conrad
C. Callis, for the Standard Oil Co. of New Jersey, which shortly
combined with General Motors to set up a joint subsidiary, the
Ethyl Gasoline Corp. Lacking facilities to make its own tetraethyl
lead ,in quantity, the Ethyl company turned to the du Ponts, who
proceeded to supply it in large and profitable amounts. And in the
thirties a du Pent-G.M. subsidiary provided dichlorodifluoro-
methane (Freon ), another Midgley-Kettering product, for the re-
frigerant that went into G.M.’s Frigidaire.
Success with such items as rayon and waterproofed cellophane
spurred the du Ponts to the most important decision of their latter-
day existence as a company, which was to enter the field of pure-
or fundamental-research. To head the new program, Dr. Wallace
H. Carothers was plucked in 1928 from the faculty of Harvard
University, where he had already distinguished himself with his
studies of the structure of substances of high molecular weight.
Once ensconced in his du Pent laboratory, where he had an annual
fund of $250,000 to play with, Dr. Carothers began working on the
synthesis of the long-chain-or polymerizing-molecules that form
the basic building blocks of living tissue. In April of 1930, when
people everywhere were despairing of the ability of private enter-
prise to turn up new and profitable lines, Dr. Carothers and his crew
of assistants watched as the first “thread” of a new long-chain sub-
stance, silk-like and strong, was drawn out of a laboratory still.
Four years later Carothers and his team had succeeded in getting
a synthetic filament that was proof against attack by heat, solvents,
and water. And four years after this, in 1938, nylon was at last
ready to go in a pilot plant. Altogether, the du Ponti spent $27
million-$6 million for research, $21 million for plant-to put
nylon on the market. The first pair of nylon stockings was offered
for sale in May of 194&and by 1941 du Pent operating capacity
for nylon was more than two million miles of yarn a day. Some
400 textile mills, cut off from their sources of raw silk for stockings
by the attack on Pearl Harbor, grabbed for the stuff. Nylon also
236 . THE ENTERPRISING AMERICANS
went into toothbrush bristles, tennis racquets, fishing rods, and
self-lubricating bearings.
Other du Pent triumphs of the thirties included Lucite, synthe-
sized musk oil (a basis for fine perfumes), and the merchandising
of neoprene, the basis for a synthetic rubber. Meanwhile Union
Carbide, which had bought the Bakelite Co., the earliest hard-
plastic manufacturer in the country, for $11 million in stock, was
also expanding its oxygen and acetylene plants, and proliferating
with chemicals and alloys. Behind Allied Chemical & Dye and
Union Carbide & Carbon there were a profusion of lesser com-
panies: Dow Chemical, a bulk chlorine producer, which perfected
styrene for synthetic rubber; American Cyanamid, the first developer
of a nitrogen-fixation process; Monsanto, which moved by way of
coal-tar-based organics into petrochemicals and plastics; and the
oil companies, which developed the Houdry catalytic-cracking
process. In addition, there were fertilizer companies which pos-
sessed the industrial skills that would erupt in a vast array of
fungicides, herbicides, soil conditioners, defoliants, and insecticides
after World War IL In 1934 agricultural-chemical production
amounted to 100 million pounds; after the war the poundage
would soar to a yearly two billion.
While chemistry was leaping out of the test tubes of the thirties,
industrial physics was hardly quiescent, and there were also
developments on that strange frontier where physics and chemistry
meet. Rumors of an atom-smashing cyclotron came from the Uni-
versit y of California laboratory of Dr. Ernest O. Lawrence, and
this suggested new sources of industrial power. General Electric,
on the advice of Dr. Arthur H. Compton, went into fluorescent
lighting; Carrier went ahead with air conditioning. Electronics hit
a commercial plateau period in the thirties as radio continued to
prosper; but Vladimir Zworykin of R.C.A. worked throughout
the decade to clarify the television image projected by his icono-
scope, and Philo Farnsworth, a free lance, developed independent
television patents. The FCC, which professed to have protective
feelings about the average citizen’s investment in his radio receiving
set, dawdled over granting a commercial television license until
1940—s0 the first leap forward in putting television sets into homes
was postponed by government fiat. But in Britain, where there
THE DEPRESSED THIRTIES o 237
were fewer shackles in such matters, the first electronic television
system was set up in 1936.
Standing at the crossroads where optics and chemistry come
together, the Eastman Kodak Co. worked all through the twenties
and early thirties on the problem of making color photography
a commercial proposition. The fist processes all had flaws, and it
remained for two concert musicians, Leo Godowsky and Leopold
Marines, who had made photography a hobby, to come up with a
three-color dye-coupling developing process and a film that was
no more complicated to use than the traditional black-and-white.
Invited to join the Kodak organization at a good salary-cum-patent-
royalty figure, Marines and Godowsky perfected the color film
that was finally put on the market by Eastman under the name of
Kodachrome in 1935. Eastman also kept a close watch on the
development of a synthetic light-poltilng material, obtaining the
rights to the use of Edwin H. Land’s invention as it related to
photographic filters. The sagacious Land, a young Harvard student
when he started work on his polarizer, also licensed American
Optical and Bausch & Lomb to use his patents in making sunglasses
and optical instruments and went on to form the Polaroid Corp.
for himself.
Despite the depression in heavy industries in the thirties, Alcoa
made the continuous casting of aluminum standard practice. The
hot continuous rolling of wide-strip steel was pioneered by the
American Rolling Mill Co.’s John B. Tytusi who had first installed
his cylinders at an Ashland, Kentucky, subsidiary of Armco as
early as 1923. The son of a paper manufacturer, Tytus had watched
huge rolls of paper emerging in a long strip from the mills of
his father. In a roughly analogous way he adapted this to the mak-
ing of steel sheet. Tytus’ patents gave Armco a long headstart on
the rest of the steel community, but in the thirties other companies,
while honoring Armco’s patents, began to catch up. National
Steel, a relatively small company, was the first to introduce the
Steckel mill, a system for rolling extra-thin steel sheets. Under
tough Ernest Weir, National Steel boldly moved into the Detroit
area, making handsome p’refits while older-line companies were
floundering, and introduced new and needed competition into the
entire industry.
238 . THE ENTERPRISING AMERICANS
Harold Ickes’s public-works program helped shore up a de-
pressed market for heavy structural steel. But as the thirties pro-
gressed, private orders also started to flush the mills into larger
activity. Kettering of General Motors, whose hobby was a diesel
yacht, had perfected a diesel-electric engine that could be used also
to pull railroad cars—and just as the railroad business seemed to
be on the verge of floundering because of high costs, it was sudd-
enly discovered that high-speed diesel-drawn trains could make
money. Western roads such as the Burlington, the Union Pacific,
and the Santa. Fe started diesel-drawn streamlined service, and
soon the tistern roads were following suit with both diesel and
electric streamliners. Within a few short years, with 48,000 miles
of high-speed tracks available- in the U. S., the rolling stock of
the roads had taken on a modem appearance.
Next to chemistry, it was the aviation business that really marked
the decade of the thirties for its own. Although the Wright brothers
had flown as early as 1903, which was the same year in which
the Ford Motor Co. got its start, the airplane had taken much longer
than the automobile to realize its potential. The U.S. Army got in-
terested in the airplane around 1908, but neither the military
strategists nor the tacticians seemed to know what the plane might
be used for in wartime. In 1917 the automobile men, notably
Howard Coffin of Hudson, John N. Willys, Ford, and Henry
Leland, made Liberty engines for aircraft. American planes, how-
ever, were not manufactured in time to afl’ect the issue over the
battle lines in France.
Thus it happened that American aces like Eddie Rickenbacker
new British and French planes over the World War I trenches. They
returned to the U.S. hoping to make a true business out of air
transport. In 1923, Juan Terry Trippe, just a year after his belated
graduation from Yale, quit his job as a bond salesman and, with
his friend John Hambleton, bid a total of $4,500 for nine Navy flying
boats that were about to be junked. Trading off some of these planes
for better models, Trippe and Hambleton tried running a plane
taxi service around New York, only to find themselves going
broke. In 1925, however, the Kelly Air Mail Act authorized the
Post Office Department to sign contracts with private companies
for carrying mail at rates running up to $3 a pound, which made
THE D E P R E S S E D T H I R T I E S o 239
240 “ THE ENTERPRISING AMERICANS
At just about the same time Charles Lindbergh, then an Army
reserve flyer, began carrying the mail for the Robertson Aircraft
Corp. on the St. Louis-Chicago run.
Between them, as it turned out, Trippe and Lindbergh did more
than any other two individuals to set the U.S. on the road to the
development of air transport. Visiting Havana in 1927, Trippe
sewed up an exclusive landing permit from President Machado
of Cuba, which gave him control of the bottleneck to the Caribbean
region and so made Pan American Airways a possibility. And in
that same year Lindbergh made his solo flight across the Atlantic,
hitting Le Bourget field near Paris right on the nose. Lindbergh’s
flight sparked increasing interest in Wall Street, as evidenced by
the growth of holding companies like North American Aviation
Inc. It also led to the formation of domestic carriers like United
Air Lines and Eastern (originally called Pitcairn after its founder).
Meanwhile, T.W.A. developed as a midcontinental carrier, and
t
Cyrus Rowlett-or ‘ C.R.’’—Smith began to build American Air-
lines into a transcontinental company. Other big domestic airlines
were built in the thirties, and scores of “feeders” were consolidated
with them.
Looking beyond the continental limits of the U. S.+ Trippe’s Pan
American Airways had things pretty much to itself at the start.
Running his own private diplomatic service, Trippe negotiated
flight-landing agreements with strategic countries on both the
west and east coasts of South America. When mollifying deals were
necessary, he shared arrangements with local airlines (often run
by Germans) as well as with the Grace steamship interests. But
always he pushed the claims of Pan American Airways as a
“chosen instrument,” able to deliver service that lesser aspirants
could not guarantee to postmaster generals. With a shrewd sense
of public relations as well as of flying skills, he employed Lindbergh
to pioneer some of his first Caribbean routes. Despite some stock-
holder recalcitrance, he pushed Pan American across the Pacific in
the mid-thirties, establishing airports on lonely islands that turned
out to have inestimable military value when war came.
Pan American service to the Philippines and Macao and Hong
Kong off the coast of China had been reduced pretty much to
routine operations well before the commercial conquest of the
THE DEPRESSED THIRTIES -
241
Atlantic, which was held up until 1939 because of disagreements
between London and Washington over the right to airport facilities
spotted along the British approaches to the North American con-
tinent. Eventually the diplomatic snarls were straightened out, and
Pan Am spanned the Atlantic just in time to set a pattern of
operations for the thousands of military transport planes that would
shortly be carrying soldiers and civilian V. I.P.’S to London and
Lisbon on the edge of the Nazis’ Fortress Europa.
The development of aviation in the thirties did more than open
the vital air routes. To produce planes for Pan American and the
domestic big four, airframe companies began to dot the U. S.,
including Martin at Baltimore, Boeing at Seattle, Douglas at Santa
Monica, all of which created a vast new demand for the MelIons’
aluminum. Donald Douglas’ famous DC-3 first took to the air
in 1936. With its retractable landing gear, its variable-pitch propel-
ler, and its 180-mile-an-hour cruising speed, the DC-3 was among
the first planes to make passengers feel like something more than
unprofitable additions to baggage, and later it turned into the great
and beloved workhorse of World War H. Meanwhile huge Sikorsky,
Martin, and Boeing clippers came to discharge Pan American
passengers, mail, and cargo at the ends of the earth in Auckland,
New Zealand, and-later in the Congo. Into these planes went myriad
instruments produced by old and new companies such as Sperry
Gyroscope and Collins Radio. And Curtiss-Wright and United
Aircraft turned out radial motors of ever increasing horsepower
until the piston engine itself began to give place to the jet.
This whole complex of engineering skills helped beleaguered
Britain in 1939 and likewise helped produce the “miracle” of
production after Pearl Harbor. When President Roosevelt in a
famous defense message called for 20,000 planes, the skeptics
laughed. But in the course of the war an industry that, in the pre-
ceding twenty years, had made fewer than 30,000 planes was able
to turn out some 300,000 with an assist from Detroit. The ability
of the economy to make air power a reality was only one manifesta-
tion of its latent strength. Once firm war orders were placed,
military paraphernalia of all types poured off the production lines.
In 1918 General von Hindenburg in defeat had remarked sadly
of the U.S. industrial effort under Baruch’s War Industries Board:
242 . THE ENTERPRISING AMERICANS
“Those men understood war.” In World War H this accolade was
doubly applicable. The automobile industry alone produced 200,-
000 tanks and gun carriages, 450,000 aircraft engines, 2,300,000
machine guns, and some 2,600,000 Army trucks, while continuing
with its left hand to turn out the spare parts to keep some 26
million cars on the roads.
Thus the Great Depression ended on a new aflkmation of
industrial power, and under the impact of mobilization unemploy-
ment vanished as if by sleight of hand. Political veterans who
remember the struggles of the thirties are quick to argue, of course,
that the rapid achievement of full and overfull employment
proves that they were right all along in their assertion that the
private economy had become hopelessly static and could only be
revitalized by vast dosages of government spending and gover-
nment “investment.” Yet had the economy of the thirties been
really “mature” it would simply not have been able to produce a
new type of goods when the war button was pressed. Moreover,
it should be observed that war spending involved a huge social as
well as financial cost. For to lessen the worst ravages of inflation
the U.S. had to impose all manner of controls and, in fact, adopted
an authoritarian economic system. With its ration cards and multi-
plying directives from Washington agencies, such a system would
not be accepted for peacetime use in a free society.
The Keynesian analysis, when properly understood and quali-
fied, adds a useful dimension to economic discourse. But in its
more radical interpretation it obscures the problem of combining
general stability with the flexibility and decentralization of the
market economy. The reconciliation of large defense spending,
made necessary by the Russian danger, with limited constitutional
government and with voluntary economic enterprise became, as we
shall see, a challenge of the fifties. It was a challenge that remained
with us as we reached out to shoot the moon.
13 The Modern World of Enterprise
of Mr. Romney, the Big Three would still have had in time to ac-
cede to customer demand to produce such compacts as the Falcon,
Corvair, and Valiant.
The great electrical price-fixing conspiracy, which came to light
in 1961, would seem to prove that the impulse to cartelize business
had not entirely disappeared. But most American corporations, far
from seeking protection against competition by way of cartel agree-
ments, endeavored to get off the hook of saturated markets by
planned diversification. Even companies that were irrevocably
250 . THE ENTERPRISING AMERICANS
committed to one type of product tried periodically to “remake”
their markets. The competition between substitutes—between
stainless steel, coated steel, aluminum, wood, plaster-board,
brick, cinder and cement blocks, and a whole host of plastics, for
example—was fierce, and there were so many companies involved
in providing viable alternatives in most areas that there could be
no possibility of an effective and lasting cartel agreement even if
one were desired.
As for mergers, which were undertaken in the 1890–1910 period
in hopes of achieving an almost complete monopoly, they were now
pursued for competitive motives that were wholly in keeping with
the spirit of the Sherman Antitrust Act. Railroads sought “hori-
zontal” mergers with other railroads in order to get into a position
to maintain themselves in a transportation world that was increas-
ingly dominated by trucks, buses, private automobiles, and air-
planes. The Ford Motor Co. sought a “vertical” merger with certain
component units of the Electric Autolite Co. in order to compete
with General Motors, which owned its own spark-plug division. The
Snyder Co. of Detroit bought a company making pharmaceutical
equipment and filling machinery in order to wriggle free of total
dependence on the machine-tool purchases of the automobile comp-
anies. Other enterprises mixed mergers with internal diversifica-
tion. The oil ‘companies, with a commitment in petrochemicals,
invaded the territory of the old-line chemical companies by an
incursion into nitrogen. And the du Pent Co., baffled by the govern-
ment’s objection to its part ownership of General Motors, licensed
nylon manufacture to Chemstrand and let out cellophane to Olin
Mathieson as it put development capital, not into new nylon and
cellophane capacity, but into such things as OrIon and Delrin.
To provide the needed diversification when saturation threatened,
the modern corporation continued to put ever greater effort into R.
and D. (research and development). It also pursued R. and D. to
keep its older products in competitive trim. R. and D. resulted in
the oxygen process, which cut the cost of making steel. It de-
veloped the process of turning taconite ore into pellets that can be
used as a high-grade blast furnace feed. In the coal industry, R.
and D. had not only mechanized the mines as fast as labor costs
rose, but resulted in the pulverization and liquefaction of coal
THE MODERN WORLD OF ENTERPRISE -
251
for delivery over long distances through pipes. Much of the
money for R. and D. was provided for ostensibly restricted pur-
poses by the government, which had its own military-atomic and
space-age requirements to worry about. Nevertheless, R. and D.
resulted in a hundred new things in the consumer markets, from
power steering to powerful antibiotics, and from Fiberglas sailboats
to stereophonic phonograph records.
Paced by technology and rising demand, most industries in the
economy showed expansion but at sharply different rates. Steel,
chemicals, oil, aluminum all moved up with the gross national
product, and the growth of the utilities, especially in areas like
Florida and the Southwest, made comparative kilowatt figures
from the Soviet Union look tame. Other lines of business, such as
cotton textiles, continued to suffer from the competition of
new products; railroads, despite piggyback trucking and hopes of
mergers, were enmeshed in chronic overregulation; and even
the airlines, the star performers of the thirties, had a hard
time making money out of their extremely expensive jet fleets. The
biggest and most spectacular gains were made, of course, by the
high-technology industries, with the electronics industry leading the
van and developing at a rate that would have caused even so san-
guine a pioneer as Thomas A. Edison to rub his eyes with amaze-
ment. In 1939 factory sales of electronic equipment of all kinds
amounted to less than $400 million; in 1960 the figure reached $10
billion, to which $5 billion more would have to be added to account
for broadcasting revenues, servicing, and distribution. No other seg-
ment of the economy could match this for the postwar period.
An industry that has been called the “multiple non-industryfl
simply because it forms a part of so many things, electronics has
been all over the place. Military developments, underwritten by
government, have found their civilian uses—and vice versa.
Methods of mass production of the printed circuit were developed
by the Bureau of Standards for the proximity fuse, which in itself
is a tiny transmitter-receiver that has to be housed in the nose of a
shell. Once the war was over, Philco, Motorola, and other radio-set
makers pounced upon the printed circuit as a substitute for wired
circuits in commercial radio. Radar, used in the air and on the sea
for detection purposes in wartime, became a standby of police
252 . THE ENTERPRISING AMERICANS
forces for trapping speeding motorists. Advanced microwave radar
was employed by the military for weapons control and by ships and
planes for storm spotting as well as general navigation. ENIAC, the
first “giant electronic brain,” was put together by J. Presper Eckert
and John W. Mauchly, who formed the Eckert-Mauchly Com-
puter Corp., for Army Ordnance in 1946. Such computers were
subsequently produced by Remington Rand (UNIVAC), Thomas
Watson’s I.B.M., and others, and were leased or sold to the Bureau
of the Census, the insurance companies, and the larger banks and
utility companies.
Basically, the various computers and communications control
devices were adaptations of old discoveries. But the postwar period
brought forth one electronic invention that added a new dimension
to the business. This was the tiny transistor, which was produced
by Dr. William Shockley and a team of Bell Labs scientists in 1948.
The transistor, a three-electrode “tube” of solid matter that could be
substituted for the glass vacuum tube, met all the requirements for
the “miniaturization” needed to give real impetus to the rocket and
missile age. Using a rare metal, germanium, for their solid semi-
conductor material, Dr. Shockley and his team won the Nobel Prize
for their patents, which were assigned to Western Electric for use in
work for A.T. & T. and for general license to the trade. By 1951
any company could obtain use of the transistor patents by paying
$25,000 advance on royalties.
Texas Instruments, which, as Geophysical Service Inc. had been
in the oil exploration field, was among the early users of the Shock-
ley patents. With his license in hand, T.I.’s President John Erik
Jonsson, the son of a Swedish immigrant, bought up talent on a
big scale—and within two years his company had brought down
the price of a germanium transistor from $16 to $2.50. Sales mul-
tiplied—and after 1954, when T.I. made the first practical silicon
transistor, the market really took off. With its better resistance to
extremes of heat and cold and its longer life, the silicon transistor
took some of the hazard out of space age experimentation. In
an electronics market that had a compounded growth of
some 15 per cent a year, T.I. showed a 40 per cent annual
growth. Its 1954 sales were $24,500,000; its 1961 figure was $235
million—and the profit therefrom had grown more than forty-six
THE MODERN WORLD OF ENTERPRISE . 253
times the 1948–50 base. In 1960 T.I. stock sold for sixty-five times
earnings. As the sixties unfolded, T.I. and other electronics compan-
ies encountered tougher going. But the show was a gorgeous one,
making possible the whole vast new enterprise of space exploration.
Roughly, the companies involved in electronics could be shuffled
into three groups. One group specialized in components such as
transistors, capacitors, vacuum tubes and so on: representatives of
this type of company included Texas Instruments, Varian Associ-
ates, Litton Industries, Transitron and older companies like Sprague
Electric in New England and Standard Kollsman in California.
Another group stuck largely to end products (1.B.M. and Sperry
Rand with their computers, Beckman Instruments with its power-
ful analytic tool, the mass spectrometer; and Minneapolis-Honey-
well with its data processing systems and its “first complete
automatic programing system for computer control of industrial
process”). Aircraft manufacturers moved sidewise—or shifted
entirely—into the end-product electronic field: Boeing and North
American and Northrop had their missile projects, and the Glenn
Martin Co. (now part of Martin-Marietta) dropped air frames for
missiles and controlled spacecraft entirely. Finally, there were the
middle-type companies which made some of almost everything in
the electronic line-old companies like R. C.A., Sylvania, G.E., and
Philco, which was absorbed by the Ford Motor Co. As for Ford, it
had already committed itself to space work with its Aeronutronic
Division, which was hard at work on a lunar capsule.
In 1960 government orders sopped up $5 billion worth of elec-
tronics, missiles alone accounting for $4 billion. Meanwhile civilian
markets-old and new—were ponderable. Television sets remained
in the five-million to six-million-a-year area, grossing around $1
billion. Color television, after years of disappointment, had be-
come a practical reality. The Teco subsidiary of Zenith Corp.
held licenses for pay-as-you-see television patents and awaited
only the permission of the FCC to develop a whole new and
promising field. Meanwhile electronics penetrated into the fac-
tory and production line. Much of the early postwar development
of automation was electrically, not electronically controlled: the
big Cross Co. “transfer-matic” lines for machining the automobile
cylinder block, which are as long as a football field, had not been
254 . ~~~ E N T E R P R I S I N G AMERICANS
run by electronic signaling and “feedback” devices. But continu-
ous-process industries such as petroleum, chemicals, and paper
used electronically guided flow systems. And after the Korean War
electronics began to be applied to the automation of hard-goods
manufacture.
While electronics was the star of the postwar business world, it
was not the only great performer. Without any big governmental
R. and D. subsidy, drug manufacturers took off on their own,
jumping their sales from $300 million in 1939 to an almost in-
credible $3.3 billion in 1961. The $410 million that the public
spent on antibiotics alone in 1961 represented more money than
was spent for all types of drugs in 1939—as did the $350 million
spent on synthetic vitamins. Though the sums involved would, on
the face of things, argue that medical costs had been skyrocketing,
the prices for such “wonder drugs” as penicillin dropped and
dropped over the years. As for preventives such as the Salk polio
vaccine, the cost of almost total immunization in any com-
munity represented only a few cents per child. What the whole
phenomenon suggested is that the drug industry had been getting
money for the prevention or quick cure of diseases that used to
go to doctors for long and often far more’ expensive cures; pneu-
monia was now eradicated within the week, and tuberculosis in most
cases no longer demanded long sanatorium treatment. All this con-
tributed significantly to keeping people healthy and able to enjoy
the good life that rising incomes made possible.
This rise was spectacular by almost any standard, and the good
life—sometimes called “keeping down with the Joneses’’—had
become a commonplace. Entering the 1960’s, American society
could no longer be represented by a pyramid, with the few at
the top having most of the purchasing power and the millions at
the bottom having little. Modern society is “bunched in the mid-
dle,” financially speaking: some 47 per cent of all non-farm families
in 1959 had after-tax cash incomes of $5,000 to $10,000 a year.
The “proletarian” worker was disappearing; the old “blue-collar”
man, now a machine watcher, lived as often as not in a split-level
“ranch house” next to a white-collar contemporary. Blue collar’s
diversions were likely to be skiing, bowling, boating—which created
big business in themselves.
THE MODERN WORLD OF ENTERPRISE “ 255
It was sometimes charged, of course, that the American people
spent too much on wasteful luxuries and an assortment of kitsch,
or junk, but the indictment was scarcely borne out by the statistics.
In 1959, for instance, the after-tax income of the U.S. was $336
billion, three-fourths of which went for food, housing, clothes, and
transportation. The remaining quarter went into savings ($24 bil-
lion), medical expenses ($19 billion), support of private religious
and welfare institutions ($4 billion ), private education ($4 bil-
lion), and “personal” business such as bank charges and interest
on loans ($17 billion )-and $16 billion for movies, sports, read-
ing, gardening, travel, and related hobbies. With expenditures for
education and medicine rising in relation to spending for amuse-
ments, it was apparent that the U.S. economy, even in the midst of
fabulous production, had been a relatively austere one. It might
have done with a little more “waste” and “frivolity.” And Madi-
son Avenue, far from deserving censure for trying to promote
consumption, should have been praised for doing its best under
difficult circumstances.
The sober affluence of the new middle class was in itself a stabiliz-
ing factor in the economy: with 60 million cars on the road it took
a yearly production of six million cars in the early sixties merely
to meet replacement demands. At the same time, of course, Ameri-
can taste was constantly changing, with people buying electric
blankets one year and the next switching to good paperback books
or high-fidelity records or wall-to-wall carpeting. This constant
change in the use of “discretionary income” gave the economy its
unique dynamism, and precluded almost by definition attempts to
control it from a central watchtower-only low-grade economies
can be so directed and this at enormous social cost. The great
virtue of the American market system was that the consumer vote
still had a controlling influence over the flow of demand and to a
significant degree over the flow of profits and hence investment. In
1961 some 450,000 new businesses were born in the hope of
turning a profit by catering to changing consumer taste, while an
almost equal number closed their doors because they had failed
to meet the market test. Such a system might appear less tidy than
the great centrally controlled economies. But the untidiness was
only a surface manifestation hiding an inner order and discipline.
256 . THE ENTERPRISING AMERICANS
Because of America’s quick responses to changing human needs,
U. S. citizens at the beginning of the sixties had every reason to
take pride in their $560 billion gross-product system. Along Wall
Street they talked of “the soaring sixties.” But the sixties, as things
turned out, did not behave in accordance with the prophecies.
Economics, to a great extent, creates and conditions sociology, but
there are times when the cause-and-effect order is reversed; and the
sixties were to prove just such a time. President John F. Kennedy
took over from Eisenhower in 1961 with a promise to “get America
moving again.” He should have construed his mandate as one to
keep America moving.
Move it did, but its very prosperity created problems that could
not have been foreseen in a simpler time. The vast amounts of
capital that had moved abroad (the Marshall Plan, Point Four, the
rise of the multinational corporation) created sticky balance of
payments situations. For a short period, dollars tended to flow
back to buy the product of American factories, but once Japan and
West Germany had been rebuilt, and the Common Market had
managed to rid the West European world of tariffs and quotas that
did not consort with narrow boundaries, the U.S. system was placed
on notice that it must compete as it had never competed before.
The dollars that had been coming home became the Eurodollar and
stayed abroad to finance foreign subsidiaries. General Motors made
its Opel cars in West GermWy, Ford its Cortinas in Britain, Chrys-
ler had its Simca connection in France. This was competition, but
the reflex of a Europe chockablock with liquid dollar claims was a
run on Fort Knox. The “gold drain” was among the first hard
economic problems to face the Kennedy administration.
The Bretton Woods money system had been set up to soften
and defer balance of payment troubles. The hope was that the
trading nations of the West would discipline their home economies
in time to remain evenly competitive. This hope was never realized
in Britain, and in the sixties it faded in America. Discipline would
have required the cooperation of the labor movement to pursue
collective bargaining within limits imposed by the unit productivity
of the individual worker. Two young steel union economists, Harold
Ruttenberg and Joe Scanlon, tried to tell that to Phil Murray, the
head of the United Steelworkers, in the late forties, but the hold
THE MODERN WORLD OF ENTERPRISE “ 257
of the Gompers formula—’’More’’—was too strong to be lightly set
aside. In Detroit Walter Reuther continued to push the idea that
purchasing power depends on ever rising hourly wage rates. So
the incrustations on the U. S. system grew as wages and fringe
benefits went beyond productivity. The working man who kept his
job was better off than ever even in a time of rising inflation, but
the steel union lost a third of its membership as Europe and Japan,
getting the jump on America with the new oxygen furnaces, made
steel at better competitive rates.
Instead of Marx conquering the world, it was the enterprising
American who had rammed home his lesson all too well. In the
sixties we lost our overseas electronics markets to Japanese com-
panies such as Sony. Remington and Underwood typewriter trade-
marks gave way to the Italian Olivetti; Hollywood gasped for life
as France, Britain, Italy, and even Yugoslavia made better and
cheaper films; the German Volkswagen and the Japanese Toyota
and Datsun squeezed the high-powered and oversized Detroit car
out of foreign markets and even invaded the U. S. in ever increasing
numbers; and Hong Kong textiles were all over the place. Only in
airplanes and computers did we continue to hold our old lead. The
Boeing 747 remained in great demand (the German Lufthansa
began using it as a transatlantic freighter), and the Red Chinese
signaled their return to the world community by bidding for Boe-
ing’s smaller 707. But Boeing itself, made fearful by the retraction
of government support for the giant supersonic, the SST, felt con-
strained to make provision for manufacturing planes in Japan and
Italy. IBM was still the great name in jumbo-sized computers, but
the Japanese had made big inroads in the mini-computer market,
and it was only a question of time before they would go for the
bigger stuff. In the meantime we had suddenly had to face up to our
growing energy shortages. The need for oil from the Persian Gulf
and Iiquified natural gas from Algeria threatened to add pro-
gressively to our balance of payment woes. It remained a matter
of pride to realize that American international companies had been
dominant factors in developing Saudi Arabian oil fields, but this did
not keep the price of oil from rising as we lagged in exploiting new
sources on our mainland, in Alaska, and on our continental off-
shore shelves.
258 . THE ENTERPRISING AMERICANS
In spite of our international troubles we had become a trillion-
dollar economy. Our very aflluence, however, created disturbing
expectations. The consumer, with money in his pocket and a bigger
margin of time in which to enjoy life, started to ask finicky questions
about quality. Ralph Nader, a far greater master of public relations
than Ivy Lee and Edward Bernays, put himself at the head of a
consumers’ lobby, with rather mixed impact on the economy.’ The
consumers’ movement is here to stay, and it will put new life into
Better Business Bureaus and the journalism that has built its success
on the pioneering of such magazines as Consumer Reports. But
“Naderism” killed off a small economy-type car, the rear-engine
Corvair, that had already been made roadworthy by correction of
its original defects. Moreover, Nader zealotry, a good thing on
balance as long as it sticks to proselytizing within the free market,
could have disastrous inhibiting effects if it were to result in a super-
agency designed to police the American corporation. Ever since
the formation of the Interstate Commerce Commission in the
eighteen-eighties, the lesson of government regulation is that it
creates more problems than it solves. The natural history of a
regulatory agency, as the late Robert Young often complained, is
that it becomes prey to politics. As often as not, the industry to
be regulated manages to get working control of the agency itself.
The collapse of the eastern railroads in the sixties was a pointed
commentary on the “regulatory idea. The consumer of mass travel
would manifestly be better off today if railroads had been left free
to tear up unused tracks, to trim the crews of Diesel trains, and to
combine in order to compete with trucks and airplanes. The merger
of the New York Central and the Pennsylvania might have worked
if it had come a generation earlier with a good railroad man such as
, Alfred Perlman in charge of combined operations.
Environmentalism, the natural complement of the consumer
movement, has also proved a mixed blessing. The ecologists, busy
with their stop signals, perform a necessary warning service. Com-
mon sense should tell us that it is dangerous to construct atomic
energy plants along the line of the San Andreas fault in California,
or to drill indiscriminately for oil in the geologically unstable bot-
tom of the Santa Barbara Channel. Moreover, there is more than
sentimentalism involved in the protection of endangered species
THE MODERN WORLD OF ENTERPRISE “ 259
from soil and water pollution and the ravaging of fragile landscapes
such as the Alaskan tundra. The trouble with the ecologists is that
they have overdone it; instead of producing a healthy wariness, they
have unleashed an unhealthy fear.
The sum total is not a safer or more habitable world. If, for lack
of an oil pipe line across Alaska to the sea (or, better, a longer
pipe line across Canada to Midwest markets), we lack the economic
strength to pursue a successful Middle East diplomacy, the result
could be atomic warfare, with its practically universal poisoning
of the atmosphere. The answer to the ecologists is not to hold back
on investment; it is to add the necessary ingredient of safety engi-
neering to economic development. Surely American enterprise is up
to providing insulation for hot oil in the Arctic. Even better, it has
been suggested that oil might be forced through a buried cross-
tundra pipe line in a cold brine solution that would not do damage
to the heritage of either caribou or Eskimo.
The jumbo tanker, according to Dr. Edward Teller, is more of a
menace to the ecology of the oceans than any offshore drilling rig.
So it is no service to the human race, Americans included, to pro-
hibit drilling for oil off the New England coast; lack of offshore
oil merely means building more tankers for the long voyage from
Kuwait or Libya. As for the tankers themselves, they could be built
with detachable bunker units, which could be floated off and towed
to shore in case of mishap on the high seas.
Lacking oil, and worried about the atmospheric pollution that
comes from burning coal, we should be pushing the development
of clean atomic generating plants. Dr. Teller, who laments the
slowdown caused by worries over possible atomic pollution, suggests
that many hazards might be eliminated by putting nuclear power
plants underground. As for coal itself it will surely come back into
‘ favor some day when R. and D. learns to gasify it in the seams or
close to the minehead for a cleaner energy.
The damage that we have done to ourselves through over-fearful
surveillance extends to the drug industry, which has fallen behind
the West German’s in inventiveness. Nobody wants another thali-
domide, but if the test of a new drug were that it should have no
side effects, penicillin would never have come on the market. As one
exasperated chemist put it, if the marketing of a single effective
260 - ~1113 ENTERPRISING AMERICANS
drugisto bepostponed forpolitical reasons for as much as a year,
the resulting deaths could make the thalidomide damage seem
negligible by comparison.
In the late sixties many an undesirable government interventionist
chicken came home to roost. The farm legislation of the nineteen- ,
thirties did not stop American agriculture from becoming the most
productive in the world. But the hidden cost of subsidizing the big
producer (the small farmer, lacking acres to put into the soil bank,
was arithmetically eliminated from the largesse ) was to be reckoned
in the spread of the northern city slum. Traveling between Columbia
and Beaufort in South Carolina, for example, or in southeastern
Alabama, one is appalled at the emptiness of a land which Swiss
or Dutch peasants could make inordinately fruitful. The people,
pushed off acres that have been progressively turned over to twenty-
year tree crops, have crowded into the decaying areas of Detroit,
Chicago, Washington, and New York. The pressure of the slums,
in turn, has exacerbated the flight to the suburbs. The sociological
distortion has been accompanied by a distortion of investment and
consumer patterns: we have had too many resources tied up in big-
power cars, in miles of asphalt, and in a sprawl that is not a really
effective decentralization. The fault goes back to the failure of
Henry Wallace, Roosevelt’s secretary of Agriculture, to provide
a cut-off point to big farm subsidies: instead of helping the family
farm, he pushed a bigger concentration of fertilizer, feed, and ma-
chinery funds into the hands of the more wealthy producers. The
resulting displacement of populations led directly to our big city
woes, the proliferation of our Harlems and our Bedford-Stuyvesants
and the sad saga of the modeim drug culture, with its attendant
crime, that is making our biggest cities uninhabitable.
Capitalism, which did not create the problem of forced-draft
migratory patterns, does its best to mitigate it. Despite everything,
the income for black families rose by 99.6 per cent in the sixties
while the income for white families went up by 69 per cent. Ac-
cording to statisticians Ben Wattenberg and Richard Scammon, a
slim majority of black Americans are now properly to be described
as middle class people. The improvement has come about even
though minimum-wage laws have hurt teen-age blacks who, more
than white apprentices of the same age, have been unable to get
jobs at the legally imposed rates.
Photo by John Loengard, Ltie, copyright 1%2 Time Inc.
NOTE : The material used in the preparation of this book ranges widely—as
the story of American business itself does-over the economic, social, and
political life of the United States. The following list of sources and recom-
mended reading includes, therefore, the work of historians, biographers, and
statisticians, company reports and autobiographies, and even the evidence
presented by Wme novelists. Some works, however, are so broad in scope
and contain so much basic material that is indispensable to the study of the
development of a business civilization (and were so continuously consulted
and referred to) that they are listed separately—under Z. Genem-at the
start of this bibliography, followed by a list of the other sections to which
certain books particularly apply. other sources have been grouped under
eight broad subject and period headings. Generally these headings do not
refer to specific chapters but follow their chronological sequence.
I. GENERAL
D OCUMENTARY C3JIDES AND E NCYCLOPEDIAS : Adams, J. T., and Coleman,
R. V. (eds.) : Dictionary of American History (5 VOIS., 1940; secs II through
VIII); Bogart, E. L., and Thompson, C. M. (eds.): Readings in the Eco-
nomic History of the United States (1916; Sees. 11 through VII); DanielIs,
Lorna M.: Studies in Enterprise ( 1957; sees. II through IX); Flugel, F., and
Faulkner, H. U. (eds. ): Readings in the Economic and Social History of the
United States 1773–1829 ( 1929; sees. II, III, IV); Historical Statistics of the
United States 178%1957, Department of Commerce (sees. H through IX);
Johnson, Allen, and Malone, Dumas (eds.): Dictionary of American Bwg-
raphy (11 vols., 1957–1 958; sees. II through Ix); Larson, Henrietta M.:
Guide to Business History ( 1948; sees. 111 through VIII); Paullin, C. O.:
A tks of the Historical Geography of the United States ( 1932; .secs. II
through V); Seligman, E. R. A. (cd.): Encyclopedia of the Social Sciences
(15 vols., 1930-1935; sees. 11 through VII).
H ISTORIES : Beard, C. A., and Beard, M. R.: The Rise of American Civiliza-
tion (4 vols., 1927, 1941, and 1942; sees. III through VII); Bining, Arthur
Cecil: The Rise of American Economic Life (1955; sees. V through VIII);
Bishop, J. Leander: A History of American Manufactures from 1608 to
1860 (2 vols., 1864); Clark, Victor S.: History of Manufactures in the
United Sfates (3 vols., 1929; sees. II through VII); Cochran, Thomas C.,
and Miller, William: The Age of Enterprise ( 1942; sees. II through VI);
Cochran, Thomas C.: Basic History of American Business ( 1959; sees. V,
VI, VIII ); Dewey, David Rich: Financial History of the United States
265
266 . BIBLIOGRAPHY
(1936; sees. II through VIII); Faulkner, Harold U.: American Ecommk
History (1960 new cd.; sees. III through VIII); Gras, N. S. B., and Larson,
H. M.: Casebook in American Business History (1939; sees. II through
VII); Hacker, Louis M.: American Capitalism. Zts Promise and Accomplish-
ment (1957; sees. IV through VIII); Hacker, Louis M.: The Triumph oj
American Capitalism ( 1940; sees. V through VIII); Johnson, E. R., Van
Meter, I. W., Huebner, G. G., and Hanchett, D. S.: History of Domestic
and Foreign Commerce (2 vols., 1915; sees. II through VII); Schlesinger,
A. M., and Fox, D. R.: Hi@ory of American Life (13 vols., 1927-1948;
sees. 111 through VIII); Soule, George: Economic Forces in American His-
tory ( 1952; sees. IV through VII).
270 . BIBLIOGRAPHY
VI. TRUSTS, THE GROWTH OF BIG ENTERPRISE, AND THE RISE
OF THE NEW YORK MONEY MARKET
Allen, Frederick Lewis: The Great Pierpont Morgan (1948); Allen, WiI-
liam H.: Rockefeller: Giant, Dwarf, Symbol (1936); Appel, Joseph A.:
The Business Biography of John Wanamaker (1930); Baruch, Bernard: My
Own Story (vol. 1, 1957); Beard, Miriam: A History of the Business Man
(1938); Bogue, Allan G.: Money at Interest. The Farm Mortgage on the
Middle Border (1955 ); Business History Review-Staff of eds.: OiYs First
Century ( 1960); Corey, Lewis: The House of Morgan ( 1930); Diamond,
Sigmund: The Reputation of the American Business Man ( 1955); Ecken-
rode, H. J., and Edmonds, P. W.: ‘E. H. Harriman (1933); Flynn, John T.:
God’s Gold ( 1932); Henry, Robert Selph: This Fascinating Railroad Busi-
ness ( 1942); Hidy, Ralph, and Hidy, Muriel: Pioneering in Big Businem
(vol. 1, 1955); Holbrook, Stewart H.: The Age oj the Moguls (1953); Hol-
brook, Stewart H.: James J. Hill (1955); Holbrook, Stewart H.: The Story
of American Railroads ( 1947); Hoyt, Edwin P.: The Varuierbilts and Their
Fortunes ( 1962); Josephson, Matthew: The Politicos 1865-2896 (1938);
Josephson, Matthew: The Robber Barons (1934); Kennan, George: E. Il.
Harriman, A Biography ( 1922); Lloyd, Henry Demarest: Wealth Against
Commonwealth (1894); Medbery, J. K,: Men and Mysteries of Wall Street
( 1870); Minnigerode, Meade: Certain Rich Men (1927); Moody, John:
The Masters of Capital (Chronicles of America series, 1919); Moody, John:
The Railroad Builders (Chronicles of America series, 1921); Moody, John:
The Truth About [he Trusts (1904); Myers, Gustavus: History of the Great
American Fortumm (1936); Nevins, Allan: John D. Rockefeller: A Biog-
raphy (2 VOIS., 1940); Redlich, Fritz: The Molding of American Banking—
Men and Zdeas ( 1951); Satterlee, Herbert L.: J. Pierpont Morgan ( 1939);
Tarbell, Ida M.: History of the Standard Oil Company (1904); Twain,
Mark, and Warner, Charles Dudley: The Gilded Age ( 1873); Winkler,
John K.: The First Billion: The Stil[mans and the National City Bank
(1934); Winkler, John K.: John D. Rockefeller, a Portrait in Oils (1929);
Winkler, John K.: Morgun the Magnificent ( 1930); Winkler John K.:
Tobacco Tycoon. The Story of James Buchanan Duke ( 1942).
See also general sources indicated for this section.