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by
T.J. Stiles
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January 11 - February 15, 2012
With war looming, this is really smart.
“He began life by working to live, he now lives to work.”
By 1859, he operated almost entirely through corporations; he proved himself an expert at using the stock market to concentrate capital or avenge himself on his enemies, and emerged as a master of corporate structure.
I am not afraid of my enemies, but God you must look out when among your friends-C. Vanderbuilt,1867
The Republicans had nominated the Illinois railroad lawyer Abraham Lincoln on a platform of firm opposition to any spread of slavery.
I don't think this is correct.
The federal budget for 1860 had amounted to just $63 million. (The annual figure would grow to more than $1 billion by the end of the war.)
IF WALL STREET HAD SAINTS, then the college of financial cardinals would surely canonize Elbridge G. Spaulding. Spaulding, chairman of a House subcommittee on emergency measures, performed a true miracle: he conjured money out of nothing, and so contributed more toward the Union victory (and the future of New York's financial sector) than any single battlefield victory.
The uncertainty of war caused many across the country to withdraw deposits or return notes for gold, ultimately draining reserves in Manhattan.
Lincoln signed the Legal Tender Act on February 25, 1862, and the Treasury began to issue $150 million in “greenbacks,” as the new bills were nicknamed.
Jackson had staked his presidency on the fight against the federal charter of one bank (albeit an enormous one); now Washington chartered hundreds of banks, dictated how they would structure and place their reserves, and even issued a national paper currency for the first time since the ratification of the Constitution. In addition, Congress enacted a federal income tax in 1861, also for the first time, extending the touch of the central government to individuals through an extensive new bureaucracy as never before. As one New Yorker wrote in his diary, “The direct tendency of all the acts of
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The heart of the era. The birth of a nation.
Perhaps the most revolutionary innovation
of all was Elbridge Spaulding's greenback. The idea of “fiat money” (as economists call irredeemable legal tender) offended economists and businessmen, who belie...
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the Legal Tender Act represented a direct attack on the ancient worldview that was rooted in the tangible and real, by declaring that mere markers, the product of imagination alone, would be the medium of exchange and store of value.
Whenever a military campaign began, speculators would gamble on the result by buying greenbacks or selling them short.
Currency speculation.
The old commercial heart of the city had pulsed with cotton, beating in time to Southern harvests and exports. Seemingly overnight, a transplant gave New York a new, industrial, Northern heart of coal and iron and rifles and tents and shoes and uniforms. Greenbacks and military purchase orders flowed into New York and quickly revived business. Factories, workshops, and warehouses could not meet demand, so new factories, workshops, and warehouses opened.
On the other hand, Vanderbilt socialized with another set that came rapidly to the fore in the volatile atmosphere of the war years: the aggressive, enterprising, risk-taking “fast men” of Wall Street. These men—Vanderbilt's circle—raced trotters, played whist at Saratoga, and bought and sold stocks with an avidity never seen before.57
Original Wall Street personality
Cynicism, of course, always seems to be the most sophisticated position to take; yet it is also the laziest (along with hero-worship, its direct opposite).
Historian Alfred D. Chandler Jr. famously referred to the rise of the large business enterprise—a rise led by the railroad corporation—as a “managerial revolution” in American business.
His initial interest in the company need not have concerned the public at all, except that it led him into a conflict with one of the great perils that plagued American democracy in the 1860s, that of government corruption. The elected officials of New York flapped around what they assumed to be the mere corpse of a company, each looking to tear off a piece for himself. Vanderbilt would not let them. The origins of his empire, then, lay not in his godlike foresight, but in his determination to punish the greed of a few foolish men.
The Harlem's fixed strength was its penetration of the center of New York, down Fourth Avenue and through its streetcar line. This was something that no other railroad possessed—not even the only other steam railway to enter Manhattan, the Hudson River, which was restricted to the far west side. The Harlem provided the only portal for direct rail traffic with industrial New England,
During the Civil War, Americans began to fear that rampant corruption threatened democracy itself.
in 90 more year an Irish Catholic would be president - JFK
At least two-thirds of a railroad's expenses remained constant no matter how much or how little traffic it carried.
The importance of the railroad in the nineteenth century is a historical cliché; a cliché can be true, of course, but will have lost its force, its original meaning. Garrison's letter, on the other hand, speaks to the railroad's dramatic impact at the time of the Civil War. It was, one contemporary writer argued, “the most tremendous and far-reaching engine of social revolution which has ever either blessed or cursed the earth.” It magnified the steamboat's impact, instilling a mobility in society that unraveled traditions, uprooted communities, and undercut old elites. It integrated markets,
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The first all-rail shipments of grain from Chicago to Buffalo began in 1864; within a decade, they would surpass the volume carried by lake, river, and canal.
The railroads had raised up Chicago even earlier, building on its status as a major lake port. Cook County, home to this midwestern metropolis, grew from 43,385
people in 1850 to 394,966 in 1870.
Railways to the eastern seaboard allowed Pittsburgh to flourish as an iron and steel center; railways to the oil fields of Pennsylvania permitted Cleveland to emerge as a refining center; railways to the East brought farmers from Ohio to Nebraska into the global market. It is telling that the word “rail”...
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Most manufacturing was still conducted in family-owned workshops and small mills; very few factories represented as much as $1 million of investment. (Historian Alfred D. Chandler Jr. counted only forty-one textile mills in the 1850s capitalized at $250,000 or more.) Even the largest commercial banks rarely boasted a capitalization of more than $1 million. By contrast, at least ten railroads had a capitalization of $10 million or more even before the war began.
large market cap companies today do not need that kind of capital to start like Apple, Microsoft, Facebook, Google.
Railroads were not simply the first big business, as Chandler famously called them; in Civil War America, they were the only big
business.
The best-trained minds in the United States grappled with the problem, developing new systems of organization, control, and accounting.5
There was another, more instinctive response to the war's death and destruction. It was a resurgence of a superstition that owed its modern origin to a pair of toe-cracking girls from Rochester, New York. With so many spirits to contact, Spiritualism became more popular than ever, attended by a general faith in the unseen.
Vanderbilt was a charter member. Though he belonged to the Union Club and others, he began to spend most evenings in the Manhattan Club with his friends, railroad directors, and sons-in-law, playing whist for
money, always for money.
And he had a gambling addicted son.
These railroad companies had been created for parochial reasons—to connect New York to Albany, to connect the Great Lakes with the Hudson River, to undercut the Hudson River Railroad—but now they were pressed into a continental transportation system.
In 1861, there were roughly fifteen unions in New York City; by 1864, there would be 157. “A larger proportion of the metropolitan working population enrolled in trade unions between 1865 and 1873 than during any other period of the nineteenth century,”
Of course, walkouts had occurred in previous decades, but the Harlem drivers' strike pointed to the future. The Harlem men were employees of a large, impersonal corporation. Most could anticipate working their entire lives for wages, rather than starting their own farms or shops as their fathers might have done. Strikes now broke out not simply over short-term grievances, but to rebalance the long-term relationship between capital and labor—as seen in the campaign for an eight-hour day. A labor movement emerged, mirroring the rise of the large business enterprise.61
“That has been my principle with steamships. I never had any advantage of anybody in running steamships; but if I could not run a steamship alongside another man and do it as well as he for twenty percent less than it cost him I would leave the ship.”
And yet, surprisingly, he agreed to consider a lease of the Hudson River and the Harlem to the New York Central. In retrospect, Vanderbilt's openness to virtually abandoning his railroad career—a career that later went on to such triumphs—is stunning. It obliterates any notion that he harbored long-term plans for monopolizing New York's railways.
Express companies had existed for decades, carrying expensive, high-priority items—especially money, for this was an economy that relied heavily on cash.
Before the war, the federal government had not reached down very far (except in the territories); it had delivered the mail, inspected steam engines, and helped to capture runaway slaves, but not much else. Now it taxed individuals, extended aid to freed people, defined citizenship, specified rights, prescribed penalties for violating those rights, and soon would impose direct military administration of most of the South. In this crisis, Americans awoke to the power of the central government.
“We may as well break with those people tomorrow as at any time. I don't want to take two, three, or four days to do a thing that we can do in one.”
I am not afraid of my enemies, but, my God, you must look out when you get among your friends,”
*
How could society demand that private citizens provide the capital for the nation's railways, but leave them unable to protect their investments?
He used his own cash to buy large blocks of shares, moved into the management to stay, and brought along his eldest son and sons-in-law.
Like private equity today.
Vanderbilt's most famous reform was the most superficial: he forbade brass ornamentation on all locomotives, to save the time spent polishing them. This one step attracted lengthy comment in newspapers and railroad journals.
The surprising truth is that Vanderbilt fought one of the greatest business conflicts in American history purely out of a desire for revenge.
To defeat the attempted corner, they engaged in a stock-watering operation of unprecedented size and speed.
Poison pill.
In economic culture, railroads ran headlong against the deep Jacksonian belief that free competition was an essential component of democracy itself—that monopoly threatened free government. Their dual nature as both public works and private businesses presented a paradox: What was more important, to protect shareholders in their property rights, or to prevent a monopoly? Good management and returns on investment, or competition?
