The Origins and Operations of the Kansas City Livestock
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REGULATION IN THE LIVESTOCK TRADE: THE ORIGINS AND OPERATIONS OF THE KANSAS CITY LIVESTOCK EXCHANGE 1886-1921 By 0. JAMES HAZLETT II Bachelor of Arts Kansas State University Manhattan, Kansas 1969 Master of Arts Oklahoma State University stillwater, Oklahoma 1982 Submitted to the Faculty of the Graduate College of the Oklahoma State University in partial fulfillment of the requirements for the Degree of DOCTOR OF PHILOSOPHY May, 1987 The.s; .s I q 8111 0 H~3\,.. ccy;, ;i. REGULATION IN THE LIVESTOCK TRADE: THE ORIGINS AND OPERATIONS OF THE KANSAS CITY LIVESTOCK EXCHANGE 1886-1921 Thesis Approved: Dean of the Graduate College ii 1286885 C Y R0 I GP H T by o. James Hazlett May, 1987 PREFACE This dissertation is a business history of the Kansas City Live Stock Exchange, and a study of regulation in the American West. Historians generally understand the economic growth of the late nineteenth and early twentieth centuries, and the business institutions created during that era, within the perspective of "progressive" history. According to that view, Americans shifted from a public policy of laissez faire economics to one of state regulation around the turn of the century. More recently, historians have questioned the nature of regulation in American society, and this study extends that discussion into the livestock industry of the American West. 1 This dissertation relied heavily upon the minutes of the Kansas City Live Stock Exchange. Other sources were also important, especially the minutes of the Chicago Live Stock Exchange, which made possible a comparison of the two exchanges. Critical to understanding the role of the Exchange but unavailable in Kansas City, financial data was 1Morton Keller, "The Pluralist State: American Economic Regulation in Comparative Perspective, 1900-1930," in Thomas K. McCraw, Regulation in Perspective: Historical Essays (Boston: Harvard University Press, 1981), pp. 56-94; Thomas K. McCraw, "Regulation in America: A Review Article," Business History Review 49 (Summer 1975) :159-183. iii obtained in chattel mortgage records in Texas, Oklahoma, and Kansas. This material outlined much of the involvement of commission merchants in financing the cattle trade. The records of the Wichita Cattle Loan Company, in Wichita, Kansas, clarified the processing of "cattle paper" out of the Southwest and filled in where other sources were unavailable. I wish to express my sincere gratitude to all those who assisted me in completing this dissertation and during my stay at Oklahoma State University. In particular, I am indebted to my major adviser, Dr. W. David Baird, for his intelligent guidance, concern, and invaluable help. I am also thankful to the other committee members, Dr. H. James Henderson, Dr. George F. Jewsbury, Dr. Joseph A. Stout, and Dr. Edward 0. Price III, for their advisement in the course of this work. Other faculty members, librarians, and data processing personnel contributed to the study. It owes much to Dr. Charles W. Cheape, now associate professor of history at Loyola University, Baltimore, Maryland. The initial ideas for this study originated in Dr. Cheape's research seminar in business history at Oklahoma State in the fall of 1983. Dr. James L. Huston, an economic historian, also read the dissertation and made helpful suggestions. Dr. Richard c. Rohrs, graduate advisor, was always available for an insightful critique on historical methodology. Heather Lloyd, John B. Phillips, Mary H. Evans and Mary R. Dean at iv the Edmon Low Library helped find many of the primary sources. Jack Haley of the Western Historical Collection at the University of Oklahoma, Norman, made helpful suggestions on the location of sources and microfilmed the records of the Chicago Live Stock Exchange. Paul P. Woods, Tom R. Buttress, and Roger Stevens of the University Computer center at Oklahoma State assisted in the completion of the dissertation by providing easy access to, and technical advice on, the University's word processing equipment. The livestock merchants assisted in answering questions on the nature of their trade. Most helpful were Delbert Fields, and Ray Davis of Kansas City, Missouri, August Riser of Omaha, Nebraska, and Darrel Overman of Joliet, Illinois. Special thanks are due to the Department of History at Oklahoma State University for the financial support I received in the form of the Townsend Dissertation Award in 1985. Appreciation is also due to Vernie c. and Eva Reed Hazlett, Kansas farmers for four decades in Norton County, Kansas, who taught me most of what I know about livestock. Their generous financial support enabled me to finish this dissertation. v TABLE OF CONTENTS Chapter Page I. INTRODUCTION 1 II. LIVESTOCK COMMISSION BUSINESS • 14 III. LIVESTOCK COMMISSION FIRM 36 IV. "EVILS AND ABUSES' OF THE LIVESTOCK TRADE o 59 v. ANTECEDENTS, IDEAS, AND ASSUMPTIONS 81 VI. THE ORGANIZATION OF THE KANSAS CITY LIVE STOCK EXCHANGE . • • • • 93 VII. ADMINISTRATION AND REFORM • . • . • 116 VIII. RESISTANCE TO REGULATION FROM THE SOUTHWEST . • • . • • • . • • 132 IX. AMERICAN LIVESTOCK COMMISSION COMPANY • • • 154 X. FINANCING THE CATTLE TRADE OF THE SOUTHWEST • • . • . o • • • • • • • • • 172 XI. THE WICHITA CATTLE LOAN COMPANY . • • 191 XII. TWENTIETH CENTURY TRENDS . 209 XIII. CONCLUSION •. o • 225 A SELECTED BIBLIOGRAPHY o 233 vi LIST OF TABLES Table Page I. Numbers and Percent of Cattle and Hogs Marketed by Commission Firms October 1885 • • • • • • • • . • • . • 53 vii CHAPTER I INTRODUCTION An organizational revolution occurred in the United States in the latter half of the nineteenth century. Historians have recognized the era as one of combination and merger of business organizations in the industrialized sections of the United States. In that sector the transportation and communications revolution resulted in the creation of large industrial firms by the 1880s. In fact, the railroad and telegraph companies were the first modern business enterprises in America. As a consequence, the changes concentrated business firms into a few large corporations after the turn of the century. Inevitably, this revolution led to the impersonalization of American society, and a search for new ways to regulate the American economy. 1 1For a general treatment of these trends see Robert H. Wiebe, The Search for Order, 1877-1920 (New York: Hill and Wang, 1967}; for a review of the literature see Louis Galambos, "The Emerging Organizational Synthesis in Modern American History," Business History Review 44 (Autumn 1970) :279-306, and "Technology, Political Economy, and Professionalization: Central Themes of the Organizational Synthesis," Business History Review 57 (Winter 1983} :471- 493. 1 2 A similar transformation occurred in the distribution of agricultural products in the American West. Commodities exchanges reflected the trend, especially the Chicago Board of Trade, the Merchants Exchange of st. Louis, and the New Orleans Cotton Exchange. 2 Although not discussed in the historical literature, livestock exchanges also appeared in major market centers of the West. Within five years, they were organized in Chicago (1884), st. Louis (1885), Kansas city (1886), and omaha (1889). 3 Focusing upon one of those exchanges, this dissertation examines the origins and operations of the Kansas City Live Stock Exchange as well as the commission firms based there. The Exchange reformed and regulated the livestock trade of the American Southwest from 1886 to 1921. In the absence of a strong positive government, the Exchange became in essence a regulatory agency that promoted democratization of the trade rather than consolidation. 4 Historians generally associate regulation with the power the twentieth century state. But the Kansas City Live 2Emory R. Johnson, ed., "American Produce Exchange Markets," The Annals of the American Academy of Political and Social science 38 (September 1911):319-664. 3 william H. Thompson, President of the Chicago Live stock Exchange from 1888 to 1901 understood the connection between livestock and commodity exchanges. See, "Livestock Exchanges," Proceedings of the National Live Stock Association (Denver: The Smith-Brooks Printing Co., 1900), pp. 232-236. 4The Kansas City trade area varied from decade to decade, but covered primarily Missouri, Kansas, Oklahoma, southern Nebraska, eastern Colorado, northeastern New Mexico, and northern Texas. 3 Stock Exchange from 1886 to 1921 performed all the functions of a regulatory agency, at least as defined by Kenneth Davis in Administrative Law Treatise. An administrative agency, according to Davis, was an organization other than a court or a legislative body that affected the economic activities of private parties through adjudication, rulemaking, investigating, prosecuting, negotiating, settling, or informally acting. 5 Within the context of regulation, the history of the Kansas City Livestock Exchange remains within the scope of business history. Traditionally, business historians have analyzed their field either from the "robber baron" or the "industrial statesmen" perspective. These views represent sharply contrasting interpretations of the problems created by the economic growth during the late nineteenth century in the United States. A maldistribution of wealth, urban slums, farm distress, and a growing impersonalization of society accompanied the economic growth. The stewardship of the nation passed from politicians to a group of business leaders whose actions historians still evaluate and debate. Those who subscribe to the "robber baron" school have