Books by John Chamberlain THE ENTERPRISING AMERICANS THE ROOTS OF CAPITALISM THE AMERICAN STAKES FAREWELL TO REFORM THE ENTERPRISING AMERICANS The Enterprising Americans: A Business History of the United States BY JOHN CHAMBERLAIN INSTITUTE FOR CHRISTIAN ECONOMICS TYLER, TEXAS , 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 Published by The Institute for Christian Economics P.O. Box 8000, wler, TX 75711. For Ernestine, who understands the likeness of all creative people Contents Author's Preface (1991) IX Publisher's Foreword, Gary North XI Introduction XVII 1. Free Enterprises Before the Revolution 1 2. Businessmen Join in an Unbusinesslike War 24 3. The Quest for Capital and the Sprouting of Invention 43 4. Early America Goes Places 63 5. Frontier and Factory 81 6. The Pre-Civil War Speedup 100 7. The Civil War and Its Aftermath 119 8. The Gilded Age 140 9. The Rise of the Money Power 163 10. The Age of Edison 185 11. F.O.B. Detroit 202 12. The New Frontier of the Depressed Thirties 223 13. The Modern World of Enterprise 243 Bibliography 265 Index 273 VII Author’s Preface (1991) w HEN I wrote The EnterprisingAmericans back in 1959 and 1960, which ran in thirteen consecutive issues of For[une Magazine, the American businessman was without honor. He was a Robber Baron, or, if not that, a Babbitt, at best likeable but crude. These stereotypes annoyed my friend John Davenport, a managing editor at Fortune. As I have told the story in my original introduction to the book, he had been looking for a business history to give his many daughters. They had asked for something more than Matthew Josephson’s The Robber Barons or the many histories that looked on trade with disdain. I was quite ready to volunteer as a cicerone for John Davenpo~t’s girls, for I had experienced years of forced immersion in corporation stories for Harry Lute, who had started Fortune in the depression in hopes that he might make business respectable. The book that I produced must have started something, for Har- per and Row, its publisher, kept it going for almost thirty years as the word “enterpriser” gave way to the Frenchified “entrepreneur.” I revised it once to catch up with new developments in electronics, the spread of shopping malls, and the birth of computers. Silicon Valley was something definitely American, with new business sprouting from garages and backyards. Silicon Valley gave the microchip to Japan, but it is still improving on it for homegrown uses. The question naturally arises: why not further revisions? One reason for not continuing revisions ad infinitum is that the Ameri- can example has proved all too contagious. It is now “The Enter- prising World.”General Electric, Thomas Edison’s old company, thought it had an inside track on all household appliances. But it found it couldn’t compete with single-minded Koreans in making and marketing microwave ovens. It had to work overtime to pre- serve its lead in compressors for refrigerators. A big chapter in The Enterprising Americans is titled “F.O.B. Detroit.” But Detroit is struggling to sell in competition with SAAB 1x x AUTHOR’S PREFACE and Volvo (Sweden), Honda, Nissan, and Toyota (Japan) and Mer- cedes (West German y). American steel is being ousted from Detroit cars by plastics. Fortunately, we have a Du Pent company to make plastics. Boeing of Seattle is still Number One in jetliner aircraft production, but the Europeans have been closing fast with their Air- bus. The Concorde is a European experiment. So, what we have now is a world-wide sprawl. The Entrepreneur is everywhere. Americans can take the credit for it, but it means that we will be fighting to keep old advantages and gain new ones. When entrepreneurship moves into Eastern Europe and Gorbachev’s Russia, as it is about to do, we will really have to hope to hold our own in the Twenty-first Century. If Red China ever learns, by way of Taiwan, the world will be a very different place, and far richer. Now, if we can just persuade the “greens” to be patient while we search for non-bankrupting, market-based incentives and new technologies to clean up our environment. John Chamberlain (1991) Publisher’s Foreword Gary North A MERICANS’ attitudes regarding the moral legitimacy of business ebb and flow, generation by generation. When John Chamberlain wrote this classic history of American business in 1960, the attitude of American intellectuals toward business was almost universally skeptical, when not actually hostile. The only major exceptions to this rule were on the college campus – and really only at the best col- leges – where a handful of innovating scholars were beginning to revolutionize the study of American economic history, men such as the present “dean” of American business historians, Thomas C. Cochran. They understood the magnitude of the achievements of American entrepreneurs in a nation which long has enjoyed com- parative freedom from government intervention into markets. What is remarkable in retrospect is how well (and how early) John Chamberlain told essentially the same story, but in the language of the journalist rather than the college professor. The Enterprising Americans was itself an act of intellectual entrepreneurship. It pioneered a new vision of the American past. By the mid-1970’s, the “new” economic historians’ revision of American economic history had begun to penetrate the thinking of a growing number of conventional historians, at least the younger ones. A reappraisal of American business history was later paral- leled – I would even say encouraged – by the influence of President Reagan’s moving rhetoric in favor of economic freedom, coupled with seven years of economic boom (following the sharpest eco- nomic decline since 1940, in 1981-82). Business in the Reagan years generally had a good press. Even the intellectuals had to admit that things were turning out better than they had expected. But the story of the seven lean years that follow the seven fat ones is a familiar one in man’s economic history. The partiai break- down of the “junk bond” (higher risk, higher interest rate) market in 1989, coupled with the growing scandals of the faltering savings and loan industry – an industry subsidized into irresponsibility for dec- X1 XII PUBLISHER’S FOREWORD ades by federal loan guarantees – have cast a darkening shadow over public optimism regarding business. It may be, as political ana- lyst Kevin Phillips is saying in 1990, that an anti-business political reaction is getting ready to hit, especially if the U.S. economy stumbles into recession, inflation, or both. (Ironically, in late 1989, Eastern Europe and even segments of the Soviet Union rushed to throw off the chains of Communism and join the enterprising West.) We have seen similar shifts in public opinion in the past. In the early nineteenth century, the attitude of most Americans toward business and enterprise was overwhelmingly positive. America was seen as a revolutionary, historically unprecedented land of oppor- tunity. Reality actually matched imagination; America remained just such a land throughout the nineteenth century, as is testified to by the millions of immigrants who sailed into Boston and New York harbor after 1847, followed by the flood that steamed in after the Civil War. 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.