Warren CH2:Layout 1 7/12/08 4:15 PM Page 15 2 THE ESTABLISHMENT AND GROWTH OF IRON AND STEEL MAKING IN BETHLEHEM The town of Bethlehem, Pennsylvania, was founded in 1741 by Count Zinzendorf, the leader of a group of Moravian settlers. By the mid-nineteenth century,the clearing they had made in the forest by the side of the Lehigh River had become a town of some three thousand people and a service and process- ing center for the surrounding agricultural area, with flour milling, brewing, tanning, saw milling, agricultural implement manufacturing, and so on. As late as spring 1852, C. H. Schwartz, traveling to Bethlehem from Doylestown, twenty miles to the south, was impressed by its unspoiled surroundings. Of the country- side south of the river he wrote, “Its richness was unsurpassed in my knowledge. The famous Saucon Valley was below me at one time, a veritable paradise.”1 In fact, well before then, bulk transport developments had begun to change the economy and character of the area. The Lehigh Canal had reached the south- ern edge of Bethlehem in 1829. The business expansion that followed was cut 15 © 2008 University of Pittsburgh Press. All rights reserved. Warren CH2:Layout 1 7/12/08 4:15 PM Page 16 short by the panic of 1837 and then by a general depression of trade until 1844. Local reaction to these threats to the traditional way of life of the town took a form that would shape its future distribution of industry and other urban func- tions. In 1847, the Moravian congregation sold a tract of land to C. A. Lucken- bach. In this area, extending from the Lehigh toward South Mountain, were four large farms. Soon to be known as South Bethlehem, it would receive the larger-scale, nuisance-creating activities encouraged by the new transport facili- ties, while the old town largely retained its dignified ways. By 1855, the Lehigh Valley Railroad had more decisively altered the spatial relationships of the town, and development soon followed. The first important manufacturing activity was zinc smelting, which drew on local calamine deposits. It led to bigger things, both in the scale of manufactur- ing and, much more importantly, in methods and in the entrepreneurial qualities it brought into the area. By 1854–1855, control of zinc mining and smelting op- erations had been incorporated in the Pennsylvania and Lehigh Zinc Company. This firm was managed by a Philadelphian and member of the Society of Friends who had received some chemical training and, as time was to prove, possessed great abilities in marketing, finance, and industrial promotion. At this time, Joseph Wharton was in his late twenties, a prototype of the new men who would transform the economy of the nation. He would be closely involved in the development of the lower Lehigh valley for half a century. When in the panic of 1857 the zinc company was forced into receivership, Wharton leased it, reconstructed it, and made it profitable. During that year, his commitments also extended into what would become a much bigger project. During the 1850s, iron ore was discovered in the Saucon valley. An unsuc- cessful attempt was made to attract a government foundry to the area. Then, on 8 April 1857, the Saucona Iron Company was incorporated to build an an- thracite iron works at Bethlehem, near the ore, and also favorably situated at the junction of the Lehigh Valley Railroad and the North Pennsylvania Rail- road, the latter providing a link to Philadelphia. The initial idea came from a local merchant who had leased the Saucon ore beds: Augustus Wolle, one of the main investors in the Catasauqua Ironworks seven miles farther upriver. With two other local business leaders, C. Brodhead and C. W. Rauch, he was granted a charter for the new iron company. Wharton and Asa Packer of the Lehigh Valley Railroad Company were also involved. The promoters intended to make pig iron for sale. However, it was soon clear that they had chosen an 16 PART I. The Bethlehem Iron Company © 2008 University of Pittsburgh Press. All rights reserved. Warren CH2:Layout 1 7/12/08 4:15 PM Page 17 unpropitious time. The economic depression in 1857 that caused the failure of the zinc company also resulted in that year’s production of anthracite iron falling 12 percent below the record level of the previous year. Output fell a fur- ther 7.5 percent in 1858. In such circumstances it proved impossible to sell suffi- cient stock in Saucona Iron, and the project fell into abeyance. As the iron trade recovered in 1859 and then surged on to new heights, the scheme was revived, but it now took a form different from that of the existing large iron works in the valley, a change mirrored in a new title: the Bethlehem Rolling Mills and Iron Company. Its first board, formed in June 1860, was again largely of local men, but with an admixture of regional railroad interests: Alfred Hunt of Philadelphia as president, with directors Asa Packer, who had first served the Lehigh Coal and Navigation Company and eventually was president of the Lehigh Valley Railroad, J. T. Johnston of the Central Railroad of New Jersey, John Knecht of Shimerville, and three Bethlehem men, Augustus Wolle, Charles W.Rauch, and their secretary, Charles B. Daniel.2 There seem to have been two reasons for adding finishing operations to the blast furnaces of the original scheme. One was to spread risks rather than be wholly dependent on sales of pig iron; the other, which gave this intention its particular shape, was the inclusion of a new promoter. Packer brought in as chief engineer and general superintendent a former civil engineer with the canal company, Robert Heysham Sayre. The LVRR had purchased rails from the Lackawanna Iron and Coal Company, but that company was associated with rival railroad interests and Sayre decided that his railroad needed a reliable alternate source of supply. He therefore pressed his fellow Bethlehem directors to install rolling mills. In spring 1861, another change of title created the Beth- lehem Iron Company. Before this occurred, Sayre had made another vital contri- bution to Bethlehem Iron by securing for it the services of one of the outstanding men in the iron business. After learning the trades of blacksmithing and machine work in the late 1830s, in 1846 twenty-four-year-old John Fritz worked on the construction of the new rolling mill in the iron works at Norristown. In 1849, he helped build a new iron plant and rail mill at Safe Harbor on the lower Susquehanna. Then, after a short time in a small foundry and machine shop at Catasauqua, he moved away from the anthracite iron district to western Pennsylvania, where he became general superintendent of the Johnstown works of the Cambria Iron Company, whose blast furnaces would use coke. There, in addition to molding the whole Establishment and Growth 17 © 2008 University of Pittsburgh Press. All rights reserved. Warren CH2:Layout 1 7/12/08 4:15 PM Page 18 Robert H. Sayre. Courtesy of the National Canal Museum, Easton, Pennsylvania. of a major plant into a viable operation, he demonstrated highly inventive abil- ities in pioneering the three-high rolling mill, which increased efficiency and reduced costs. Yet, despite successes as plant supervisor and technological in- novator, his relations with the Cambria directors were far from harmonious. The latter provided an opportunity that Sayre proved adept at exploiting to the advantage of Bethlehem Iron. In spring 1860, he visited Fritz in Johnstown. Then on 1 May Sayre wrote to him. He explained that he could quite under- stand how Fritz might find it difficult to leave an establishment he was so iden- tified with, but he believed that the Bethlehem area might suit him far better, and that a move would not affect his reputation: “You say truly that a man’s merit is measured by his success.” They could offer great opportunities: “The establishment of a good mill at this place producing a first rate quality of rails will establish your reputation in a section of the country that is destined to be in my opinion the most populous and wealthy in this or any other state. I predict a growth for it that will surprise its most sanguine citizens.” He mentioned that Rauch and Daniel concurred with Fritz that they needed sufficient capital to 18 PART I. The Bethlehem Iron Company © 2008 University of Pittsburgh Press. All rights reserved. Warren CH2:Layout 1 7/12/08 4:15 PM Page 19 purchase their machinery at cash prices and agreed that Fritz should have com- plete control: “I tell them that a rolling mill is like a man of war, it must have but one captain.” Sayre ended on a persuasive note: “Hoping to have the pleas- ure of seeing you soon and of hearing you say that you are coming to dwell among us, I remain yours truly, Robert H. Sayre.” Fritz arrived in Bethlehem on 5 July 1860, and two days later Augustus Wolle sent him the resolution made at a board meeting that day that appointed him superintendent and manager at a salary of four thousand dollars a year. In addition, on 1 July 1861 he would receive forty shares in the company and twenty more on 1 July for each of the three years after that. These shares were in exchange for his agreement to the free use of his patent for a three-high rail mill. It indicated that a vital decision had already been made that would differentiate the new Bethlehem Iron Com- pany from its near neighbors and from the majority of those in the wider an- thracite region.