COPPER CAPITALISM: THE MAKING OF A TRANSATLANTIC MARKET IN METALS, 1870-1930 by NATHAN DELANEY Submitted in partial fulfillment of the requirements For the degree of Doctor of Philosophy Department of History CASE WESTERN RESERVE UNIVERSITY April 2018 ii Copyright © Nathan Delaney All rights reserved. iii CASE WESTERN RESERVE UNIVERSITY SCHOOL OF GRADUATE STUDIES We hereby approve the dissertation of Nathan Delaney, candidate for the degree of Doctor of Philosophy*. Committee Chair David Hammack Committee Member Kenneth Ledford Committee Member John Flores Committee Member David Clingingsmith February 23, 2018 *We also certify that written approval has been obtained for any proprietary material contained therein. iv CONTENTS LIST OF TABLES v ACKNOWLEDGMENTS vi ABSTRACT viii INTRODUCTION 1 CHAPTER 1. THE FIRST GLOBAL COPPER ECONOMY 33 The Origins of the LME and Metallgesellschaft CHAPTER 2. THE DEFEAT OF A COPPER CARTEL, 1887-1889 69 Secrétan, Rothschild, and the London Metal Traders CHAPTER 3. THE TRANSATLANTIC COPPER, 1890-1914 105 Metallgesellschaft in America and Europe CHAPTER 4. THE COPPER TRADE DURING THE WAR YEARS 142 Shifting from Markets to Hierarchy CHAPTER 5. THE POST WAR COPPER TRADE 176 The Arrival of Big Business in Copper CONCLUSION 203 BIBLIOGRAPHY 206 v LIST OF TABLES PAGE 1.1 Germany, US, and UK Real Copper Prices, 1870-1887 40 1.2 German Copper Production and Consumption, 1879-1890 41 1.3 Copper Supply in Great Britain, 1854-1884 44 1.4 US Foreign Trade Balance in Unmanufactured Copper, 1864-1882 57 1.5 Nominal (%) Difference NY and London, 1870-1880 58 1.6 US Copper Production, 1875-1887 65 2.1 LME Copper Spot and Futures Prices, 1880-1890 81 2.2 Copper Stocks of Britain and France, 1887-88 89 2.3 London Price, Backwardation 1887-1889 100 2.4 Metallgesellschaft Net Earnings, 1881-1910 101 3.1 Concentration of Mine Ownership, 1890-1912 108 3.2 LME Spot Copper, 1890-1900 126 3.3 Copper Consumption Leaders, 1892-1913 138 5.1 Anaconda Assets and Net Earnings, 1920-1932 183 5.2 US, Germany, GB, Fr Copper Consumption Per Capita, 1921-1929 186 5.3 US Copper Consumption by Industry, 1921-1929 186 5.4 LME Copper Price, 1926-1930 193 5.5 LME Price Spreads, 1926-1930 193 5.6 Top 5 Copper Companies Assets and Profits, 1927-29 194 vi ACKNOWLEDGMENTS I have many people to thank who helped me finish this dissertation. Within the history department at Case Western Reserve, I must first thank four people who have given me so much of their time and sound advice. David Hammack, my Doktorvater, taught me the virtues of being a splitter, not a lumper. He also stressed the importance of historical context and the role of intuitions at a time when such concepts were out of fashion. Ken Ledford, was a mentor and Betreuer of the highest caliber. I owe him a great deal for his encouragement to explore the intersections of German and American history. John Flores also taught me the value of transnational interpretations of the past, and importance of leaving no stone unturned in the pursuit of truth. David Clingingsmith of the CWRU Economics Department was gracious with his time and gave me very useful criticism that made the dissertation much stronger as a result. So many others in the department and around the campus supported me both financially and socially and made coming to work a pleasure. Walking down from the Heights to campus, putting my lunch in the fridge and chatting with John Broich about the craft of history or work out routines was always a great way to start the day. Running into Alan Rocke, Jay Geller, Ted Steinberg, Peter Shulman, or Mariam Levin often resulted in laughs and lessons. John Grabowski is a Cleveland institution and taught me a great deal about the rich history of my adopted city. My graduate colleagues were a joy to be around – dull moments were rare. Thank you, E.P Miller, Corey Hazlett, Sam Duncan, John Baden, and vii Jon Kinser for your insights and recommendations. Scotty really did not know. God bless Mike Metsner for putting up with all my jokes and bullshit in the ECH office – an office we appropriated for many years (thank you John Grabowski for not kicking us out!). I owe Jesse Tarbert big time for reviewing so many course essays, journal articles, and thesis chapters. Jess will always be an intellectual advisor and a great friend. Outside of Cleveland, I have dozens to thank. Todd Michney who taught me how the game works. Todd is a true professional and an innovative thinker. Thanks to Sebastian Conrad of the Free University Berlin for sponsoring my DAAD Research Grant application. Thank you to Hartmut Berghoff for the opportunity to work at the GHI Washington DC as a research fellow. Thanks to Tim Rupli for housing me in DC while I was researching there. Helping out on the Hill was a pleasure, so were the great hunting adventures in MD and VA on the weekends. Thank you to the archivists all over North America and Europe who gave me money, time, and advice. Special mention to the staff at the Hessisches Wirtschaftarchiv at Darmstadt where the Metallgesellschaft business papers are housed. Also thank you to the excellent legal and archival staff at Freeport McMoRan for permitting me to review the American Metal Company records. Most importantly, thank you to my family for all their support over the years. Above all thank you to the love of my life, my wife and best friend, Maureen. viii Copper Capitalism: The Making of a Transatlantic Market in Metals, 1870-1930 Abstract by NATHAN DELANEY THE FOLLOWING DISSERTATION analyzes the development of the transatlantic copper market at a time when copper was a key ingredient of the second Industrial Revolution (1870-1930). Its findings suggest that international metal trading companies (in conjunction with the London Metal Exchange) functioned to effectively check oligopolistic efforts by large copper producers during an era when other producer industries like oil and steel came to be defined by such competition. Time and time again, dominant producers of copper (e.g., Anaconda, ASARCO, and Rio Tinto) sought ways to manipulate supply and prices to their advantage, and time and time again, nimble trading firms – most notable among them Metallgesellschaft – were well positioned to undermine such anticompetitive efforts, and profit in the process. More than just a capitalist game of cat and mouse, the producer v. trader struggle over profits and copper supply is a novel insight as it explains why cartels and monopoly-minded firms struggle to achieve super-normal profits when subjected to the competitive dynamics of futures markets. While the intense competition emanating outward from the London Metal Exchange defined the state of the copper trade through 1914, economic nationalist policies and increased vertical integration in the industry allowed American producer’s to wrestle control of the trade from the ix international dealers, which ultimately fed concerns of mineral insecurity among European nations by the 1930s. 1 INTRODUCTION AT THE HIGHEST LEVEL, this work engages a fundamental economic question related to international trade and market organization, namely how are commodities like copper, which are vital to economic progress and human welfare, best distributed? The following case study of copper between the mid- nineteenth century and World War II offers an example in which a public, relatively open market proved more effective than the vertically-integrated corporation. The chapters to follow will show how this was so in each of several distinct periods, and will offer an explanation of the reasons why the copper market and its firms developed as they did at the times they did. In pursuit of this goal, the dissertation analyzes the industry as it expanded in the world’s three largest economies, the United States, Great Britain, and Germany. It does so, through the lens of the most influential multinational metal trading company at the time, Metallgesellschaft A.G. Since the commencement of Industrial Revolution, modern western states have come to rely on a diverse and ever increasing supply of commodities. Atop the list of durable commodities most important to the first industrial revolution were undoubtedly coal, iron, timber, wheat, and cotton. Such goods were essential inputs for manufacturing groups at the fore of the industrialization process. With the development of electric power and advancements in communication and transportation technologies, the list of commodities needed 2 to sustain this development grew to include the likes of steel, petroleum, rubber, and copper.1 In order to gain and maintain access to needed commodities, many nations relied on merchant-traders to develop supply chains linking producers with consumers from around the world. Throughout the nineteenth century, the largest consumer markets for these materials were in the Western Europe.2 By 1870, European demand began to outpace domestic, regional supply. While some commodities such as coal, iron ore, zinc, and bauxite could be produced from Continental sources at significant scale, other raw materials had to be imported from abroad. Some European states – most notoriously Britain, France, Spain, Belgium, and Germany – overcame certain raw material shortcomings through conquest and colonization.3 However, not all materials were gotten through colonization. In many instances, supply chains were sustained through liberal trade among nations on 1 Steven C. Topik and A. Wells, Global Markets Transformed (Harvard University Press, 2014). 2 Most notably the economies of Great Britain, Germany, France, Austria-Hungary, and Italy. The US was the largest consumer of raw materials, but collectively, Western Europe took in more. Jan De Vries, The Industrious Revolution: Consumer Behavior and the Household Economy, 1650 to the Present Cambridge University Press, 2008).