The Myth of the Robber Barons
Page 6
In 1839, Nicholas Biddle, the former president of the Bank of the United States, lamented, "With all the materials for supplying iron in our own lands, the country has been obliged to pay enormous sums to Europeans for this necessary article. . . . This dependence is horrible." This "costly humiliation," Biddle urged, "ought to cease forever." Rails were especially needed; and, six years later, the American Railroad Journal complained: "The American iron-masters appear to consider railroad iron as unworthy of their notice. . . . Not a bar of T-rail has yet been rolled in the three great anthracite and iron districts of Pennsylvania."2
During the 1840s, Pennsylvania's Lackawanna Valley, in the northeast part of the state, would be the battleground where American independence from English iron would be fought and won. This masterpiece of entrepreneurship was largely the work of George, Selden, and Joseph Scranton, who, after much experimenting, became the first Americans to mass-produce rails.3 In doing so they harnessed talent, capital, and technical expertise from within their families and friends, investors in small towns in the Lackawanna Valley, and outsiders from New York. Two things are striking: first, the Lackawanna Valley, with its thinly scattered, low-quality ore deposits, was hardly a natural setting for manufacturing; second, in the competition for urban growth, the winning city of Scranton did not exist until the 1840s. Nearby Wilkes-Barre and Carbondale had the advantages of age and wealth, until Scranton overcame them.4
The migration of the visionary Scrantons to northeast Pennsylvania began in 1839, when William Henry, a trained geologist, scoured the area looking for the right ingredients for iron-making—water power, anthracite coal, iron ore, lime, and sulphur. He found these elements near Wilkes-Barre, the oldest, largest, and wealthiest city in northeast Pennsylvania. Wilkes-Barre's leaders, though, were cautious: they preferred to ship coal safely down the Susquehanna River, not to risk their fortunes on unproven iron. They rejected Henry's "attempts to raise a company in the Wyoming Valley [Wilkes-Barre] for an iron concern." So Henry went about twenty miles east into the wilderness of the Lackawanna Valley, and looked over the land in this area. It had some water power and, of course, lots of anthracite; he also found small quantities of iron ore and lime, so he falsely assumed they existed there in abundance.5
Playing a hunch, Henry took an option to buy 500 acres of land at present-day Scranton and built a blast furnace on it. At first he sought the necessary $20,000 for the scheme from New York and England; but the high risk of his daring experiment frightened away even the hardiest of speculators. Finding greater faith from his family, Henry received support from his son-in-law, Selden Scranton, and Scranton's brother George, both of whom were operating the nearby Oxford Iron Works in Oxford, New Jersey. Originally from Connecticut, the wide-ranging Scrantons tapped their credit lines and picked up additional capital from their first cousin, Joseph Scranton; his brother-in-law, Joseph C. Platt; and friends, Sanford Grant, and John and James Blair, who were merchants and bankers in Belvidere, New Jersey. These entrepreneurs, which we will call the Scranton group, raised $20,000 in 1840 and spent the next two years building the blast furnace and digging the ore and coal to make iron.6
Making iron, they quickly discovered, required more entrepreneurship than they had originally expected. The local ores and limestone were limited and of poor quality. They had chosen the wrong location, but it was too late to sell out and switch so they searched eastern Pennsylvania and New Jersey for the right combination of ores and limestone. As the Iron Manufacturers's Guide later understated: "The absence of anthracite iron deposits becomes a subject of curious speculation as it has been one of great pecuniary interest and was a bitter disappointment to the first manufacturers of iron with stone [anthracite] coal."7
Only the local coal lived up to expectations, and this was available in other areas with established cities closer to the lime and ore. When the Scrantons made their iron, they brought their lime and ore on boats from Danville, Pennsylvania, about thirty miles up the Susquehanna River right by the mansions on the River Common in Wilkes-Barre and over land almost twenty miles to Scranton.8
The high costs of transportation and the unexpected purchases of ore and lime almost ran the Scrantons into bankruptcy; then George Scranton came up with a plan to convert the pig-iron into nails. Such a bold venture into manufacturing would not be cheap. The need for a rolling mill and a nail factory upped the ante to $86,000. Desperate for credit, George Scranton coaxed some of this money from New Yorkers. Yet this jeopardized the family's ownership. So he placed his greatest reliance on other members of the Scranton group: long-time friends John and James Blair invested money from their bank in New Jersey, and Joseph Scranton sent funds from his mercantile business in Augusta, Georgia. By 1843, George Scranton got his $86,000, kept control within the family, and began making nails for markets throughout the east coast.9
The nail factory failed miserably. First, no rivers or rails helped market its product. Dependent on land transportation, the Scrantons transferred the nails on wagons east to Carbondale and west to the Susquehanna River and from there shipped them to other markets. Second, no one wanted the Scrantons' nails because they were poor in quality. The low-grade ores in the Lackawanna Valley provided only brittle and easily breakable nails. Faced with bankruptcy, the Scrantons contemplated the conversion of the nail mill into a rolling mill for railroad tracks. Experienced Englishmen still dominated the world production of rails in the 1840s; no American firm had dared to challenge them. After floundering in the production of nails, however, the Scrantons decided that a lucrative rail contract might be the gamble that could restore their lost investment.10
As luck would have it, in 1846, the nearby New York and Erie Railroad had a contract with the state of New York to build a rail line 130 miles from Port Jervis to Binghamton, New York. When Englishmen hesitated to supply the Erie with the needed rails, the Scrantons had their chance. They traveled to New York and boldly persuaded the board of directors of the New York and Erie to give their newly formed company the two-year contract for producing 12,000 tons of T-rails. They promised to supply rails cheaper and quicker than the British. Impressed with the Scrantons and desperate for rails, the directors of the New York and Erie advanced $90,000 to the eager Scrantons to construct a rolling mill and to furnish the necessary track.11
The construction of the mill and the making of thousands of tons of rails seemed impossible. The contract called for the Scrantons to supply the Erie with rails in less than twenty months. The Scrantons would first have to learn how to make the rails they promised to provide. Building the blast furnaces would come next. Then they would have to import some ore and much limestone into the Lackawanna Valley to make the rails. Finally, because they lacked a water route to the Erie line, they would have to draft dozens of teams of horses to carry finished rails from their rolling mills scores of miles through the wilderness and up mountains to New York, right where the track was laid. It is no wonder the New Yorkers wanted to back out at the last moment. Yet somehow, in less than a year and a half, the Scrantons did it. On December 27, 1848, just four days before the expiration of the Erie's charter, the Scrantons fulfilled their contract and completed the rail line.12
An interesting feature of the Scrantons' achievement was that hey built their rails during a time of low tariffs. Some businessmen have always argued that their government should place high tariffs on imports to protect local manufacturers against foreign competitors. Yet, in 1846, the year the Scrantons began making rails, Congress passed the Walker Tariff, which lowered duties on imported rails and other iron products from England. George Scranton actually said he liked the lower tariff for two reasons. First, the Scranton price of $65 per ton of rail was already fixed and was competitive with English prices. In any case, Scranton estimated his firm would be earning $20 per ton profit, so the tariff was not needed. Second, the low tariff meant that the Scrantons could buy their raw materials— pig iron, rolled bars, and hammered bars—more cheaply. This would
, Scranton hoped, lay the foundation for his firm to be the strongest on the continent for years to come.13
Many Americans were amazed that an iron works located in the middle of a wilderness, with no connecting links to outside markets, could build and deliver 130 miles of rails to a railroad in another state. The Scrantons did not want to have to duplicate this feat, so they did two things to improve their location: first, they started building a city around their iron works; second, they began building a railroad to connect their city to outside markets. That way they could ship rails anywhere in the country and also export the local anthracite, which could be sold as a home-heating fuel.14
With the confidence of New York investors, the Scrantons proposed two railroads: the Liggett's Gap, and the Delaware and Cobb's Gap. The Liggett's Gap line, running from Scranton fifty-six miles north to connect with the Erie at Great Bend, would permit Scranton to supply coal to the farms in the Genessee Valley in upstate New York; the Delaware and Cobb's Gap route, running sixty-four miles east to the Delaware River at Stroudsburg, would give the Scrantons a potential outlet for coal to New York City. By backing two lines, the Scrantons gave themselves two markets for Lackawanna Valley coal. The building of a railroad, then, was a logical sequel to the Scrantons' superb iron works. The railroad itself became a market for Scranton iron, it provided an outlet for Scranton coal, and it promoted trade for Scranton city.15
Building these two railroads was no cinch. Some of the terrain was mountainous: even after using gunpowder to level the hills, the grade was still steep (eight feet to the mile) in places. Also, George Scranton had to negotiate some delicate right-of-way problems with farmers along the rail route who were overvaluing their land. Of course, the Scrantons were using their own homemade rails for the line, but this still ran into costs. For all of this, the Scrantons needed more New York capital, but they had to be careful. They wanted to be entrepreneurs, not pawns of the New Yorkers. The Scrantons had to make sure they retained a guiding interest in their projects. This they did. The two railroads were surveyed and built from 1850 to 1853; they both were consolidated into one line, the Delaware, Lackawanna, and Western Railroad (hereafter Lackawanna Railroad) with George Scranton as its first president. In 1853, flushed with success, the Scrantons also incorporated their iron works as the Lackawanna Iron and Coal Company (hereafter Lackawanna Company) with $800,000 in stock; they elected Selden Scranton as president.16
The building of America's premier iron works and railroad was an amazing feat of collective entrepreneurship. The Scranton group became unified behind a vision of mass-produced rails, the creating of a city, and the laying of rails from its borders east and north to outside markets. As individuals, the members of the Scranton group had few of the skills and little of the capital needed to fulfill this vision; but collectively they did. They had to have outside cash, but their confidence and unity of purpose impressed New York investors and convinced them the Scrantons could do the job.17
Not everyone wished the Scrantons well. And this made their success story even more remarkable. First, there was the generally negative reaction from leaders in Wilkes-Barre, who thought the rise of a new city would threaten their hegemony in northeast Pennsylvania. The Scrantons logically tried to secure loans in Wilkes-Barre, the oldest and largest city in the area. But the businessmen there rarely helped, and they often hurt. For example, in the 1850s the Scrantons tried to get a charter for their railroad from the state legislature; Wilkes-Barre's able and influential politicians thwarted the Scrantons because the new rail line threatened Wilkes-Barre's trade dominance along the Susquehanna River through the North Branch Canal. Referring to Wilkes-Barre as "the old harlot of iniquity," a concerned lawyer advised the Scrantons that those associated with the North Branch Canal in Wilkes-Barre "all make common cause against [the] Liggett's Gap [Railroad]."18
Not only did politicians in Wilkes-Barre hamper iron production and delay rail completion, they prevented the Scrantons' emerging industrial city from becoming a county seat. The new city of Scranton happened to be situated in the eastern end of Luzerne County. So wily politicians in the county seat of Wilkes-Barre used statewide influence to delay for decades the creation of a new county. Even the prestige and influence of George Scranton in the Pennsylvania Senate and U. S. Congress during the 1850s could not force the division of Luzerne County. So while the Scrantons were trying to promote their new town as a Mecca of industrial opportunity, the town's administrative business was being diverted to the county seat of Wilkes-Barre. Summarizing Wilkes-Barre's general "policy of obstruction," Benjamin Throop observed that during all these early struggles, Wilkes-Barre had the advantage. The Lackawanna Valley was poor, and had its fortune still to make; Wilkes-Barre had inherited considerable wealth from its former generations. The public-spirited men here were, most of them, new-comers and unknown. Those of the opposition had prestige and influence.19
Possibly even more damaging than the opposition from Wilkes-Barre's politicians was the hostility from many local farmers near Scranton. These old settlers liked the prospects of improved transportation to get their crops to market, but many did not want to see the "machine" transform their "garden" into an industrial community.20 One local observer described their fears sarcastically as follows:
There were then, as there are yet, and as there always will be, a debilitated, but croaking class of persons who by some hidden process manage to keep up a little animation in their useless bodies, who gathered in bar-room corners, and who, with peculiar wisdom belonging to this class while discussing weighty matters, gravely predicted that "the Scrantons must fail!"21
Even before the Scrantons arrived, several of these farmers had formed a committee and denounced "blackleg drivellers, in the shape of incorporated companies."22
The local squabbles with the old settlers regularly kept the Scrantons from fully attending to their iron works. Recognizing this problem early, the Scrantons donated land and labor to help build the old settlers a church. Through a company store, the industrialists enthusiastically traded goods and produce with nearby farmers. Desperate for credit, though, the Scrantons were barely surviving in the early 1840s and had to seek extensions on local loans. At one point William Henry wrote, "We have not twenty-five cents in hand. . . . The credit of the concern [is] impaired." He added, "This suspense and uncertainty is worse where our credit is concerned than almost any other mode of proceeding." George Scranton felt the same way. At one point he described himself as being "worried most to death for fear we can't meet all [credit obligations]. ... I cannot stand trouble & excitement as I could once. I don't sleep good. My appetite is poor & digestion bad. ... If we can succeed in placing [the] Lacka[wanna iron works] out of debt it would help me much. . . ." During some of the Scrantons' darker moments, "every petty claim of indebtedness was urged and pressed before the justices of the township with an earnestness really annoying."23
Disputes with the old settlers over land and credit, then, persisted as the Scrantons verged for years on bankruptcy without successfully producing nails or rails. At one extreme, a vindictive local merchant threatened to "break. . .down" the Scrantons' company store by "selling goods very cheap"—if necessary by "giving away his goods." At the other end, legend has it that after the Scrantons' brittle nails were rejected by New York merchants, Selden Scranton immediately sold quantities of the "practically worthless" product to unsuspecting old settlers. Such feuding seems to have been commonplace; even when the Scrantons finally received the rail contract from the Erie, many farmers withheld the use of their mules and horses to prevent delivery of the rails; others charged exorbitant prices.24 Under these conditions, one can hardly argue that the location of Scranton was inevitably destined for urban glory. It was not.
When the iron works and the railroad succeeded, the Scrantons then promoted the growth of their new city. Their correspondence shows that they dearly viewed industrial and urban growth as symbiotic. Their investment in real estate and housing
multiplied in value after the success of their iron works and the arrival of a railroad. The Scranton group originally bought a 500-acre tract for $8,000 in 1840. As mere coal land that acreage was worth at least $400,000 by the mid-1850s. As improved land much of it was worth even more. The Scrantons had laid out streets, sold lots, and built mansions for themselves and company houses for their workers.25
Unlike the leaders in Wilkes-Barre and Carbondale, the Scranton group created an open environment for their city and actively recruited investors to come. To do this effectively, they went to the state legislature in 1866 and secured wide city limits of almost twenty square miles, which at that time included mostly farm and timber-land. They incorporated this large space to fulfill their vision of their city's future, in which they saw many more industries, homes, and parks. The space was needed to plan all this properly.26
Wilkes-Barre's leaders, by contrast, wanted to limit immigration and preserve their closed society. They intentionally settled for small city limits of 4.14 square miles and did not even incorporate this much land until five years after the Scrantons did so. This made urban planning in Wilkes-Barre difficult, and it also hindered the preventing of fires and the controlling of epidemics.27
Carbondale became an even more dreadful example of urban planning. Most industrial cities in the nineteenth century were hardly paragons of cleanliness and safety, but Carbondale was among the dingiest. Fires periodically gutted whole sections of the city, destroying property, buildings, and lives. Mines caved in from time to time; the most serious collapse buried sixty miners (fourteen died) in forty acres of subterranean caverns. Floods were also a threat. One flood, caused by a poorly planned reservoir, surged through the main street, filling the mines, taking lives, and annihilating buildings and houses.