by T. J. Stiles
Historian Alfred D. Chandler Jr. famously referred to the rise of the large business enterprise—a rise led by the railroad corporation—as a “managerial revolution” in American business. The demands of a geographically sprawling railroad with thousands of employees necessitated the creation of a bureaucracy of salaried, professional managers; these managers imposed a “visible hand” on economic decisions that remade the smaller, simpler market economy of old. By creating one of the largest railroad companies the world had ever seen, Vanderbilt would directly shape this business transformation. But the sheer size of his enterprises would give him a larger cultural significance. He operated on an unprecedented scale, amassing some of the first interstate corporations in American history, which gave him a chokehold over the nation's arteries of commerce. The gigantic entities he helped pioneer would overshadow forever after the old landscape of individuals and small partnerships. They would also infuse American life with an institutional, bureaucratic business culture—what scholar Alan Trachtenberg calls the “incorporation of America.”8
Vanderbilt would emerge as the first great icon of this revolution. This self-taught native of the eighteenth century would masterfully play the instruments of the corporation to gather unparalleled power in his own hands and contribute to a stark polarization of American society. Yet his ascendancy can hardly be dismissed as a curse. He would also create vast new wealth and forge one of the most efficient, lowest-cost transportation routes in the world, speeding American economic growth and opening new opportunities for investors and consumers. His contemporaries would have good reason to mark his rise as the start of a new era—and to give his name to it.
How did he do it? Why did he do it? Observers typically have accepted the simplistic formula that he suddenly realized that railroads, not steamships, were the technology of the future.9 In truth, what he started in 1863 emerged naturally from his earlier career. He had been embroiled in railroads since the 1830s, served as the Stonington's president in the 1840s, and his involvement in the industry had increased in the 1850s. But too often writers have credited him with deep-laid plans of conquest, a systematic scheme to build an iron Rome.10 There is another interpretation that better fits the unknowability of the future before it becomes the past, an interpretation more complimentary, perhaps, of the Commodore's abilities. Though he was an excellent planner, he was still more accomplished as an improviser, a master of the unpredictable rough-and-tumble of business combat. He possessed a keen eye for strategic opportunities in his opponents' tactical errors, for turning successful skirmishes into full-blown campaigns. When he first started, he had little inkling of what he eventually would accomplish.11
The irony of this, the most successful phase of Vanderbilt's career, is that he would resist each of the battles that brought him to new heights of wealth. He would consistently pursue diplomacy with connecting railways, accepting war only as a last resort. Contented with his realm, he would conquer a neighbor in order to eliminate its harassment of his domain. New conflicts with new neighbors would follow, leading to further conquests, until he gained a vast, consolidated kingdom—much as the Caesars pressed their boundaries forward to pacify the barbarian tribes that always lay beyond.
These epic wars of conquest began humbly, with what might be called a hobby. In 1863, he cocked an eye at the most bedraggled railroad in New York: the Harlem, the benighted line that he twice had rescued from bankruptcy. His initial interest in the company need not have concerned the public at all, except that it led him into a conflict with one of the great perils that plagued American democracy in the 1860s, that of government corruption. The elected officials of New York flapped around what they assumed to be the mere corpse of a company, each looking to tear off a piece for himself. Vanderbilt would not let them. The origins of his empire, then, lay not in his godlike foresight, but in his determination to punish the greed of a few foolish men.
ON FEBRUARY 16, 1863, Cornelius Vanderbilt wrote to former governor Edwin D. Morgan to decline a request to stand as an incorporator of a hospital for invalid soldiers. “I feel it a duty I owe myself to keep my name aloof from any association with public acts granted by legislative bodies,” he wrote, “inasmuch as whenever my name has appeared before such bodies, without any regard to the justice of the object, it has been looked upon as a speculation, and with an eye of jealousy.” Vanderbilt's concern for his personal honor is striking, and his wish to reduce his visibility even more so. “At this late day,” he added, “I am desirous of keeping myself aloof from any public transaction of any kind or nature.”12
This sentiment typified the Commodore's attitude toward both charitable bodies and his public image; and perhaps it reflected his desire to avoid any connection with the disreputable state legislature. But this attempt to distance himself from speculation would prove highly ironic. Even as he dictated this letter, the current of events carried him into an operation that would launch his career as a railroad tycoon through the greatest speculation to date.13 It would center on the New York & Harlem Railroad.
“It is not so big a road,” Vanderbilt remarked six years later. “It is a small thing, with a little capital of only about $6,000,000” ($5,772,800, actually). A small thing! Only in comparison to other railways could a business worth several million in the 1860s be considered “not so big.”14 And only in comparison to the Commodore's fortune, of course. But Wall Street agreed with his judgment, on the grounds of Harlem's potential as well as its size. New York State's two largest railroads dwarfed it, the Erie having a capital stock of just under $20 million at par, the New York Central just over $24 million. Its business suffered grave weaknesses, for it carried almost no through freight from the West, apart from some cattle, due to steep grades north of Manhattan. Even though Vanderbilt had helped reduce its floating debt, it still had trouble meeting expenses. “Of all the active railway shares dealt in at the board, the Harlems probably possess the least intrinsic value,” wrote the New York Herald on March 25, 1863. “The net earnings last year—which was an extraordinarily good one for all roads—were $473,401,” about equal to the interest on its $6.7 million in bonds. “No one believes that the road can, for ten years to come, pay anything” in dividends.15
The Harlem was a peculiar line in many ways, in part because it had been chartered in 1831, when railroads were still regarded as an unproven experiment. For example, the par value of each share was set at $50, half the standard $100 for an American corporation (though the press still reported changes in its price as 1 “percent” for each dollar, as with other stocks). It was a hybrid road, both a horse-drawn streetcar line and a steam-locomotive railway. Trains ran down the Harlem 130 miles from Chatham Four Corners or came in from New England over the New York & New Haven Railroad, crossed the Harlem River on a bridge, and rolled down Fourth Avenue to Forty-second Street. They entered a tunnel dug under Murray Hill (and covered over with parks, all at the expense of the railroad), rolled out ten blocks south, and continued into the Harlem depot at Twenty-sixth Street, a structure with crenellated walls that rather resembled a castle. There the trains interchanged passengers with the horse-drawn streetcars, which went as far down as the city hall via the Bowery. For years the company had fought city ordinances, passed at the urging of wealthy Murray Hill residents, to stop the locomotives north of the tunnel. Fearing an uptown creep of this sentiment, on April 16, 1859, the Harlem had secured from the state legislature the right to use steam engines as far south as Forty-second Street (though it was forced to haul its cars between the depot and Forty-second Street with horses).16
This undersize hermaphrodite road attracted the Commodore's renewed attention amid the Civil War boom in railway shares on Wall Street. “In 1862 he was known to be buying a large amount of the stock,” recalled William Fowler. According to rumor, Vanderbilt foresaw a great day in Harlem. “The idea that he was buying it for investment seemed intensely funny to the brokers,” Fowler wrote. Vanderbilt's purchases had no effect o
n the negative view of the railroad among financial men, even though he drove the share price from a few dollars a share to over 50. Most brokers said “the certificates were only good for wrapping paper.”17
Wall Street was at all times a waterfall of rumors, few of them accurate. In this case, the tales muttered over fillet of sole at Delmonico's proved to be true: Vanderbilt was, in fact, buying because he believed in the Harlem's prospects. “I recollect… hearing him say that this railroad property, if properly managed,” Horace Clark later remarked, “will be as good property as there was in the state.”18
What did he see in it that no one else did? From the very beginning of Vanderbilt's career, he had focused on transportation routes that had decisive strategic advantages over competitors. The Stonington railroad, for example, ran from a convenient port inside Point Judith over a direct line to Boston with easy grades that he made into the fastest and cheapest to operate at the time of his presidency. Likewise, the Nicaragua route to California had possessed a permanent superiority in coal consumption over Panama, thanks to shorter steamship voyages. The Harlem's fixed strength was its penetration of the center of New York, down Fourth Avenue and through its streetcar line. This was something that no other railroad possessed—not even the only other steam railway to enter Manhattan, the Hudson River, which was restricted to the far west side. The Harlem provided the only portal for direct rail traffic with industrial New England, a rich trade that Vanderbilt knew well from his directorship of the Hartford & New Haven. And, as with the Stonington, he moved in after the company's debts had been starkly reduced. Once in control, he could reduce the Harlem's operating costs (a science he practiced most effectively), and then he thought it would prove very profitable.19
But there was something more personal driving Vanderbilt's interest in the Harlem. Perhaps the most important element in his character—even more than his economic calculation—was pride. We know he prized his reputation (as shown by his letter to Governor Morgan, among many other examples) and cherished his status as a man of honor. Most of all, he took pride in his abilities. Competitive to the core, he had spent his life outdoing other men, whether sailing New York Bay or navigating the Nicaraguan rapids; fighting with his fists or waging rate wars; racing his steamboats or running his four-footed trotters; designing steamships or planning sprawling enterprises. Now he would show the world that he could revive the most necrotic of companies. “Here is a man,” the Commodore would remark in 1867, “who has taken a road when its stock was not worth ten dollars a share, and had not been for years. He has had a little pride; he said he would bring up that road, and make the stock valuable.”20
Of course, Vanderbilt's pride mattered little to anyone else. He had been an important Harlem stockholder for almost a decade, and his slowly increasing stake changed nothing for the public (except those few who also owned stock and saw the value rise). But his purchases led him into a confrontation with one of the great evils that worried civic-minded New Yorkers: the corruption of their government.21
During the Civil War, Americans began to fear that rampant corruption threatened democracy itself. The head of the New York Custom House alone could scoop in as much as four times the salary of the president (which, at $25,000, was many times larger than that of railroad presidents or other extremely well-paid men). As the federal budget grew, the scope of graft seemed to swell as well. Profiteering off military contracts seemed to run rampant, particularly under Lincoln's first secretary of war, Simon Cameron, who did without competitive bidding. Manufacturers delivered cheap, flimsy shoes and uniforms made of recycled wool, or “shoddy,” that soon fell apart. Conflicts of interest abounded as businessmen filled new government posts; for example, Thomas A. Scott, the superintendent of the Pennsylvania Railroad, served as assistant secretary of war with jurisdiction over military transportation.22
Crooked dealing within the federal government seemed almost tame compared to its rapacity in New York. George Templeton Strong, like many, complained of “our disgraceful, profligate legislature.” Harper's Weekly reported late in 1863, “Last winter, it became evident to all discerning observers that a combination of adventurers had bought up a majority of both branches of the Legislature.” And city government looked worse. At war's end, the Union League Committee on Municipal Reform would admit a “longing for a temporary dictator who would sweep these bad men from our municipal halls and cleanse this Augean stable of its accumulated corruption.”23
As Vanderbilt steadily purchased Harlem stock, the company fell afoul of a past master of bribery, one of the Commodore's oldest enemies, George Law. New York's merchant community smelled sulfur wherever he went. “It is impossible for outsiders to estimate his worth, & it is doubtful if he can do it himself,” R. G. Dun & Co. reported in 1859. The next year it added, “He is reported to be sharp & over-reaching in his transactions & dealt with accordingly.” He had spread his money freely in the fallow fields of Washington during his years in the U.S. Mail Steamship Company and the Panama Railroad. Now he devoted himself to transportation in Manhattan, with a stake in various ferries and the Eighth Avenue Railroad, a horse-drawn streetcar line, so his bribes flowed upstream to Albany24
Sometime around March 1863, Law reportedly began to twitch and tweak the state legislature into granting him a charter for a streetcar railroad down Broadway. “Reportedly” is as conclusive as any account can be; though the press blamed him for pushing this bill, direct evidence of his involvement is hard to find.25 But no doubt exists over the furious reaction that erupted in late April when Manhattanites learned that the most famous avenue in America might be bound with iron rails. As the bill advanced toward passage, a long list of New York's patriarchs—among them William B. Astor, Moses Taylor, Peter Lorillard, and Royal Phelps—signed a petition to the new governor, Horatio Seymour, to protest “bestowing a franchise of immense value upon individuals, many of whom are unknown.… Its effect will be to injure immensely if not almost destroy the most beautiful thoroughfare on this continent.” The New York Herald declared that New Yorkers were “wonderfully unanimous” in “disgust and anger at the shameless corruption of the Albany scheme.”26
One might well wonder why the state should intervene in a purely municipal matter. The answer is that the Broadway bill, and the corruption that surrounded it, reflected a long-standing struggle for power between city and state, and within the Democratic Party. In 1857, in an effort to weaken then-mayor Fernando Wood, the Republican legislature had passed a series of measures to strip New York of authority over its own affairs. This had strengthened Wood's Democratic opponents more than the city's Republicans, as one of his leading rivals, William Tweed, gained an independent power base in the enhanced New York County Board of Supervisors. By 1863, the city's Democratic Party had divided into three fiercely alienated factions: Tammany Hall, Wood's Mozart Hall, and a splinter group led by former U.S. attorney John McKeon. Even Tammany itself was split between Tweed's crowd and the wealthy circle around Horace Clark, Augustus Schell, and August Belmont.27
The “George Law” bill threatened to further erode the city's power over its own streets, and deny it any revenue from a potentially lucrative franchise. City hall, torn by its internal feuding, looked unlikely to come up with an effective response. But there was one force that could unite the bitterest enemies in New York: money.
Someone conceived a plan to have the city preempt the Law company, by granting the Harlem the right to run a streetcar line down Broadway. If the city fathers must have a Broadway railroad, they thought, they should at least keep control of it—and its proceeds. According to Harper's Weekly, the aldermen and councilmen demanded that, in return for this gift, the Harlem pay roughly $100,000 in bribes. (“We don't pretend to know exactly,” Harper's wrote.) What's more, rumors began to fly about unusual purchases—and purchasers—of Harlem stock. “Men with strongly Celtic faces were seen on Wall Street,” recounted Fowler, with the unblushing anti-Irish prejudice of the day, “s
ixth-warders by the cut of their jib, and said to belong to the Ancient and Honorable Board of Aldermen.”
On April 21, this farce turned into slapstick when a deputy sheriff appeared at a meeting of the aldermen, bearing an injunction on behalf of Broadway's stage and omnibus lines. “He was ordered to retire,” the New York Herald reported, “but not seeming inclined to go, the President directed the Sergeant-at-Arms to remove him.” Once the deputy had been wrestled out and the door locked, the honorable gentlemen voted to give the Harlem the Broadway streetcar franchise. Two days later the railroad's workmen began to lay tracks. Meanwhile the “George Law” company went to work on another section of Broadway, in anticipation of victory in the well-greased legislature.28
Even with General Grant attacking Vicksburg from the rear, with General Joseph Hooker in motion against Robert E. Lee, the people of New York could talk of little else but the battle of Broadway. “The coup d'etat of the Common Council” was “the great theme of conversation in the city yesterday,” the Herald reported on April 24. “The deepest interest was expressed by all classes, and a high state of excitement prevailed in Wall Street, about the City Hall, and around the newspaper bulletins.” Finally a fresh injunction halted both sides. Strong wrote that the “only visible sign” of the Harlem's Broadway line “is a strip of lacerated pavement between 13th and 14th Streets, and a few sleepers and rails lying out in the rain.” Then Governor Seymour vetoed the George Law bill. The city—and the Harlem Railroad—had won.29
Where was the Commodore? True to his word, “at this late date” he chose to keep “aloof from any public transaction,” particularly the mass corruption of New York City and State. Though he held a seat on the Harlem board, he did not bother to attend meetings with any regularity until the beginning of May (though Horace Clark helped fight the George Law bill in Albany). The first overt sign of Vanderbilt's intentions came on May 13. With the Harlem's annual election five days away, he asked Erastus Corning, president of the New York Central Railroad, to serve as a director on the new board.30 (Corning declined.) On May 18, Vanderbilt swept the election, winning directorships for himself and his circle, including Clark, Daniel Drew, Augustus Schell, and a vice president of the Bank of New York named (appropriately enough) James H. Banker. The next day the board unanimously elected the Commodore president.31