* * *
THE YEAR 1886 was both the high point of the Knights of Labor and the beginning of its mortal decline. The collapse of the strike, a severe blow in itself, was accompanied by two other disasters. One was a job action by Chicago meatpacking workers affiliated with the Knights. The packers had launched a successful strike on May 1 for an eight-hour day with no reduction in pay from the previous ten-hour schedule. But Powderly, as was his habit, refused to allow the strike to spread to noncompliant companies in the stockyards. The industry exploited his indulgence, and returned to a ten-hour day by the fall. It was as though Powderly had snatched defeat from the jaws of victory.
Public respect for the Knights was shaken further by the Haymarket affair, in which a dynamite bomb was exploded at a rally for the eight-hour day in Chicago’s Haymarket Square on May 4. In the ensuing melee, seven police officers and four civilians were killed, some by police bullets fired in confusion. Eight purported anarchists were eventually tried and convicted in the affair, although the identity of the bomb thrower was never conclusively established. Among the accused, however, were two members of the Knights.
Time was passing the order by. In 1887 alone the Knights lost three hundred thousand members. Its representation among railroad workers had fallen away almost entirely, and Powderly and the other leaders tried to make up the loss by reconfiguring the order into a farmers’ union, without notable success. Powderly’s aversion to strikes made the organization seem increasingly irrelevant in a period of intensifying labor agitation. In 1893 he was voted out of office, but by then he was acknowledging to his associates that the order was “in the throes of dissolution.”
Powderly had been correct in recognizing that he and his members had been engaged in a historic struggle during the strike of 1886, but he was wrong in denying that it was “the beginning of the war between capital and labor.” The Great Southwest Railroad Strike was indeed the beginning of that war, as it applied to the railroads. The railroad tycoons read it as a sign of their firm grasp of power over labor. But the end of the strike was not the end of the war. The ultimate battle would be staged just a short time later. In the meantime, however, a new figure joined the pageant of railroad monarchs.
Part II
* * *
Morgan and Harriman
8
The Rise of Ned Harriman
EDWARD HARRIMAN’S LIFE would have provided suitable grist for a novel by Horatio Alger, whose rags-to-riches tales reached the peak of their popularity during Harriman’s lifetime. Like a stereotypical Alger hero, Harriman rose from raw (if genteel) poverty to the economic and social heights, reigning as one of the two most important railroad magnates in the nation, his only equal in influence over the economic life of the United States being J. Pierpont Morgan. For the last decade of the nineteenth century and the first of the twentieth, Harriman and Morgan would dominate American business like twin colossi.
As reckoned by the eminent railroad economist William Z. Ripley, Harriman at the peak of his power
controlled fifty thousand miles of railway—more than there were in existence in the entire country at the close of the Civil War. He was a dominant factor in the inner circles of the greatest banking institutions. . . . Ramifications of his political power, Federal and State, extended to every quarter of the land. State and even national conventions took his orders. Members of Congress did his bidding. Laws were enacted at his will.
At the outset of his career he would be consistently underestimated by his rivals, invariably to their disadvantage; by the time of his death he would be reviled, perhaps unfairly, as a quintessential robber baron, labeled by his onetime friend Theodore Roosevelt as among the “malefactors of great wealth.” Roosevelt was one of only two men “who ever dared to block his path,” Ripley observed. The other was Pierpont Morgan, who would not go unscathed in the effort.
By combining a brilliant financial mind with an instinctive eye for operational efficiency, Harriman emerged as a new kind of figure in the railroad industry. Upon his death, after two decades as a business leader, he would be hailed by the distinguished investment banker Otto Kahn as “the last figure of an epoch.” Harriman’s railroads by then spanned the continent, bringing goods and riches to farmers, industrialists, and rural and urban dwellers. One of his roads, the Southern Pacific, had come to symbolize the economic oppression of the Gilded Age even before he took it over, however, having become known as “the Octopus” after the title of an allegorical novel by Frank Norris describing the railroad’s stranglehold on California wheat farmers.
Ned Harriman, as he was known to associates, gathered friends not merely from among bankers, brokers, and business partners, but scientists and naturalists, for whom he sponsored a notable expedition to Alaska, one of the most remote corners of the known world. Among the unlikeliest such colleagues was the environmentalist and preservationist John Muir, who formed a lifelong bond with the railroad man after being invited to join Harriman on that expedition in 1899, when Harriman was in the very thick of his climactic contest with Morgan. In a slender volume of posthumous reminiscences, Muir drew on imagery from the natural world, the object of his and Harriman’s shared devotion, to describe Harriman as an almost elemental force.
“He fairly revelled in heavy dynamical work and went about it naturally and unweariedly like glaciers making landscapes,” Muir related, “cutting canyons through ridges, carrying off hills, laying rails and bridges over lakes and rivers, mountains and plains. . . . A great maker and harvester of crops of wealth, . . . he used his income as seed for other crops of world-wealth in succession.” Fortunes, Muir wrote, “grew along his railroads like natural fruit.” While engaged in business, Harriman retreated behind his cold, deep-set eyes; settled amid friends and family, he exuded “the loving-kindness that, like hidden radium of the deep buried fires of ice-clad volcanoes, was ever glowing in his heart.”
* * *
Frequently underestimated by his competitors but never for long, Edward H. Harriman brought a single-minded focus to the management of his railroads that made his empire the most expansive in the nation.
* * *
Contrary to Theodore Roosevelt’s words of vilification, Harriman left a legacy of good works—among them thousands of acres of parkland donated to the public, and the first Boys’ Club in the world, founded in a Tompkins Square basement to induce youths of the Lower East Side to come off the streets by offering them sing-alongs and indoor athletics. Perhaps his proudest achievement was saving California’s Imperial Valley, an agricultural breadbasket exporting $2 billion of produce a year, from a catastrophic flood caused in 1905 by an ineptly designed canal cut into the banks of the Colorado River. At Roosevelt’s insistence, Harriman applied the vast resources of the Southern Pacific to the task of returning the raging Colorado to its proper course after three previous efforts by others had failed. He had taken a moment to give the go-ahead to his engineers’ $3 million restoration plan while standing at a window in the Southern Pacific’s Oakland headquarters, contemplating the smoldering wreckage of San Francisco and his own rail yards, which had been devastated by earthquake and fire on April 18, 1906, three days earlier.
Roosevelt pledged to reimburse Harriman for the rescue of the Imperial Valley, but Congress never made good on the promise. Nevertheless, Harriman described the project to a newspaper correspondent years later as “the best single bit of work ever done on my authority and responsibility.” Shortly before his death in 1909 he visited the valley one last time. While he inspected the levees his crews had erected under punishing conditions while utter ruin lurked on the horizon, an interviewer from the Los Angeles Examiner asked him whether, given the government’s refusal to repay the huge expenditure, he did not regret his company’s involvement.
“This valley was worth saving, wasn’t it?” Harriman asked.
“Yes,” the reporter replied.
“Then we have the satisfaction of knowing that we saved it, hav
en’t we?”
* * *
EDWARD HENRY HARRIMAN was born on February 25, 1848, in the Episcopal rectory of Hempstead, New York, where his father served as pastor of an impecunious Long Island congregation. The first Harriman in America, Edward’s great-grandfather William, had come to New York from London in 1795 to establish himself in the West Indian trade. Only one of his eight sons, Orlando, survived to adulthood. Like his father, Orlando thrived in business—until the Great Fire of 1835, which destroyed more than six hundred buildings in New York City, including Orlando’s warehouses and all his inventory. He “never fully recovered,” the Harriman family chronicle acknowledged, though he eventually rebuilt his business sufficiently to retire at least in relative comfort.
Orlando’s eldest son and Edward Harriman’s father, also named Orlando, compiled a distinguished academic record at Columbia University, but joined the Episcopal ministry instead of following his father into business like his younger brothers. He was ordained in 1841 and that same year married Cornelia Neilsen, the daughter of a well-connected New Jersey physician. Orlando’s marriage was fortunate, for Cornelia proved a steady, secure, and moralistic influence on her offspring throughout the difficult years to follow, in which Orlando Harriman’s churchly career traced a slow trajectory into penniless mediocrity. “Cold and austere in manner, . . . he lacked the magnetic personal charm which might have given popularity and success to a clergyman of much less ability,” reported Edward Harriman’s first biographer, George Kennan.
Orlando flitted from congregation to congregation in the New York suburbs, from Sing Sing (later known as Ossining) to Tarrytown to Hempstead to Staten Island. It was a dismal existence, complicated by the tendencies of poverty-stricken vestries to skimp on their pastor’s wages. A pay dispute in 1850 prompted Orlando to abandon the East entirely, leaving Cornelia and their four children behind until he could lay down roots in California, which was then in the thick of gold rush euphoria. Answering an invitation from a parish in the state’s mountainous North, he departed in midsummer, crossing the continent by way of Panama. There, exhausted by weeks of travel across the humid isthmus on foot and by mule, he fell ill and was delayed by a month.
Continuing his journey by sea, Orlando would read the burial service over seven fellow passengers felled by fever before reaching San Francisco. Upon landing he learned that his congregation, having heard nothing of him for weeks, had filled his job with another candidate. He spent a year as an itinerant preacher in the mining camps of California before finally returning East, broken and humbled. It would fall to his son Ned to carry the family name back to California, in triumph, more than a half century later.
Orlando resumed his career in New Jersey as what was known as a “semi-attached curate.” As before, he was generally underpaid, sometimes cheated of his stipend entirely. The records of a Hoboken church state that Orlando was hired as rector in 1859 at $200 per year; seven years later, when he resigned, the congregation still owed him $374 in back pay, on which he “compromised at $250, payable in six months, with interest.”
Over this period of Ned Harriman’s life “hangs a heavy cloud,” the contemporary financial chronicler C. M. Keys reported. It was made worse by the distance the family had fallen from the prosperous upbringing that Orlando and Cornelia had both experienced in their youth. Ned Harriman would seldom speak of this phase of his childhood; indeed, he would take pains later in life to eradicate the evidence, spending his own money to convert the down-at-the-heels rectory where he was born into a whitewashed three-story homestead, and refurbishing its chapel as a house of worship fashionable enough to attract congregants from the high society of metropolitan New York.
The family’s lot improved a bit in the late 1860s, when Cornelia inherited a bequest allowing Orlando to retire. Now there was money to send Ned, their youngest son, to the private Trinity School in Manhattan, which the child reached every day by ferry from Jersey City. He was small for his age but “scrappy,” indifferent to studies but nimble at athletics. Family lore had it that after two years at Trinity, fourteen-year-old Ned marched up to his father, threw down his books, and announced, “I am going to work.”
Ned found employment with the Wall Street firm of D. C. Hays, earning five dollars a week as a “pad shover.” This lowly job involved carrying from office to office notebooks on which the latest prices of securities and their bids were scribbled. From his earliest years in the financial district, Ned Harriman displayed that bifurcated personality John Muir would notice many years later. When engaged in business, he showed a frigid, uncompromising determination: “Not one man in a thousand found him genial, not one in ten thousand congenial, . . . a cold-blooded little cuss,” was the recollection offered by an early acquaintance. Yet he must have shown some capacity for ingratiation, for by age twenty-two he had been elected a director of the sociable Travelers’ Club and was a welcome participant in its Saturday-evening smokers. He joined the Tenth Company of the New York militia’s Seventh Regiment, the “society” company, which placed him in close proximity to the politician and financier August Belmont and other rich, influential contacts. Still an undersized runt of a man, he nevertheless became known for his prowess at boxing, riding, shooting, and billiards—all skills sure to endear him to this set of aristocratic young bloods.
One thing on which almost all the early witnesses agree is that Harriman displayed a preternatural affinity for the stock market, along with an ambition to make the most of his talents. No average pad shover, he could keep in his head the intricate figures that others had to write down. More important, he had an instinct for the underlying value of securities that were viewed in the prevailing trading mentality of the Street merely as scraps of paper swirling about in search of the greater fool. In that environment, the man with foresight had a subtle advantage over his fellows. Harriman’s compatriots had a hard time comprehending the secret of his trading success, chalking it up vaguely to his “extraordinary ‘nose for money’.”
Harriman rose quickly at D. C. Hays, becoming a managing clerk at the age of twenty. Two years later he touched his uncle Oliver, a successful businessman, for $3,000 to buy a seat on the New York Stock Exchange, and opened a third-floor office at the corner of Broad Street and Exchange Place.
It was the start of a career that would bring him to the heights of the most dynamic industry in America.
* * *
THOSE WHOM HARRIMAN brought into his circle as business associates seldom forgot their first encounter with him. For Otto Kahn, it happened on a hot summer afternoon in 1894, when he found himself sitting across his desk from a bantam-sized middle-aged man with an intense stare.
The German-born Kahn had joined the firm of Kuhn, Loeb & Co. only the year before, after having been trained in high finance at the London office of Deutsche Bank and following his wedding to Addie Wolff, the daughter of a Kuhn, Loeb partner—fulfilling a tradition in that banking firm, where partnerships were based not only on financial acumen but ties of blood and marriage. At twenty-seven, Kahn was dignified, cultured, and impeccably groomed. With his pomaded hair and a mustache waxed to two needle-sharp points, he was a living counterpart of the stately appointments of his office suite.
The man occupying the chair facing him was his opposite in almost every particular. He looked weary, rumpled, and pale, with a mustache that drooped like a wet mop and a visage that seemed to have every one of its nearly fifty years written in its creases. Nor was the business proposal he submitted for the firm’s approval much more prepossessing, at least as it seemed at first. Kahn listened politely before stepping away to present the details to his partners, and presently returned to deliver their judgment to his visitor: They would pass. The man shuffled to the door, turned, and said, “I am dead tired this afternoon and no good any more. I’ll tackle you again tomorrow, when I am fresh. I’m bound to convince you and get you to come along.”
He did return, the next day and the day after that. Eventually
the partners yielded to his “sheer persistency and the lucidity of his arguments,” Kahn recalled years later. Kahn was not specific about the details of the visitor’s business proposition when he related the encounter for his memoirs; but he did recall that “by the way, his judgment was right; the business turned out very well.”
Harriman already had done some small business with Kahn’s firm, which by 1894 knew him as an executive of the Illinois Central, a respected midwestern railroad, but this was the first opportunity Kahn had had to size him up. As in many more transactions to come, Harriman “simply brought to bear the stupendous force of his will and personality,” Kahn would reflect. “Smooth diplomacy, the art of leading men almost without their knowing that they are being led, skillful achievement by winning compromise were not his methods. . . . His dominion was based on rugged strength, iron will, irresistible determination, indomitable courage, tireless toil [and] amazing intellect.” One time when Kahn counseled him that he might win over his adversaries more by gentle persuasiveness than stiff-necked obstinacy, Harriman replied crisply, “I can work only in my own way.”
Harriman had arrived on Wall Street “at a moment that was ripe for the making of men,” wrote C. M. Keys. He had carried his pads from firm to firm while Gould, Fisk, Drew, and Vanderbilt were waging war over the Erie. “It was a time when men played the game with aces up their sleeves,” Keys observed. But the door was opening for a new stamp of player.
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