History of American Business: A Baruch College Blog

The nineteenth century beheld an unpresented westward migration, in which Richard White chiefly credits the creation—and failure—of the railroads to; yet his bias towards the impact of the railroad in the chapter “Creative Destruction,” underestimates major forces that drove westward expansion, diminishing his chief argument. Within the chapter, White argues that the westerly expansion of the railroads was as much a facilitator in westward migration, as it was in the corruption society, politics, and the environment. The two sections of this chapter, “Dumb Growth” and “Cattle”, exemplify the negative impact of the railroads in a broad view of nineteenth century history, but fail to account for some institutions that existed when the railroads arrived.
Initially, White argues that the railroads enabled settlements in the West through transportation of troops and supplies to subdue the native population; when this was accomplished, he argues “western railroads had to induce both producers and consumers to move west.” (White 456) Although the railroads played a large part in reducing and restricting the native population, native populations clashed with Americans and their European Ancestors in the West long before the first tracks were laid. The same can be said for the existence of western agricultural settlements. Despite the increase in traffic through the railways, White downplays, even ignores, major societal, political, and environmental aspects in westward expansion. Among these are, as previously states, the existence of agricultural settlements, as well as, and an existing market for trade in animal furs and hides, the Gold and Silver Rush, the end of Civil War, migration of the Mormon population to escape religious persecution, the impact of the Homestead Act, and the large numbers or people that migrated via land trails. In reducing the existence of these components, White creates a narrow view in which he can argue that the railroads were not only the supreme creators of the West, but also unadulterated destructive force that led to overflooding of markets and the annihilation of human and animal populations.
Ultimately, White is effective in emphasizing the impact the creation of western railways had on the expansion—for better or worse—of the United States, but his argument is not compelling enough to overcome the realities that these are not sole aspects in the realization of what Americans considered their manifest destiny. In failing to make this argument, it is difficult to concur with the principal argument of the chapter, which is that the creation of railroads, rather than human conduct functioned as “creative destruction” in the nineteenth century. White raises several questions in the chapter:
“The development of the region would have been delayed without multiple transcontinentals, but what would have been lost? Mines that glutted the market for silver? The Catastrophes that befell cattle and buffalo on the Great Plains? The suffering of those who settled lands that could not sustain them all over the West? The calamities that afflicted Indians who lost their land, their way of life, and often their lives?”(White 461)
However, these questions do not emerge from the development of railroads, rather they reveal the needs and desires of those seeking to utilize any means, including the railroads, to achieve western expansion in the United States. Overall, White’s failure to make a connection between the railroad and the surrounding circumstances of nineteenth century America hinder his assessment of the railroads as “creative destruction.”

Within Richard Whites “Introduction” from Railroaded he dives in on the evolution of the railroad system and how railroad corporation came to be hated because they had monopolized the greater areas and territories when settlers were lured into moving to places on the belief on being able to produce, yet they would be producing for these monopolized companies. Richard White argues that the transcontinental railroads of the late 19th century were political, business, and social failures that should not have been constructed when and where they were. The excerpt also discussed American and Canadian politics that fueled the reform movements of three countries, due to this in the late 19^th century these railroad failures were essentially the key piece to the complicated development of modernity and the historical role of corporations.  The excerpt also discusses the utter uprooting of older ways, and the formation of new technology in the hands of new men with a new form of corporate organization.

Railroaded also emphasizes on financial capitalist, the use of credit and the financial markets as the central engine of corporate growth and expansion. It was quoted in saying “It was not capital that built the railroads but credit, and that capital was ultimately the risk in the railroads for the men who controlled them.” Capitalist such as Jay Gould, Henry Villard, Thomas Scott just to name a few were entrepreneurs who bought bonds that allowed the railroads to proceed. The markets that were used and exploited were historical, they had state involvement, regulations, and military protection. Throughout the excerpt we can also depict how it is not whether governments shape markets, but how they shape them within social and cultural practices, it also establishes a kind of networking between politics and business that persists to this day. Essentially corruption is quite simple: It’s the trading of public favors for private goods, and that’s what happens repeatedly with the railroads and the federal government.”

Many entrepreneurs obtained great fortunes, but had created inefficient, costly, and dysfunctional corporations. These corporation although did create innovation in production, it became a problem because they built railroads that were better left unbuilt and flooded the market with products that had little to no need. Upon the trajectory of the time, it was shown that these investments would have been better off in other sectors of the economy, also many disbursed large amounts of capital and labor for no prosperity. The Transcontinental was built ahead of its time, railroads such as this one reshaped then sense of time and space.

The section about the business of accounting journals and those that profited from them in Caitlin Rosenthal’s Accounting for Slavery was particularly interesting. 

The cotton industry in the 1840s-1850s was still going strong and plantation owners, in their need to increase efficiency and profits, looked towards accounting books to gather, organize, and compare data. The demand was there as Rosenthal described southern planters as having an obsession with data, testing out different strategies to get the most out of their slaves like incentive systems varying in complexities from threat of violence to payment systems. 

While accounting books were already being made and used around this time, it was Thomas Affleck’s accounting books that the demand for such journals began to grow. Affleck greatly profited from publishing his Plantation Record and Account Book due to its complex but intuitive design. Affleck specifically designed it so that anyone with a simple understanding of mathematics could use it, advertising it as a way for plantation owners to delegate bookkeeping to other employees which allowed those owners more time for other business matters(Rosenthal, 88).

Even though his journals were among the most popular in the south, Affleck still had trouble maintaining such a business. For example, Affleck would publish his journal in different versions each aimed towards plantations of various sizes though most of the very big plantations had any use in them, even still using only some parts of it(Rosenthal, 92). There was also the problem of trying to find a printer company that would consistently print Affleck’s journal, Affleck needing to hire several to keep up with demand. Even still that wasn’t enough since Affleck would at times still not have any journals to sell(Rosenthal, 92). Rosenthal even states that saying that the journals sold well was only something Affleck said with calculations and sales hard to verify(Rosenthal, 91).

Maybe it’s because of my major in accounting that I took an interest in this small detail in the grand scheme of things. The fact there was a demand for such data collection I believe really showed how much this data mattered to plantation owners and how important was in their business.

 

Chapter Five of Rosenthal’s “Accounting for Slavery” made me think deeply about the extent to which emancipation of enslaved people in the United States changed the dynamic between plantation owners and workers. Rosenthal writes “Planters found that their relationship with their workers had suddenly become market relationships. Now they would have to recruit, maintain, and pay workers” (Rosenthal 158). After I first read this sentence, I was hesitant to believe this notion of a seemingly immediate transformation from slavery to recruited workers who are treated with respect. Rosenthal makes it sound a bit too easy. As I continued reading, Rosenthal came back to this idea several times and he used different pieces of evidence to both support this statement and challenge its truthfulness. 

 

There is no doubt that after the emancipation of enslaved people in the United States, there was an immediate transformation. Workers had to be paid, and they could quit their jobs. One piece of evidence Rosenthal uses to demonstrate this is figure 5.1, which shows a chart outlining the productivity on Pleasant Hill Plantation. While these carts normally included the total amounts of cotton picked on the plantation, after Emancipation, they, instead, included days of labor completed by a worker. This wasn’t just the case in regards to the Pleasant Hill Plantation. After Emancipation, there are rarely any instances of plantation owners keeping specific records on the amount of cotton picked by workers. This demonstrates how the degree of control of plantation owners over their workers greatly decreased. 

 

Throughout chapter five, Rosenthal also introduces evidence to refute her claim about “market relationships” between planters and workers. One great example of this is figure 5.3 which shows how plantation owners charged their workers for basic necessities and for absences from work. Plantation owners charged their workers for “shoes, bacon, rice, beef, and taxes” (Rosenthal 163). At the end of the fiscal year, workers were in debt to their bosses on many old Southern plantations. This certainly raises some questions about the reality of “market relationships” between former enslaved people and plantation owners. 

 

The dynamics and relationships between planters and workers in the newly Emancipated South are complex, and undoubtedly, they varied from place to place. It is difficult, if not impossible, to define such a unique time. While it may be true that following Emancipation “market relationships” formed between planters and workers, it is also safe to say that this was not the case in every situation.

In Richard White’s book Railroaded, White argues that although railroads were important to the development of North America, railroads were failures politically, economically, and socially. White makes a point that they should not have been built when they were and where they were. White states, “[Railroads] created modernity as much by their failure as their success” (Page XXI).

White says that although North Americans were aware of the Transcontinental Railroads failures, they chose to look past it because North Americans loved the railroads because it represented the era they were in. It was the era where technology was advancing. Many railroad companies had to be bailed out by the governments and forgiven for their loans that could not be paid back. By the end of the century, the Transcontinental railroad was even under political attack. The government had to suppress workers and protect the rights of their owners and managers for the sake of keeping public good and order.

White says that the railroad allowed people to travel and settle in the West. It also helped transport goods, like: silver, wheat, gold, timber, coal, corn, and livestock. However, White questioned why so many of the railroads were built when there was not much need of them yet. The railroads lured people to settle into places that produced crops, cattle, and minerals that the markets could not even absorb profitably. There weren’t markets created for such things yet, so it ended up for the most part, going to waste. From this, I can tell that White thinks it was a waste to invest so much into the railroads because its cost ended up exceeding their benefits in the long term (Page XXIV).

The passage written by David Montgomery summarizes several points as to how entrepreneurs develop strong businesses, how were the wages when during passing decades, the strategies used by monopolies and elites, government interfering benefits and consequences, and what factors lead to economic crashes. He starts off the chapter with the advancements made in technological fields of trading, transportation, and most importantly manufacturing. The North and South is still in the midst of recovering from their civil war and geographical conditions are affecting production and manufacturing, although, tensions still seem to be still high if the former Confederate states are being omitted from benefits. On the topic of separation, economic classes became a larger issue, race and religion become subjects of prejudice, and political parties clash during the mid 19th century.

During the mid 19th century, the country has gone through a drastic growth spurt in the field of production. With the focus on production being made more efficient with machinery and factories, America has become the top contender for most efficient country in mechanical manufacturing. This leads to the economy growing, and the elites to further the gap between them and the lower class. They call themselves capitalists, yet they see their employees as human resources and issues, they even go as  far as to refer to their status as “middle class”, which begs the question, where does that leave their employees at? (Montgomery, 14) In the passage, the working class were only acknowledged by their superiors when they are working, when they are not, they become strayed from capitalism. If one wishes to earn their keep, they must become earners, but this is taking it too far when the working class works for measly wages and not being treated human. Even less then human is the hysteria of workers coming from abroad, those who have different faith, and those of differing political parties. In modern times, wages and employment are not determined by who one was, but here showed otherwise. An example, Hamilton Manufacturing Company of Massachusetts had different wages for those of Irish and Swedish descent, and also gender. (Montgomery, 41) Montgomery points out that the wages of the masses are very conflicting controversial, nearly the entirety of the 19th century was filled with strife, the civil war, great crash, and even more conflict with the elite and middle classes because of who one was and the lack of much interference to the elites’ growth.

Prompt: What was the historic transformation, or change over time, that the author is describing in the reading? According to the historian, why and how did this change take place? Did these changes take place gradually or rapidly, and how did they affect some of the people involved?

Source: Richard White, Railroaded, Chapter 11 “Creative Destruction,” section 2 “Dumb Growth.”

Answer: In the 11th chapter of Railroaded, titled “Creative Destruction,” Richard White has a very peculiar and unusual section that is reflective of the entire book’s message. The section, titled “Dumb Growth,” is mainly about two things, the immediate inefectiveness of the railroad at beneffiting the places it served, and the demise of the bison which both went hand in hand. The chapter’s subject of creative destruction also complements the prompt well, indeed showing a historic transformation, but one that is more unfortunate, rather than welcomed and needed. 

The section starts off with two simple questions, which are also the subject of the greater work, “But were the transcontinentals worth their cost? And did their rapid expansion, on balance, yield more benefits than harm?” (White, p.460) White also continues to clarify the immediate criticism of asking such questions, by saying that “The issue was never the choice between railroads and no railroads.” (White, p.460) I found this to be a quite novel and unusual telling of the history of the railroads from this period, being aware of the toll it has taken on animals, environment, and the native population, I haven’t considered that the issue was maybe about too much expansion by the railroads, rather believing that it’s introduction itself brought great harm. Hence, it is a bit of an unusual argument to see on this matter. White says the following about the dumb growth, “The railroads seemed unable to achieve a balance between too much and too little. They enabled farmers and miners to produce far more cattle, wheat, and silver than the world needed.” (White, p.461) This matter of excess and unnecessary production and in turn consumption, is what drove this instance of creative destruction. However, creative destruction is often driven by a need, rather than a desire, and it is desire for profit that railroads wanted to satisfy by expanding into untapped lands, hoping that industry will follow the transportation, an extremely backward plan. 

Such an absurd way by the railroads to stimulate rapid economic growth led to a backfire, “Hauling something, even at a loss, was better than hauling nothing.” (White, p.462) Such a business model led to two unfortunate effects, the first being the destruction of the environment as trains would run for the sake of running while transporting little, benefiting the few entrepreneurs and hunters. While the other effect was the artificial creation of industry that normally would not have sprung up through more natural means of there being a demand and a supply, result being that: “Bison became the first victims of dumb growth.” (White, p.462) The story of the bison is intertwined with the story of the Native Americans, both experiencing a severe decline in population beginning in the 1870s. The argument for the hunting and processing of the bison being an artificial industry, is further supported by the figures White provides: “In the years between 1871 and 1879 the hunters reduced the southern herd effectively to zero. Hide hunters supposedly took 3.5 million bison from the southern plains in the 1870s…” (White, p.465) To fractionally reduce the population of a species is an immoral and selfish act, to reduce a fraction of a species simply for the sake of business and trade, not out of necessity to feed the starving is an even more egregious act. The tremendous nature of the dumb growth is made even more clear when “…at a generous estimate 1.75 million hides reached market over the eight years of the southern hunt…” (White, p.465) These figures show the negative side of creative destruction, as well as the dark side of capitalism and consumption, also showing the stark difference between the reasoning behind hunting the bison by the Native Americans and the hunters. 

Although we saw great historic transformation, the great takeaway from this section and chapter is that in purely economic terms, Joseph Schumpeter’s idea of creative destruction is rational, justifiable even. Yet when put into practice as seen with the railroads in the American west, the real consequences may not be so rational. Forcing the creation of an industry in a place where it is unlikely, is a recipe for destruction, not the creative kind, but the literal kind. And so went the creative destruction of the non-existent economic system of the American west brought about by the railroads, leading to “…the social costs of farm and business failures, the dispossession of Indian peoples, the degradation of the environment and the waste of resources…” (White, p.462)

Prior to the Civil War, industrialisation was largely restricted to the North. Even in that north, only a small number of employees worked in factories and were paid wages. However, the advent of new technology changed the lives of people in the North. The population grew, which affected the economy and led to goods being produced not just for survival, but also for profit. Farmers began to produce grain for shipment to the city. In both the north and the south, agriculture was the main industry. Industrialisation introduced in the north meant that processes that used to take hours by craftsmen were phenomenally shortened by machines. Hence, people with craftsman’s skills gradually disappeared and employers sought to increase efficiency by having more workers do simple jobs in their factories. For employers, the lower the wages of workers, the higher the net profit. Hence, workers worked 12-14 hours every day for a pittance. Although they were free labourers working for wages, their treatment was probably almost the same as that of slaves. Ironically, however, industry developed because workers worked in such an environment. According to A very short introduction of American Business History written by Walter Friedman, he wrote that the textile industry became a major industry in the USA, enabling mass production that was once impossible. The gains led to further investment and new entrants into the industry, and market competition intensified.

After the Civil War, new energy sources such as oil, coal and electricity, materials such as steel and rubber, and means of transport such as the Panama Canal and the transcontinental railway emerged, and joint-stock companies with modern management methods appeared as governments began to protect trade. These companies made fortunes in the financial and oil markets, creating conglomerates such as Carnegie in steel, Rockefeller in oil and Morgan in finance. Each market was monopolised by these conglomerates. In addition, many slaves freed by the Emancipation Proclamation during the Civil War did not receive redistribution of land, so they became sharecroppers again, working under contract to their employers. This abolished the traditional institution of slavery, but the reality was that slavish contracts with employers continued and agricultural production did not fall.

In 1859 the eve of the American Civil War, Thomas Affleck, a planter and nurseryman, published the final edition of his plantation record and account book. He thinks that his Journal book of account can save him from financial debt when he realizes he doesn’t have much control over his Plantation workers. After the Civil War, the southern states were still trying to manage their control over their plantation worker knowing that they now had their right to exercise their new freedom. Mr.Affleck realized that he doesn’t have much control over his planation workers so he has to start negotiating with them. 

In 1880, a decade after Affleck’s death his son has a different view of management. When Scientific management practice started to begin, Affleck’s son Issac Dunbar Affleck published the retitled Farm Record and Account book, an improved plan from the original book. Which talked about the communication to scientific agriculture and how offering space for monitoring all kinds of data. The book also shows how much has changed from Thomas Affleck’s earlier volume. When the inventory of slaves was gone, Affleck recommended the careful calculation of human capital. It was Form C, which calculate and record the cotton that was picked, was replaced with a series of forms, C1-C6, each of which is new from negotiating with tenants, planters, and laborers. It was a new way of recording data. 

Planters’ relationship with their workers has changed due to market relationships. Now they have to recruit, maintain and pay workers. It’s a new set of rules they had to obey after slavery was illegal. The plantation owner can no longer use workers for free labor. They have to adapt to the new way of running a plantation and keep track of different data and information to create a new way of managing the plantation. The emancipation has changed the process of enabling exacting agricultural management. After a while, the planters have to restore cotton production but the labor productivity was slow, it wasn’t the same as before when they have full control over their workers.

The freedpeople were the most successful in negotiating during the year of Radical Reconstruction, But they were economically lower in the rank of class and position in society.

At the end of the American Revolution in 1783 several economic and political concerns worried the newly independent nation. One such was the wealthy elite amassing too much political and economic power calling for limits on the amount of land that can be purchased. This point can be shown in (pg 110) when it states Many elites defended their traditional authority and complained that subversive democrats wanted to take all the property and level all distinctions, whereas many farmers and artisans feared an aristocracy of wealth. In order to promote their positions political factions like the Federalist who wanted a strong national government  worked to gather new followers to boost their party. The other party that developed the Republicans or the Democratic Republicans who were concerned about class conflict and wanted a more egalitarian socioeconomic structure. These democrats were looking out for the poorer classes of people against the wealthy monopolizing power. All this shows the post war turmoil as the country grappled with its socio economic policies even when Hamilton introduced a new tax there was revolt the illusion of a smooth transition for the new nation was mired in district and fears of social class. As by the end of the war America had the least amount of class division in the world. Key figures such as Hamilton and Adams feared the French Revolution for its radical ideas and liked England for its Stability so based much of their system on it. For these key members of the Federalist party the French Revolution and its Enlightenment thinkers were a danger to what they worked to build and wanted closer ties to England. As we can see the issue of class and wealth inequality shaped much of this period as strong individual property rights was of importance to American men but also the goal of attaining more economic equality.