The Myth of the Robber Barons

http://www.amazon.com/The-Myth-Robber-Barons-ebook/dp/B004X2IJ72/ref=tmm_kin_title_0?ie=UTF8&m=AG56TWVU5XWC2&qid=1341374484&sr=1-1

Book Review Extract: by Herb Sorensen

I read a fascinating book this weekend, and include chapter three of The Myth of the Robber Barons below.  The whole book is short and an easy read:

 CHAPTER THREE The Scrantons and America’s First Iron Rails Steamships and transcontinental railroads were obviously important to America’s industrial revolution. Even more critical, however, was the iron and steel industry itself. A successful iron industry could be the means of manufacturing a variety of cheap products to sell at home and abroad. With iron, for example, Americans could mass-produce rails and use them to cut transportation costs, open markets out west, and speed new products to cities throughout the nation. In the world of the 1800s, if a nation could produce cheap iron and steel, it could shape its own destiny.

The problem for America was that Englishmen controlled the world’s iron markets. They had developed the first blast furnaces, and they had also invented the puddling techniques needed to purify molten iron. They likewise had a generation of skilled iron-makers eager to compete on a world market. In short, they had a large head start and, during the 1830s, used it to build all of America’s iron rails. They also sent America iron-tipped plows, locks, nails, and all of the cast-iron pipes used for the nation’s water system. By 1840, dozens of Americans were frantically tinkering with different types of fuels, ores, and blast furnaces, trying to produce American-made iron.1

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 they 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

Bulding 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, 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.

In light of these disorderly influences, it is startling to discover that, before 1851, Carbondale had no fire or police department. In that year, after an unusually severe fire “laid waste to the greater portion of the city above the public square,” Carbondale’s shortsighted leaders finally decided to get some “means of protection against fire or outlaws.” The dedication of Carbondale’s new civil servants seems to have been slim because another fire soon ravaged the city, this time “entailing a considerable loss” to William Richmond’s coal-car factory and George L. Dickson’s mercantile firm, among other damage. This new city government apparently made no provision for sanitation; as one resident complained in 1875, “Another inconvenience is that citizens have no convenient place to dump their coal ashes, or empty. . .rubbish.” Such a perilous environment prevented a stable business climate and may have helped push Richmond, Dickson, and other entrepreneurs out of Carbondale and into Scranton.28

All of this creates the impression that, once the iron works and the railroad were established, and once the city of Scranton was incorporated, the Scranton group had it made. But this was not the case; in fact, most of the Scranton group did not die rich, and two died very poor. William Henry, the original leader of the group, left the city in the 1840s after some bad investments. Henry had energy and vision but little patience and endurance; he died embittered and impoverished in 1878. Sanford Grant, the first owner of the company store, wilted when faced with business competition and industrial risk. Selling his stock, he left for safer business climes in Belvidere, New Jersey, where he lived, without ulcers or wealth, until his death in the 1880s. Displaying greater fortitude than Grant, Selden Scranton became the first president of the Lackawanna Company; five years later, though, he and his brother Charles left to operate a blast furnace in Oxford, New Jersey. Their iron-making talents ultimately failed them; Selden declared bankruptcy in 1884 and died shortly thereafter. George Scranton, the early leader and driving force behind coal and railroad development, had more faith and perseverance than most of the others. He amassed $200,000, built a fine mansion, and served as U.S. Congressman from northeast Pennsylvania. George, however, still lost some of his fortune during the Panic of 1857 and had to sell much of his stock in the Lackawanna Railroad at reduced value. Plagued with health problems from overwork during the rugged days of the 1840s, George died in 1861 at age forty-nine.29

Three other members of the Scranton group never abandoned their vision of manufacturing rails and building a city; they achieved fabulous success and wealth. On top was Joseph Scranton, who said at the start, “I have no fears of the ultimate success [of the iron works],. . .1 have invested in it. Should remain till it is doubled or lost as the case may be.” Twenty-seven years later, Scranton was president of the flourishing Lackawanna Iron and Coal Company and was worth $1,100,000, making him the wealthiest man in northeast Pennsylvania. His brother-in-law and next-door neighbor, Joseph C. Platt, was superintendent of the Lackawanna Company and was worth $220,000. Right behind Joseph Scranton with $910,000 was his friend James Blair, who had backed the Scrantons from nails to rails. Blair held lots of stock in both the iron works and the railroad; he then expanded and started Scranton’s first trolley company.30

Some people point to such wealth, and the absence of it in other households, and argue that the state should redistribute it, or at least tax it at high rates. It hardly seems fair, they might say, that some people should have so little, while three men—Joseph Scranton, Joseph Platt, and James Blair—should own close to ten percent of all the wealth in the city (according to the data in the 1870 federal manuscript census). As socialist Harold Laski once said, “Less government. . .means liberty only for those who control the sources of economic power.” What we need, according to this view, is an active state to transfer income, chop up inheritances, perhaps even to impose equality of condition.

To argue this way is to miss a key point: Scranton’s founders, as entrepreneurs, created something out of nothing. They created their assets and created opportunities for others when they successfully bore the risks of making America’s first iron rails. Without them, almost everybody else in the region would have been poorer. The amount of wealth in a region (or a country) is not fixed; in 1870, Scranton, Platt, and Blair got the biggest piece of the economic pie, but it was the biggest piece of a much larger pie—made so by what they cooked up when they came to Pennsylvania thirty years earlier.

When the Scrantons came to the Lackawanna Valley, it was a poor farming region with no close ties to outside markets. In 1850, according to the federal manuscript census, no one in the Lackawanna Valley was worth more than $10,000. In 1870, after the Scrantons had established their city and their iron works, thirty-three families in Scranton alone were worth at least $100,000; and one was already a millionaire. Thousands of other families were working their way toward better lives. The Scrantons’ iron works and railroad were the means to this end.31

Some people look at the results of splendid entrepreneurship and say that someone else might have come along later and done the same thing. We can see how improbable this is in the Scranton case. The wealthy leaders in the older, more prosperous city of Wilkes-Barre, for example, shunned manufacturing for years and often tried to thwart the Scranton’s plans. If the Scrantons had not come along, much of the iron ore in central Pennsylvania and New Jersey would probably have been exported to Philadelphia, Pittsburgh, or New York, where more abundant capital would have eventually taken the risks of making manufactured goods. Northeast Pennsylvania would have been left in the dark.32

To be sure, the anthracite in the Lackawanna Valley was already attracting New York investors: but they came only to get coal, not to build cities and make the region prosper. Without dedicated local entrepreneurs, the Lackawanna Valley, like so many mining regions, would have enjoyed only fleeting and limited prosperity. The entrepreneurs in New York would have bought the coal land cheap, then supplied transportation to the region, collected their profits, and left the exporting area full of deserted mines and ghost towns.33

Let’s look at the different opportunities the Scrantons, as entrepreneurs, created intentionally and unintentionally for others. First, the people in northeast Pennsylvania, especially those with capital to invest, now had new and better opportunities available. Scranton, in fact, became a magnet for entrepreneurs in nearby towns, except for Wilkes-Barre. Investors in the nearby county seats of Montrose and Towanda came to Scranton and set up the city’s first two banks. From nearby Honesdale came Scranton’s first large-scale flour miller. From Carbondale came the presidents of both of that city’s banks, a locomotive builder, a stove maker, a coal operator, and the mayor. Not all of these men won fortunes, but several did, and their investments helped diversify Scranton’s economy and made it one of the fastest growing cities in America in the late 1800s.34

Another group of winners were the many local farmers who held on to their land and sold it later as coal land. All they had to do was watch others do the work of establishing the region’s export. After this, they cashed in. The Scrantons bore the risks of making rails from imported ore; then they risked building a railroad to connect the Lackawanna Valley to New York City. All the farmers had to do was hold on to their land and watch it rise in value—from $15 an acre in 1840 to $800 an acre in 1857. In just seventeen years, then, a 160-acre farm increased in worth from $2,400 to $128,000. Some of these locals even ended up richer than the wealthiest of the Scrantons. Benjamin Throop, for example, was a local physician who watched the Scrantons build their iron works; then he bought up much of the land in the area on the chance that they would succeed. He later wrote a book describing his real estate exploits and expressing his gratitude to the Scrantons. He even named his only son after George Scranton. When Throop died in 1897, at age 86, he left an estate of $10,000,000.35

Even immigrants could sometimes get rich in Scranton. The growth of Scranton from farming hamlet in 1840 to 45,000 people in 1880 brought thousands of immigrants to town. Many of them worked in the factories and improved their lives; they saved a little money and bought their own homes. Some of them had the talent and vision to rise to the top. In 1880, of Scranton’s forty most prominent businessmen, measured by memberships on boards of directors, nine of them were immigrants. Some of these rags to riches immigrants were clearly among the most successful men in Scranton. Thomas Dickson, for example, came to America from Scotland and began work as a mule driver. Soon he was making engines, boilers, and locomotives for the Scrantons; he ended up as president of the Delaware and Hudson Railroad, a 500-mile line that linked Scranton to markets all over the east. Another immigrant, John Jermyn, came to Scranton in 1847 from England and began working for the Scrantons for 75 cents a day. Soon he was managing coal mines and was putting what little money he earned into coal land and real estate with a knack that amazed everyone. The critical risk in his career came in 1862, when he leased some abandoned mines northeast of Scranton. Defying the skeptics, Jermyn bought new machines and fulfilled a contract for one million tons of coal. He then tripled his contract and was on his way to becoming the largest independent coal operator in the Lackawanna Valley. A local credit agent said that Jermyn was “believed to be unaffected by the times, holding his own versus all contingencies.” When he died in 1902, Jermyn left an estate of $7,000,000.36

Because the Scrantons did what they did, thousands of Americans had new opportunities in life. If they could just capture the Scrantons’ vision, they had a chance to succeed. One life that was made anew was that of Joseph J. Albright, the uncle of Selden Scranton. Albright was in business near Nazareth, Pennsylvania, and went bankrupt in 1850, when he was nearly forty years old. He had to sell all his furniture at a sheriff’s sale and deal with creditors from two states. He wrote Selden that “it is hard at my age to be thrown upon the world pennyless [sic],” and hoped that Selden’s wife “wouldn’t be ashamed of her poor friend.” He even seems to have contemplated suicide and wrote that “death would have been a relief” to him.37

The Scranton group came to Albright’s rescue and gave him a job as coal agent for their railroad. Soon Albright caught the Scrantons’ vision. He was patient and invested wisely: he bought stock in the Scrantons’ iron and coal company; he then joined them in building the city’s gas and water system. On his own, he invested in a company to mill flour and in a firm to make locomotives. By 1872, he was worth half a million dollars and was elected president of the largest bank in the city. He had become a believer in Scranton and wanted to help the city that had given him a chance; when he died, he deeded his home to the city and gave $125,000 to build a major public library to help educate future generations in Scranton.38

Not everyone joined the Scranton team. Albright did, but another relative, Phillip Walter, also of Nazareth, resisted an elaborate courtship from the Scrantons in 1852. He told them he was reluctant “to pull [up] stakes and move” from “my long cherished home” because “I might fail.” After a visit to Scranton, in which Walter sold hundreds of dollars worth of merchandise to an expanding population, he confessed that “I was quite enchanted with your place and the great, though undeserved, esteem in which I was held by many of the inhabitants.” Walter also admitted, “I certainly could not find a place anywhere where I would rather go than to Scranton.” He further acknowledged, “My sons. . .would likely find openings for business in such a thriving place as Scranton appears to be and will yet become.” Other men of means saw these advantages and settled in Scranton. But Walter avoided getting “carried away by the admiration of your thriving place” by his reluctance to uproot and his haunting fear that “still I might fail.” Winnowing out the conservative and the weak at heart, Scranton seems to have attracted a select set of venturesome leaders to guide its industrial growth.39

In building their city, the Scrantons consciously promoted entrepreneur ship. The securing of wide city limits was part of this effort. They believed their city would grow, and they diligently planned its expansion. Along these lines, the Scrantons and their allies established a board of trade in 1867 to promote the industrial development of their city. They installed an innovative Welsh immigrant as the board’s first president. The board actively recruited industry and even secured a law granting all new corporations tax-free status for their first ten years in Scranton.40

In this open environment, Scranton grew as a manufacturing center and attracted many capitalists who were willing to take different types of risks. This made for a combination of inventiveness and creative entrepreneurship. For example, Henry Boies came to Scranton from New York in 1865 and founded the successful Moosic Powder Company; then he perfected a gunpowder cartridge that reduced the death and injury resulting from carelessness in mining explosions. Boies seemed to court risky ventures and had failed twice before coming to Scranton. Once he had made his fortune in powder, the credit lines were open, and he went to work inventing a flexible steel wheel for locomotives. He started the Boies Steel Wheel Company in 1888 to manufacture his patented invention.41

Another innovation that succeeded in Scranton was Charles S. Woolworth’s five-and-ten-cent store. Born in upstate New York, Woolworth, his brother Frank, and partner, Fred M. Kirby, experimented in the late 1870s with the opening of specialty stores featuring largely five-and-ten-cent merchandise. Shoppers were often skeptical of the first stores opened in Harrisburg, Lancaster, and York, Pennsylvania. In 1880, however, when Charles Woolworth set up a five-and-ten-cent store in Scranton, the idea caught on. The sales in Scranton were a modest $9,000 the first year, but the Woolworths and Kirby had laid the foundation for an empire, and Charles had found himself a new home in Scranton. A decade of brisk sales in Scranton encouraged Woolworth to start branch stores in New York and Maine in the 1890s. Kirby, meanwhile, started a profitable store in Wilkes-Barre. Soon Woolworths was selling nationally, and became a major American corporation. In Scranton, Woolworth joined with other local entrepreneurs in founding the International Textbook Company, which employed thousands of people to sell textbooks throughout the nation.42

The introduction of electricity in the 1880s brought out the best in Scranton’s entrepreneurs. They didn’t produce Thomas Edison; but they did have Merle J. Wightman, who designed and built one of the first motors to run trolley cars by electricity. Scranton also became one of the first cities in the nation to have an electric trolley system. Sensing opportunity, Wightman started his own company in Scranton to manufacture trolley engines on a large scale. Other Scrantonians tried to adapt electricity to coal mining. In 1894, they founded the Scranton Electric Construction Company, which perfected and manufactured electrical apparatus (e. g., mechanical drills, locomotive hoists, and mining pumps) for use throughout the anthracite coal fields.43

Scranton did not emerge inevitably as a center for manufacturing trolley motors, locomotive wheels, or textbooks. Nor was there any particular reason why Scranton should have become a major headquarters for directing a chain of five-and-ten-cent stores. Other cities throughout America had good enough location and transportation to have been sites for these industries. Even the making and distributing of electrical mining equipment could have been done in Wilkes-Barre or in anthracite towns other than Scranton. A key to Scranton’s success seems to have been the presence of aggressive entrepreneurs, who had a philosophy of openness and commitment to growth. As the spiral of growth in industries, services, and population persisted, the city of Scranton, which was founded on a hunch, officially became one of the forty largest cities in the country in 1900.44

A lot can be learned from the story of the Scrantons. The first lesson is that entrepreneurs are needed to create wealth; when they succeed, others then have the chance to build on what they started. If we look at the later history of Scranton, we can also learn a second lesson: that it is hard for those on top to stay there in the generations that follow. An inheritance can be transferred; but entrepreneurship, talent, and vision cannot be. The industrial city of Scranton saw lots of movement down the ladder of social mobility, as well as up.

This can be seen if we look at what happened to the Scranton economic elite of 1880—those men who made up the first generation of the city’s industrial leadership. I collected data on the forty men in Scranton who, by 1880, held the largest number of corporate directorships and major partnerships. These forty men dominated all of Scranton’s major industries. Several were millionaires; and all had access to credit and contracts, which seemingly should have insured the success of their children in Scranton, which spiralled in population from 45,000 in 1880 to 137,000 in 1920.45

As founders and developers of the Scrantons’ vision, these forty entrepreneurs had much to give their children. Blessed by the luck of the draw, these fortunate offspring could choose almost any career, with the security that only wealth can bring. Raised in Victorian mansions rife with servants, they often had doting parents to give them private-school education, college if they wanted, or specialized training in engineering or industry. If these children did not prosper, they could fall back on hefty inheritances. Also, as they matured, they could take advantage of Scranton’s thriving marketplace to make even more money. By 1920, the sons of Scranton’s 1880 leaders had ample opportunity to succeed their fathers as the pacesetters of Scranton’s business world.46

Yet they did not. Few went hungry, but most could not come close to matching their father’s achievements. Only nine of the forty economic leaders in 1880 had even one son, son-in-law, or grandson who forty years later was an officer of even one corporation in Scranton. In short, the fathers and sons provide a stunning contrast.47

The fathers built the city of Scranton, but why the sons did so poorly is complicated. Part of the reason for this startling breakdown lies in the general problem of family continuity. Six families didn’t have any sons; seven others had too many—which splintered the family wealth into small pieces. In a very few cases, some sons left Scranton for business ventures elsewhere. Often the sons chose not to go into business: they led lives of brief and precarious leisure.

The fragmentation of some of Scranton’s larger family fortunes seems remarkable. For example, brothers Thomas and George Dickson became president of a national railroad, the largest manufacturing company in northeast Pennsylvania, an iron company in New York, the vice president of the largest bank in Scranton, and directors on many large companies. Yet only one of Thomas Dickson’s three sons went into business; and, under his leadership, the Dickson Manufacturing Company went out of business. George Dickson’s only child, Walter, became a mere salesman and held no corporate influence. The four sons of multimillionaire James Blair were nonentities. Only one of Blair’s sons appears to have been gainfully employed, and his job was that of assistant cashier in his father’s bank.48

Even the Scrantons of Scranton were almost extinguished. George, Selden, and Joseph Scranton were the founding fathers of American rail making, but only one of their sons showed entrepreneurial skill. Selden was childless, and went bankrupt in any case. George was worth $200,000 when he died; but his sons, James and Arthur, became men of leisure, not entrepreneurs. Joseph’s son William gave business a try, but his story was often sad. Joseph was president of the Lackawanna Iron and Coal Company from 1858 until his death in 1872. But during these years, the New Yorkers bought up so much stock that William was not allowed to succeed his father as company president. Young William was restless as a mere local manager, so he studied the new Bessemer process in Europe and returned to start his own Scranton Steel Company in 1881. The city’s low tax on new industries gave him an edge over the larger Lackawanna Company, but the older company won the competition and absorbed his enterprise in 1891. William did prove to be a very capable builder and operator of the Scranton Gas and Water Company. He and his son, Worthington, ran this company profitably and, in 1928, Worthington sold it for $25 million.49

Some of the sons of Scranton’s early industrialists literally squandered fortunes. Benjamin Throop, who was described earlier, became a millionaire in coal land and urban real estate. His surviving son had, at best, modest business skills, and when he and his wife died prematurely in 1894, the eighty-three-year-old Throop undertook the task of rearing his only grandchild, five-year-old Benjamin, Jr. The elder Throop died shortly thereafter, but young “Benny” inherited a ten-million-dollar fortune. Young Throop married into a prominent local family and, having no financial worries, began raising German shepherd dogs. He served in World War I, but by that time his wife had divorced him and he seems to have lost any interest that he might have had in gainful employment or in the city of Scranton. During the 1920s, like a character from an F. Scott Fitzgerald novel, he spent most of his time in Paris indulging champagne tastes in cars and women. He married a French movie star and traveled widely during their marriage. Throop died in 1935, in his mid-forties, of undisclosed stomach ailments after apparently dissipating his grandfather’s entire fortune.50

Throop was a rare but not unique example of dissolution. Given the tradition of partible inheritance, many of the sons of economic leaders knew that they would never have to work, and so they became men of leisure with no business interests. For example, James Blair’s son Austin was “a gentleman of leisure [with] [n]o[thing] to do except fish and hunt.” According to a credit agent, “his fa[ther], James Blair, is a millionaire and supports him [and] lets him have a fine residence rent free and supplies him with funds when required.”51

Without strong parental guidance, a slothful life was understandably attractive to these scions of wealth. Owing to the genetic improbability that Scranton’s 1880 elite would produce only children like themselves, with a knack for business, the fragmenting of economic leadership should not surprise us. Edmund B. Jermyn’s taste for horse racing—this son of the multimillionaire coal operator apparently “never missed a day’s [horse] racing at Honesdale or at Goshen, N. Y.”—becomes understandable. The son grew up under different conditions with different options in life from those that were available to his rags-to-riches father.52

The Throop and Blair families may provide clues to one possible relationship between parental guidance and entrepreneurship. On one hand, all of Benny Throop’s parents and grandparents died before he was eight years old, so he had no family pressure to become a businessman and pass on the family fortune. The four sons of James Blair, on the other hand, had a long-lived father, who personally directed many of his own enterprises until his death at age ninety. The elder Blair outlived two of his sons, and the other two had passed middle age by the time they were independent of paternal control. By living so long and holding on so tightly to his investments, Blair may have quenched the spirit of entrepreneurship in his sons. The role of the parents, the lack of business talent, the quest for leisure, and the problems of family continuity in general all seem to have combined to fragment the Scranton economic elite of 1880.

Of course, not all of Scranton’s early industrialists had downwardly mobile sons. Nine of the forty top capitalists in the Scranton of 1880 passed the torch of leadership from father to son in 1920. hi any randomly selected group of forty families, of course, some would produce sons or have sons-in-law with a flair for business. It is improbable, however, that nine of forty randomly chosen families would have corporate officers as sons. This merely shows that industrial leaders are much more likely than other groups in the population to father corporate officers. It does not show continuity of economic leadership because more than three-fourths of the industrial families of 1880 in Scranton failed to continue a line of corporate succession in the following generation.53

While most of the sons of entrepreneurs stumbled, a variety of new immigrants in Scranton saw their opportunities and took them. By 1920, for example, Andrew Casey, an Irish liquor dealer, had become a bank president and a hotel magnate. Michael Bosak, a Slovak immigrant who started life as a breaker boy in the 1880s, owned banks, a manufacturing company, and a real estate firm in Scranton in 1920. Few had the talent and vision to build such empires, but those who did picked up where the city’s founders had left off.54

Scranton was, in a sense, America’s first manufacturing city. It marked the spot where America began its independence from British iron. During the next generation, Scranton became a showcase of remarkable entrepreneurship and industrial growth. In this relatively open environment, Scranton’s economic order was fluid: upward mobility for the poor existed side by side with downward mobility for the rich. Entrepreneurs were prize possessions for cities and for the nation; but their vision, talent, and drive were hard to transfer from generation to generation. Most of the families of Scranton’s early industrialists died out as entrepreneurs; they didn’t inherit their fathers’ vision and turned over the city’s economic leadership to newcomers.

And so the cycle goes—which means that if Scranton is typical, then two seemingly contradictory generalizations about the rise of big business are both true. First, a small constantly changing group of entrepreneurs consistently held a large share of the nation’s wealth. Second, the poor didn’t get poorer, and the rich didn’t get richer either.

Folsom, Burt (2010-07-01). The Myth of the Robber Barons, Young America’s Foundation. Kindle Edition.

http://www.amazon.com/The-Myth-Robber-Barons-ebook/dp/B004X2IJ72/ref=tmm_kin_title_0?ie=UTF8&m=AG56TWVU5XWC2&qid=1341374484&sr=1-1