Iron Empires Read online

  One who did contest the monopoly was Thomas Gibbons, a wealthy Georgia plantation owner who began running rival steamboats in defiance of the New York monopoly by basing himself in New Jersey, where local authorities protected him from the threat of arrest for violating New York law—as long as he evaded New York authorities while afloat on the river. Gibbons admired Vanderbilt’s pugnacious competitiveness in ferrying passengers and cargo across the Hudson by sail on his modest fleet of schooners. (Decades later, when he reigned as one of the richest men in New York, Vanderbilt would say that nothing in his career had given him as much satisfaction as “when I stepped into my own periauger [or perogue, a shallow-draft vessel], hoisted my own sail, and put my hand on my own tiller.” Vanderbilt had bought what became his flagship craft, which carried twenty passengers, at the age of sixteen.)

  Gibbons hired Vanderbilt to captain his steamboats. The choice proved wise. During the twelve years of their partnership, Vanderbilt would harry Livingston’s heirs, who inherited the monopoly, under the very eyes of New York constables, at one point evading arrest for sixty consecutive days. The conflict between New York and New Jersey was finally decided by the US Supreme Court in 1824. In a landmark decision following a legendary oration by Gibbons’s attorney, Daniel Webster, Chief Justice John Marshall extended the commerce clause of the Constitution, which reserved to Congress the sole right to regulate interstate commerce, to navigation.

  Marshall’s decision surely came as a relief to Hudson River entrepreneurs, for the superiority of steam over sail had made itself known quickly. Hostage to the wind and weather, a sloop under canvas could take as long as nine days to reach Albany from New York City; on its first commercial voyage, the Clermont had made the trip in thirty-two hours. Soon, larger, faster, and more luxurious steamships were plying the river. “No one who has not seen these magnificent vessels can form a just idea of their vastness, their elegance of finish and furnishing, and the completeness of their equipment,” marveled a writer in 1859. The grandest steamboats on the river were those belonging to Vanderbilt—who had bought out his former patron, Gibbons, along the way earning the unofficial honorific “Commodore”—and one Daniel Drew, perhaps the only ship owner on the Hudson who could match Vanderbilt in sheer cussed competitiveness.

  The careers of Drew and Vanderbilt would remain intertwined virtually to the end of their days. As steamboat rivals, Vanderbilt and Drew engaged in ruthless mutual fare-cutting that eventually reduced the price of a passage across the Hudson to twelve and a half cents. The rate war almost broke them both, but Drew, whose fundamental commitment was to his personal financial condition rather than public service, flinched first. Having accumulated a debt of $10,000 by operating his vessel, the Water Witch, at rock-bottom fares, Drew quietly sold it to Vanderbilt one winter. When the river reopened to traffic following the spring thaw, the Witch was still on the water, but now under Vanderbilt’s ownership.

  * * *

  From owning an unassuming sailboat ferrying passengers across New York Harbor, Cornelius Vanderbilt went on to build the grandest personal fortune of the Gilded Age.

  * * *

  Although Vanderbilt vastly outstripped Drew in terms of fortune and preeminence, he would always harbor a curious affection for his rival. “About the only soft spot that the Commodore had in his nature,” W. A. Croffut wrote, “was a sentimental willingness to help Mr. Drew out of scrapes.” The two were close contemporaries—Vanderbilt was nearly three years older than Drew, but both were in their sixties when they moved into railroads, and they died two years apart. Vanderbilt saw in Drew, who had begun his career as a cattle drover, a man who had risen like himself from modest circumstances and a crude upbringing to command a fortune. Perhaps he was amused by Drew’s relentless pursuit of profit, whatever the underlying treachery and disregard for the public welfare.

  Vanderbilt may also have respected Drew as an adversary he had underestimated, as he would underestimate his eldest son, William H. Vanderbilt, known as Billy, before recognizing his talents. In his first encounters with Drew on the Hudson River piers, the Commodore openly scorned him as out of his depth: “You have no business in this trade,” he would tell Drew; “you don’t understand it, and you can’t succeed.” But then Drew fought him to a draw, and Vanderbilt felt compelled to give the drover his due. In time they would become friends of a sort, meeting on occasion to “relax in each other’s company, talk boats and money, and manhandle the language with impunity.”

  Although he was then known as an entrepreneur of Hudson River transport, Daniel Drew would ultimately earn a reputation as one of the great manipulators on Wall Street, in a period when an almost complete lack of regulation gave full scope to the most piratical speculators. Charles Francis Adams Jr. and his brother Henry would describe Drew as “shrewd, unscrupulous, and very illiterate,” and “a curious combination of superstition and faithlessness, of boldness and cowardice, of daring and timidity.” In general, Wall Street’s opinion of Drew was similarly dualistic—for every broker who regarded him as the embodiment of vigorous capitalism, another damned him as “a believer in the doctrine of total depravity.”

  Drew was expert at cloaking his swindler’s instincts in a conspicuous display of spiritual piety; an ardent Methodist, he rarely missed a Sunday in church or allowed himself to be seen in public without a well-thumbed prayer book in hand. On Wall Street that sanctimoniousness garnered him the nickname “Uncle Daniel.” Those who mistook him for “a country deacon,” however, did so to their misfortune, the veteran investor Henry Clews reported. Not a few of his business acolytes would discover at one time or another that Drew, at the same moment he was urging them to buy into a stock because it was destined to soar, was selling the same shares short and driving their price to the cellar.

  * * *

  Outwardly pious but possessed of a brigand’s soul, Daniel Drew, here seen in an etching based on a photograph by Mathew Brady, served his fellow railroad financiers alternately as ally and adversary.

  * * *

  The most enduring yarn about Drew dated back to his early career as a cattle drover. The legend was that before bringing his herds to market, Drew fed them on salt; the thirsty animals would drink almost to bursting just before being weighed and sold by the pound. The story might have a twice-told flavor, but some on Wall Street detected in it the origin of the term “watered stock,” applied to shares issued at a price far beyond their actual value—a common element of railroad “financiering” in the age of manipulation.

  Like Drew, the Commodore projected an outward appearance very much at odds with his true personality. Vanderbilt looked the part of a patrician, tall of stature with a condescending squint always playing in his eyes, whether they were trained on his partners at whist, his corporate adversaries, or his beleaguered son William, whom he had banished to a farm on remote Staten Island until he could be deemed worthy of succeeding to his father’s business. (Cornelius, who initially dismissed his son as “dull and commonplace” and was known to call him a fool to his face, eventually came to rely on him as a full partner and adviser—with good reason, for as wealthy as Cornelius was when he died, William would multiply the family fortune many times over and make “Vanderbilt” the most glittering name of the Gilded Age.)

  Even as a youth, Croffut reported, the future Commodore “was not blessed with popular manners. He was not conciliatory, and never seemed to care what people thought or said of him. . . . He was not choice of his language. He was sometimes harsh, abrupt, unceremonious, and even uncivil.” Or as a later historian of Wall Street put it, Vanderbilt displayed “the upbringing of a wharf rat.” For all that, Croffut allowed: “He was honest. He charged fair prices. He allowed nobody to underbid him.”

  Vanderbilt’s competitive spirit was a watchword. In 1849, when the California gold rush inspired the greatest western migration yet known to the young United States, he had sent a steamer south to Central America to transport forty-niners across Lake
Nicaragua as an alternative to the customary passage across Panama. When his engineers reported that the upstream route to get his steamer from sea level to the lake was not navigable, he assumed personal command, breasting rapids and other obstructions from the vessel’s bridge “to the great terror of the whole party,” as one of his engineers would recount. Vanderbilt’s route shortened the journey by six hundred miles, its price sliced in half to $300. He sold the Nicaragua service a few years later to a group of investors who unwisely tried to abrogate the sales contract by refusing to pay him. Vanderbilt decided against taking them to court. “Gentlemen,” he wrote them: “You have undertaken to cheat me. I won’t sue you, for law is too slow. I will ruin you.” And so he did, by launching a competing steamer fleet and driving them into bankruptcy.

  By the time Vanderbilt had turned forty, in 1834, he was worth a half-million dollars and owned a fleet of twenty vessels. An admiring correspondent for Harper’s Weekly would look back a quarter century later, in 1859, at the Commodore’s challenge to the steamboat monopolists whose “wealth and obvious soullessness” had previously held commerce and passenger traffic hostage. “In every case . . . the establishment of opposition lines by Vanderbilt,” the correspondent wrote, resulted in “the permanent reduction of fares. . . . The monopolies were sometimes ruined, but the public traveled at half the old rates. One may be sorry for the former, but, after all, the latter is entitled to some sympathy too.” Now Vanderbilt was about to transfer his instinct for cutthroat competition onto dry land.

  * * *

  IN THE THREE DECADES since Vanderbilt had rejected the invitation to invest in the New York & Harlem in 1832, railroad transportation had made its power known. Even before the Civil War, Americans had understood that long-range freight transportation would be crucial for developing the nation’s vast territory, but they assumed that the dominant mode of transport would be by water—that is, by riverboat and canal. A proposal by John Stevens of Hoboken in 1812 for a railroad traversing New York from the Hudson River to Lake Erie elicited mostly ridicule; the completion of the Erie Canal in 1825 seemed to have delivered the ultimate rebuke to the visionary concept.

  Yet rail transport’s superiority over the inland waterway was too obvious to ignore for long. One advantage was its speed: A trip on the Erie Canal’s 363 miles between Albany and Buffalo took up to four days; a locomotive would soon be able to cover the distance in less than five hours. Also, a canal had more or less to follow the hydraulic path of least resistance, but a railroad could begin and end almost anywhere.

  This would prove to be as much a drawback as a boon, for in the early years of the rail era, wherever the lines could go, they went. Builders laid out their routes incoherently, without regard for commercial demand or potential. “There was a road from Hartford to New Haven,” the financial analyst John Moody recounted in 1919, “but there was none from New Haven to New York.” By 1842, he noted, New York State possessed several disconnected stretches of railroad between Albany and Buffalo, even though the route between the state capital and the thriving grain depot on Lake Erie—the Queen City of the Lakes, as Buffalo was nicknamed—was a key to New York State’s prosperity. “It was not until 1836 that a plan was adopted for a single line reaching several hundred miles from an obvious point, such as New York, to an obvious destination, such as Lake Erie,” Moody wrote. That enterprise was the Erie Railroad, which would become famous not so much for the resourcefulness of its designers but for the creativity with which it was plundered by its buccaneering owners—Vanderbilt, Drew, and the disreputable duo Jim Fisk and Jay Gould.

  The America of that era was a youthful land—nearly two-thirds of its population was age twenty-five or younger. The country was poised to break out across a continent that for the most part was lightly populated by those of European descent, for some 96 percent of that population was nestled between the Mississippi River and the Atlantic Ocean, with about a quarter residing in cities.

  America was also an agrarian land, but its agriculture was overwhelmingly focused on a single crop: cotton.

  To say that cotton was king in mid-nineteenth-century America is no exaggeration. Sven Beckert, an expert on antebellum history, calculates that the crop accounted for more than half the nation’s exports through 1860. It was the source of considerable wealth not only among Southern plantation owners, but in the Northeast, where it fueled the business of textile mill owners, bankers, and traders (including the Brown brothers of Rhode Island, whose descendants would go into partnership in the 1930s with E. H. Harriman’s sons Averell and Roland to create Brown Brothers Harriman, still one of the nation’s largest privately owned banks). It is a discomfiting fact that the primacy of cotton in the American economy in the early nineteenth century made Northerners and Southerners alike complicit in the crime of slavery.

  Some historians treat cotton plantations, not the railroads, as “in fact America’s first ‘big business,’” Beckert has written, observing that the plantations were among the first businesses in America to become industrialized, with the installation of steam-powered spinning machines and looms.

  In the years before the war, moreover, the South had become increasingly dependent on railroad transport. The railroad brought boom times to an economy that had depended on the unruly Mississippi River as its circulatory system for goods. The South was relatively underserved by rail, having only about 9,800 miles of track in 1860, compared with 20,800 in the North. But even that meager infrastructure allowed plantation owners to reach eastern markets faster and more reliably than they ever could via river steamboats, molested as the water craft were by the Mississippi’s seasonal floods and droughts. The change made the South a net exporter of goods, chiefly cotton. “Railroads are the greatest revolutionists of the age,” wrote a Cincinnati newspaper editorialist in 1854. “They do not respect rivers; and locomotives outstrip steamboats.”

  While the railroads facilitated the export of cotton from the South, they also served as an escape route for slaves. One was Frederick Douglass, who described how he boarded a busy train in Baltimore with borrowed seamen’s papers one day in 1838 en route to Philadelphia and freedom. In choosing his plan, he recounted, “I considered the jostle of the train, and the natural haste of the conductor, in a train crowded with passengers.” The conductor’s entry into the Negro car to collect tickets was “a critical moment in the drama,” Douglass wrote, for in Maryland he could still be arrested as an escaped slave, but his successful impersonation of a sailor on his way to join his crew carried the day. The freedom of movement of people and ideas across a newly developing continent was among the “influences, social, moral and political” that Charles Francis Adams predicted would upend his native land.

  * * *

  This famous historical map published by Charles O. Paullin in 1932 shows the benefits—and the limits—of rail transport in the mid-1800s: It took two days to get from New York to Chicago by rail, but weeks to travel from the Midwest to the West Coast, then still beyond the railroads’ reach.

  * * *

  By the start of the Civil War in April 1861, most of the eastern half of the country had been crosshatched with rails from Maine to Georgia, across to Chicago, and from there due south to New Orleans; but the railroads penetrated no farther west than Kansas City. In 1857, according to a famous map published by the historian Charles O. Paullin, one could reach Cleveland from New York in a day and Chicago in two by rail. But then the tracks ran out and the burdens of overland travel took over: Traveling to San Francisco from Chicago required four weeks and Seattle nearly six.

  This imperfection disturbed a New York merchant named Asa Whitney. In 1844 Whitney was freshly home from a tedious trading trip to China. The outbound and return voyages, routed past the Cape of Good Hope, had each taken more than five months. The journey was protracted even for that era of intercontinental sail, and rendered almost intolerable in Whitney’s view by the afflictions of a cabin filled with the captain’s impen
etrable clouds of cigar smoke and excessive heat inside and out.

  Shortly after this voyage, Whitney experienced his first trip by rail, a brief journey in upstate New York at the unimaginable speed of twenty-five miles per hour. “Time & space are annihilated,” Whitney confided to his diary. “We pass through a City a town yea a country, like an arrow from Jupiter’s bow.” He converted the experience into a proposal he called his “Memorial relative to the construction of a railroad from Lake Michigan to the Pacific Ocean,” which an obliging New York politician introduced in Congress on January 28, 1845.

  Whitney assured the lawmakers that his three-thousand-mile railroad would be practicable and profitable. “To the interior of our vast and widely-spread country, it would be as the heart to the human body; . . . It would enable us, in the short space of eight days, and perhaps less, to concentrate all the forces of our vast country at any point from Maine to Oregon, in the interior, or on the coast.” The plan also offered salubrious spiritual aspects, for the railroad “would bring all our immensely wide-spread population together as one vast city the moral and social effects of which must harmonise all together as one family, with but one interest—the general good of all.”

  He asked Congress to cede him a permanent right of way sixty miles in width along the entire route. Sales of that acreage, he estimated, would provide him with an estimated $50 million to build the railway, and another $15 million to run the road until it could pay its own way. His audacious plan elicited nationwide comment, much of it derisive. The project was condemned as “silly and chimerical” and the brainstorm of a “visionary”—at a time when that word denoted a person tormented by hallucinations. But Whitney barnstormed the country to drum up support, and gradually the ranks of railroad supporters swelled, especially after the Treaty of Guadalupe Hidalgo ended the Mexican War in 1848 and brought the United States most of what would become six western states. Suddenly a southern transcontinental rail route from New Orleans to the Pacific seemed plausible, notwithstanding Whitney’s proposal for a northern route.