15 May 2022

Origins of the Santa Fe Railroad

From From the River to the Sea: The Untold Story of the Railroad War That Made the West, by John Sedgwick (Avid Reader / Simon & Schuster, 2021), Kindle pp. 83-85:

It no longer needed a visionary. It needed moneymen from the great capital centers of Philadelphia, New York, and Boston.

Of the three, Boston was the most railroad minded. It had been the nation’s first major hub, with any number of lines running in and out of the city. For a small city on a stub of a peninsula, Boston was surprisingly worldly. The first great Boston fortunes were made in the China trade, then amplified by investments in the textile mills of early industrialization, only to be compounded by provident marriages to the daughters of other wealthy Bostonians. The investors were referred to as the Boston Crowd because of this interbreeding. They were mostly drawn from that class of Bostonians—Brahmins was the derisive term—whose members were, in the main, Harvard-educated Episcopalians, with the occasional Unitarian thrown in, who lived for their clubs and thought of themselves as existing on a social plane only slightly down from God. They were like honeybees in a hive—industrious but interchangeable.

From this esteemed collective about the only one to emerge with a distinctive personality was Thomas Jefferson Coolidge—and he on the strength of a surprisingly frolicsome memoir he had privately printed, the copies limited to just forty-eight—who served as the Santa Fe president for a year starting in 1880. Coolidge took his middle name from the American president, his great-grandfather on his mother’s side, but his lineage could be traced back to a Coolidge who settled in Watertown, just downriver from Boston proper, in 1630.

Coolidge grew up in Canton, China, where his father was a partner in a Boston trading firm that dealt tea and opium in the China Trade. After Harvard, he married the daughter of William Appleton, clipper ship owner, European trader, president of Boston’s Second National Bank, congressman, president of the Massachusetts Hospital, and one of the richest men in the city.

Coolidge served as the ambassador to France, and on any number of important national commissions, but he prized above all else his membership in The Friday Club, which, he noted, had once blackballed the eminent Dr. Oliver Wendell Holmes, father of the Supreme Court Justice, for fear he would dominate the conversation. His memoir is rich in frivolity—meeting the actress Fanny Kemble at a monastery in the Alps, touring the Caribbean aboard his eighty-foot yacht, riding a donkey to the temple of Ramses in Egypt.

In recounting his life, Coolidge mentioned his yearlong presidency of the Santa Fe railroad only in passing. In October of 1878, he wrote, he took his son and namesake for an extensive tour of the West that covered almost ten thousand miles, particularly enjoying the Colorado portion aboard the Santa Fe Railroad with one William Barstow Strong. Coolidge did not mention that he was a director of the company at the time. When he returned to the West two years later, he noted that he again boarded a Santa Fe train, but this time stepped off at Topeka, where “I was elected president of the Atchison Railroad at the annual meeting.”

Six sentences later, he was done with it. “I resigned as soon as I could,” he wrote. “I think in about a year and a half.” He failed to mention that on assuming the presidency, he had purchased $700,000 worth of the company. The point being, he presided over the Santa Fe only as an investor. The moment the investment seemed unpromising, he sold it and got out.

None of the Boston Crowd served as presidents for more than a few years. But this was the way of the modern corporation as they came to define it. They were not managers, but investors, and that inclined them toward caution in a business that demanded daring.

13 May 2022

Railroad Boom and Panic, 1870s

From From the River to the Sea: The Untold Story of the Railroad War That Made the West, by John Sedgwick (Avid Reader / Simon & Schuster, 2021), Kindle pp. 66-68:

The western trains didn’t just build America out. They built it up, raising America into the industrial colossus that was well on its way to succeeding the British empire as the mightiest in the world. By 1873, the railroads had succeeded farms to become the nation’s largest employer, the repository of most of its capital investment, the near-total basis of the stock market, and the creators of the most spectacular private fortunes the world had ever seen. The nation’s preeminent railroad man, Cornelius Vanderbilt of the New York Central and other railroad holdings, was well on his way to accumulating a fortune of $100 million, requiring a new word, tycoon, to describe someone so unimaginably rich. Many more tycoons would follow.

The speed of the transformation was simply staggering. The Northern money that had previously been bankrolling the Civil War shifted to building trains. By 1873, the total railroad investment had tripled after the close of the war to $3.7 billion, taking the total number of train companies operating in the US to an astounding 364. They pulled the entire economy along with them, raising the number of businesses in America by 50 percent in one year, 1870, alone.

No one demonstrated this shift—and its hazards—more than the financier Jay Cooke. He had been a major player in financing the war effort, dispatching thousands of salesmen into the northern countryside to sell $1 billion in war bonds to villagers who wanted to do their bit. Now that the war was over, Cooke switched to selling Northern Pacific railroad bonds on a similar basis, creating a bank in Philadelphia as his repository. The Northern Pacific had been created by Congress as a second Union Pacific—a private corporation relying on federal funding—but it suffered from the same flaw, much magnified. If there had been little immediate market for the lands of the Union Pacific, there was even less for the lands of the Northern Pacific that ran farther up along the chilly outback of the north. Tracklaying went so slowly, and the returns were so meager, that the company was still a thousand miles short of completion when the Crédit Mobilier scandal broke in 1873, exposing the Northern Pacific’s massive vulnerabilities.

Alarmed, the partner who ran Cooke’s New York City branch frantically shifted his holdings to his wife’s name to preserve his fortune, then shuttered the bank to keep other Northern Pacific investors from retrieving their funds. Cooke then closed the main Philadelphia branch, causing the big bag of air that was the Northern Pacific to suddenly burst. “If I had been struck on the head with a hammer, I could have not been more stunned,” said one Northern Pacific executive. The Cooke bank’s collapse sparked a run on banks throughout the East, driving forty of them into bankruptcy, and shaking financial institutions everywhere. The president of the Bank of California killed himself when his bank collapsed. Five thousand businesses went under, taking $250 million in debts with them, dragging down lenders and driving up national unemployment to fourteen percent. A “mad terror” so convulsed the stock market, it had to close for ten days. Western Union stock dropped by half, railroads as a class by a third. A quarter of them, eighty-nine in all, went out of business.

In the past, there had been regular economic “panics”—the word for financial disruption—but they had been relatively brief. This one, the Panic of 1873, extended all the way through 1879. For its length, severity and sweep, it would rival the Great Depression as the greatest financial catastrophe in American history. This was the downside of the spectacular railroad boom: while both the railroads and the country grew together, they shrank together, too. Duluth, Wisconsin, had largely been created by the Northern Pacific, and when the railroad went into bankruptcy, Duluth became a ghost town, its population plunging from five thousand to thirteen hundred as refugees left to hunt for work elsewhere. The ruin stoked fury all along the railroad routes, culminating in the biggest job action in American history, the Great Railroad Strike of 1877, when eighty thousand railroad employees went out across the country, and a half million other workers followed in sympathy. In Pittsburgh, Pennsylvania Railroad strikers set fire to the roundhouse, igniting the train station and starting a conflagration that burned down three square miles of the city.

12 May 2022

Origins of the Union Pacific Railroad

From From the River to the Sea: The Untold Story of the Railroad War That Made the West, by John Sedgwick (Avid Reader / Simon & Schuster, 2021), Kindle pp. 35-37, 47:

The first train to venture into the uncharted West was the Union Pacific, a new railroad company that had been created by Congress solely for the purpose. Extending out from the Midwest, the UP had linked up with another federal creation, the Central Pacific, coming in from California. Together, they created that first transcontinental, the Pacific Railway. May 10, 1869, was a glorious day for the young country, as it marked the occasion when the two lines met at Promontory Point in the Mormon country north of Salt Lake City. It was a fantastic engineering achievement and a triumph of heroic perseverance, especially by the track layers, mostly Irish going west, mostly Chinese coming east, who engaged in a spirited competition to outdo the other. (That honor fell to the Chinese.) But when judged purely on commercial terms, the line was a dismal failure. It was the moonshot of the railroad era, an accomplishment that was only symbolically significant. It was all too telling that when Leland Stanford, one of the four powerful money men behind the Central Pacific, tried to slam home the Golden Spike with a monstrous hammer, he missed it entirely. This was especially embarrassing since the blow was to complete an electric circuit that would automatically send the thrilling news out over the telegraph wires that accompanied the tracks. A telegraph operator had to key in the word that flew around the world—“DONE!”—setting off a chorus of bell-ringing all across the country, led by Philadelphia’s cracked Liberty Bell. In San Francisco two hundred and twenty cannons boomed forth; Washington, D.C., fired a hundred more. Chicago greeted the news with the biggest parade of the century. And so it went, total jubilation all around the country. It was as if these intrepid Americans had discovered a new continent, come up with a spectacular invention, or won a world war. And, indeed, they had done all of these. What they had not done was find a sound business rationale for the endeavor.

A railroad to the Pacific had first been proposed by a New York merchant, Asa Whitney, back in 1844, and was long championed by the visionary engineer Theodore Judah. But it was the former railroad lawyer Abraham Lincoln who pushed the initiative through as president in the war year of 1862. Lincoln had also set the width of track for the railroad, establishing the peculiar distance of four feet eight and a half inches as the national standard for a train system.

[Endnote:] Previously, American trains ran on a maddening hodgepodge of track widths. When Lincoln went by train from Springfield, Illinois, to New York City to receive the Republican presidential nomination for president in 1860, his trip took four days because of all the delays in transferring to trains on five different widths of track. If he had ridden a single width of track, the trip would likely have taken one.

10 May 2022

Nationalizing the Opium Trade

From Imperial Twilight: The Opium War and the End of China's Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 446-447:

With the advent of a free, legal, and open Asian commerce in opium, the native merchants of India and China moved to dominate the trade, squeezing out the Europeans who had acted as go-betweens in the past. By the 1870s, the India-China opium trade was so firmly locked up in the hands of native traders on both sides that there was no longer much money to be made by the Western firms that had pioneered the “country” trade in the early part of the century. In the face of declining profits, Jardine, Matheson & Co. (now run by a slew of nephews and other descendants of the founders and their partners) pulled almost entirely out of the opium trade in 1873, joined by other large Western firms. Domestic production in China, meanwhile, kept rising—ultimately to such stupendous heights that it would dwarf the continued imports of the drug from India. The dawn of the twentieth century would find China producing ten times as much opium internally as it imported from abroad, an explosive abundance of cheap domestic narcotics that would create a public health emergency worlds beyond even the most exaggerated estimates of what had existed in the 1830s prior to the Opium War. So much for the virtues of legalization.

In spite of the best efforts of moral activists at home, the British government would ultimately do nothing to scale back the dependence of British India on opium revenues or otherwise try to help prevent the growth of the drug’s use in China. Meanwhile, the Qing dynasty would continue in its failure to suppress or even regulate the use of opium by the general public in China, wallowing in a quagmire of official corruption it could not escape. Up to the twentieth century, though, Britain’s role in that process would be dwelled upon more by westerners than by the Chinese. It was the English-speaking world that condemned it as “the Opium War” from the beginning, while Chinese writers through the nineteenth century, including Wei Yuan, simply referred to it as a border dispute or foreign incident. To them, opium was a domestic problem and the war was a minor affair in the grand scheme of China’s military history. Only after the fall of the Qing dynasty in 1912 did historians in China begin to call this war “the Opium War” in Chinese, and only in the 1920s would republican propagandists finally transform it into its current incarnation as the bedrock of Chinese nationalism—the war in which the British forced opium down China’s throat, the shattering start to China’s century of victimhood, the fuel of vengeance for building a new Chinese future in the face of Western imperialism, Year Zero of the modern age.

08 May 2022

Opium-funded Philanthropy in India

From Imperial Twilight: The Opium War and the End of China's Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 432-433:

Funneling the vast fortune from his China trade back into real estate in Scotland, Matheson would die the second-largest landowner in the entire United Kingdom.

Neither James Matheson nor William Jardine went in for significant philanthropy as John Murray Forbes’s uncle Thomas Handasyd Perkins had done in Boston, but a loftier place in public memory was reserved for Jamsetjee Jeejeebhoy, Jardine’s longtime associate in Bombay. With a fortune made by dominating the opium and cotton export trade of western India, Jeejeebhoy poured his own money locally into Parsi charities, famine relief, schools, hospitals, and public works, establishing himself as one of the leading figures (the leading figure, by some fawning accounts) who turned Bombay from a colonial backwater into a modern global metropolis. A director of banks and newspapers along with managing his business empire and funding many charitable works, Jeejeebhoy was a steadfast supporter of British rule, and on February 14, 1842, just as the war in China was nearing its end, Queen Victoria knighted him. “I feel a high, I hope a justifiable pride,” he said at the time, “in the distinction of being enrolled in the knighthood of England, marked as that order has ever been by the brightest traits of loyalty and honor.”

Jeejeebhoy was the first Indian to become a British knight, and in 1857, Victoria would make him a baronet as well. The name of “Sir J. J.,” as he is known colloquially, adorns schools and hospitals in Bombay to this day, the great philanthropist of the city’s Victorian past. As one Gujarati newspaper rhapsodized at the time of his death in 1859, “His hospitals, rest houses, water works, causeways, bridges, the numerous religious and educational institutions and endowments will point to posterity the man whom Providence selected for the dispensation of substantial good to a large portion of the human race.” Of the fact that so much of that “substantial good,” dispensed to such a “large portion of the human race,” was made possible by Jeejeebhoy’s sale, through Jardine and Matheson, of Indian opium to Chinese smugglers, little is said.

06 May 2022

Parliament Debates the Opium War

From Imperial Twilight: The Opium War and the End of China's Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 405-407:

The motion finally came to a vote at four o’clock in the morning of April 10 [1840] after three grueling nights of debate. Five hundred and thirty-three weary parliamentarians filed out into the division lobbies, and when their votes were tallied, it turned out that Palmerston had prevailed by the slimmest of margins. A majority of just nine votes—271 to 262—allowed Melbourne’s government to escape censure and effectively gave Palmerston’s war in China a sanction to proceed as planned. The outcome was so close that if the very cabinet ministers whose conduct was on trial had not been permitted to vote in their own favor, the motion to condemn them would have passed. For that reason it had been said that if the majority were fewer than ten votes, Palmerston and the other ministers would still agree to resign. It was, but they did not.

It is impossible to measure exactly how much influence George Staunton had on that outcome, but at least seven or eight of the Whig lawmakers had openly expressed their willingness to defy their party and oppose the China war if the debate should convince them it was morally unjust. If Staunton had declined to support Palmerston, or even had spoken against him, it would have taken just five of those waverers to change their votes and the entire outcome would have been reversed. James Graham’s resolution of censure would have passed, Melbourne’s government would have been brought down, and the Opium War might have been prevented.

An angry opposition press hunted for parties to blame. Some faulted Graham for couching his resolution in such political language of “negligence” rather than targeting the war head-on: if the Conservatives had “proposed to stop the war at all events, and to prevent every infraction of the laws of China with respect to opium—so surely would Parliament have gone along with them, in censuring the conduct of the Ministers,” said the Spectator. Another paper observed that though the ministry survived the vote of censure (barely), nevertheless “they are condemned by two hundred and sixty-two of the people’s representatives, and by the nation at large the principle of the war is all but universally condemned.” A majority of just nine votes out of more than five hundred “would have been fatal to the existence of any preceding Administration,” said one critic, “and it argues a contempt of the opinion of Parliament, and a degree of assurance never equalled, to persevere in plunging the country into war on the strength of such a vote.”

Any lingering hopes that the closeness of the vote in the House of Commons might still derail the war were destroyed a month later with the failure in the House of Lords of a much more explicit motion to blame the crisis on British opium traders. Palmerston’s Conservative antagonists had a clear majority in the upper house, and the motion was expected to pass until the elderly Duke of Wellington—the general who had defeated Napoleon at Waterloo, Britain’s greatest living military hero, a former prime minister, and a Conservative—broke with his party to deliver an adamantly pro-Palmerston speech that silenced the motion’s supporters and sent it to a quick death.

Wellington said he had looked into the cause of the war and was positive that “it could not be opium.” The lanky, seventy-one-year-old “Iron Duke” argued that it was entirely about the protection of British lives in the far corners of the world, an unquestionably fair use of military power. The dispatch of a naval fleet was the only fitting and just response, he believed, to the rash and violent actions of Lin Zexu against Elliot and the British merchants.

03 May 2022

China's Silver Shortage, 1830s

From Imperial Twilight: The Opium War and the End of China's Last Golden Age, by Stephen R. Platt (Knopf, 2018), Kindle pp. 304-307:

There was nothing the government could do about the weather, but the root cause of the economic turmoil in the 1830s, and the problem from which many of the others grew, was a human one: China’s monetary system had gone haywire. It was mainly a problem of currency, of which the Qing dynasty had two primary forms: copper for small transactions and silver for large ones. Copper came in minted coins (with holes through the middle so they could be strung on a loop for convenience), while domestic silver—nearly pure and known in English as “sycee”—was unminted, traded by weight in units of measurement called taels that were just under an ounce. In normal times, a tael of silver was worth a thousand copper coins, and, value for value, the excessive difficulty of moving large amounts of copper between provinces meant that silver was the medium through which all long-distance trade was conducted within the empire. Silver was also, significantly, the basis on which tax quotas were assessed. By contrast, copper was the medium of the rural marketplace and menial wages. Nearly all of the income and savings of the lower classes of China—farmers, hired laborers, craftspeople—were in copper coins.

The crisis was that the value of silver had begun to rise sharply, and as it rose the exchange rate between silver and copper skewed out of control. From the ideal rate of 1,000 copper coins per tael of silver in the eighteenth century (even less at times, which was a boon for peasants since it meant their copper money was worth more), it had risen to 1,200 by the time Daoguang came to the throne. By 1830 it reached 1,365 copper coins per tael of silver and showed no signs of stopping. Since taxes were assessed in a fixed amount of silver, which had to be purchased with copper currency, this meant that by the early 1830s the peasants of China had suffered a nearly 40 percent increase in their effective tax burdens for reasons none fully understood. And as with nearly every problem in the empire, the corruption of officials made a bad situation even worse, as tax collectors commonly charged even higher rates of exchange so they could pocket the proceeds. By the late 1830s, some regions were reporting copper–silver exchange rates as high as 1,600 to 1, with tax collectors independently demanding as much as 2,000 copper coins per tael of silver owed. This dramatic decline in the worth of copper currency was disastrous for the general population, piling economic hardship on the poor who could scarcely bear it and sparking widespread tax protests that layered on top of all the other sources of dissent against the government. But although the emperor could occasionally grant tax amnesties to regions afflicted by floods or drought, the government quite desperately needed every tael of revenue it could get and so the exactions continued.

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Even with that outflow of sycee silver, however, the inflow of Spanish dollars to purchase tea and silk at Canton should have been able to maintain a relatively steady overall silver supply in China (and in fact, since the late eighteenth century Spanish dollars had been preferred even over native sycee in some of China’s most important domestic markets). But on that count, a range of forces far beyond China’s borders came into play. First, it had been American merchants who brought most of the silver to China in the early nineteenth century (fully one-third of Mexico’s entire silver output between 1805 and 1834 was carried to China by Americans). But a shift in U.S. government monetary policy in 1834 made silver more expensive for American merchants, so they switched abruptly to using bills of exchange—which were acceptable to the Hong merchants but resulted in a decline in the amount of tangible silver entering the country from abroad. With the drop in American imports, China, which for centuries had been the world’s largest net importer of silver, unexpectedly turned into an exporter of the metal.

In the even bigger picture, though, what the Chinese scholars who blamed foreign trade and opium for the scarcity of silver in China did not realize was that it wasn’t just a Chinese problem: by the 1820s, silver was becoming scarce everywhere. Most of the world’s supply at this time had come from mines in Spanish Mexico and Peru (thus the importance of the Spanish dollar), but national revolutions in Latin America that began in the 1810s shut down those mines and choked off the world’s largest fonts of the precious metal. Global production of silver declined by nearly half during the 1810s—the same time its value began to creep upward in China—and it continued to decline during the decade that followed. The ramping up of the opium trade in 1820s China thus coincided fatefully with the onset of a global slump in silver output that would last for the next thirty years.

Regardless of where the specific blame lay, it was a devastating confluence of economic forces for China: the loss of sycee through the opium smuggling trade, the global scarcity of silver after the Latin American revolutions, and the drying up of American silver imports into China together helped cause a catastrophic decline in the empire’s supply of the metal. And it was a vicious cycle, for as silver became more valuable in China, wealthy families and businessmen would hoard it, removing even more from circulation and making the problem worse.