ENTREPRENEURS OR CORPORATIONS: DIVERGENT PATTERNS OF CLASS FORMATION I THE EARLY ANTHRACITE MINING TRADE, 18154860

Mark C. Jepson
ABSTRACT
Theories of capitalist classformation presuppose that the historical triumph of the business corporation over the individual proprietorship in major industries derived from either the increasing capital requirements, or the increasing organizational complexity, of industrial development. Similarly, economic historians of the Pennsylvania anthracite mine industry argue that the corporate imperative originated in the economic requirements of mining and transporting coal. In this study, I challenge both the theoretical and empirical forms of the argument which reduce the rise of the corporation and the decline of the individual enterprise to industrial requirements. Instead, I employ an historical comparison of the anthracite industrys three commercial districts to show how classformation, whether by corporations or by individual proprietors, resulted from political class struggles. Specifically, IJind that the strugglesfor corporate charterprivileges in the state legislature determined the pattern of class formation in anthracite mining. The finding

Political Power and Social Theory Political Power and Social Theory, Volume 16,342 Copyright 0 2003 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 019%8719/doi:10.1016/S0198-8719(03)16001-2

MARK C. JEPSON

is significant, first, for underscoring the extra-economic origins of class formation, and, secondly, for revealing the historically contingent quality of class formation.
Unless you becomemore watchful in your States and check the spirit of the monopoliesand their thirst to exclusiveprivileges,you will, in the end, find that the most importantpowers of Governmenthave been given or bartered away and the control of your dearest interests have been passedinto the hands of these corporations. - 1837 FarewellAddress President AndrewJackson

INTRODUCTION
Originating and Central Questions
Not long after the House of Morgan consolidated the anthracite coal mining industry into a single "community of interest," a federal commission appointed to study the anthracite coal strike of 1902 pronounced, "there is probably no commodity entering into human consumption which possesses so much the character of a natural monopoly as the anthracite coal of Pennsylvania" (quoted in Aurand, 1971, p. 15). Like all such statements made after the fact, questions about historical possibilities or alternate outcomes are pre-empted by the very fact itself. Few have questioned the inevitability of monopoly in anthracite mining precisely because of the prevailing belief that individual proprietorship perished from natural causes (i.e. market forces). From a general theoretical perspective, this study investigates the question of how, and to what extent, politics influences capitalist class formation. More specifically, how can individual proprietors, whether in trade, industry, or agriculture, resist corporate development through political struggle? The central empirical question is, therefore, not why corporate concentration had to happen in anthracite mining, but why, for almost five decades, individual enterprise reigned supreme as the business model of the anthracite coal industry in the largest and most productive district of the industry, at a time, no less, when the other districts were undergoing rapid corporate development and concentration? How did political struggle determine these divergent paths of development and forms of class relations.'?

One Industry, Two Patterns of Class Formation

While rapidly expanding urban coal markets ensured the development of Pennsylvania's anthracite coal fields in the early nineteenth century, they did not

Entrepreneurs or Corporations

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I I I

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Fig. 1.

Anthracite Mining Fields and Commercial Districts. Source: Shegda (1952, p. 11).

determine how, or by whom, the fields would be developed. From the first "official" shipment in 1820,1 the anthracite coal trade was geographically divided into the Schuylkill, Lehigh, and Wyoming districts. The map above (Fig. 1) depicts both the anthracite trade districts and the anthracite mining regions they encompassed. The three commercial districts developed close together in time and place, and, to a great extent, employed the same methods to produce the same product for the same markets. For the present analysis, the most important difference between the districts was summed up in 1833 by Schuylkill journalist George Taylor (1833, p. 3): "The Schuylkill Mines are worked by individuals in their individual capacity [whereas the] Lehigh and Lackawanna [Wyoming] mines are owned and worked exclusively by incorporated companies." In other words, the Schuylkill district

MARK C. JEPSON

was developed by individual proprietors, and both the Lehigh and the Wyoming districts were developed by corporate monopolies. The coal trade of both the Lehigh and the Wyoming districts operated under a single, all-inclusive, management. The separate branches of the trade were, from the very beginning, integrated into a single corporate structure, and carried on by separate corporate "departments," whose various expenditures were totaled and then subtracted from coal sales receipts at the end of each season. "The Lehigh Coal and Navigation Company," submits a prominent canal historian (Patton, 1987, p. 15), was "the first vertically integrated company of its type in America .... The Delaware and Hudson Company, like the Lehigh, was a multi-functional enterprise which mined anthracite, transported coal by means of waterway and gravity railroad, and marketed the coal in New York City." The Lehigh Coal and Navigation Company's (hereafter LCNC) monopoly of the Lehigh coal trade lasted for 17 years (1821-1837), while the Delaware and Hudson Coal Company's (hereafter DHCC) monopoly of the Wyoming coal trade lasted for 21 years (1829-1850). Even after the two monopolies were broken, most of the coal in these districts continued to be produced by the top producers. During this time, the average output of each of these highly-capitalized corporate firms exceeded 100,000 tons per year, or ten times the average individual output of Schuylkill's one-hundred operators. While a handful of corporate competitors gradually entered the Lehigh and Wyoming districts after 1840, individuals were completely locked out of the Lehigh trade, and never produced more than 5% of the output of the Wyoming anthracite trade. 2 In contrast, the Schuylkill Navigation Company's [hereafter SNC] distinguishing characteristic was its narrow field of enterprise. Of the three corporations, the SNC was the consummate canal company, confined to one of the four branches comprising the Schuylkill coal trade. While the SNC also enjoyed a monopoly over the Schuylkill coal traffic in the earliest decades of the anthracite coal trade, the other three branches - the land business, the shipping business, and the mining business - were developed by different segments of individual proprietors, which were themselves internally segmented. By the end of the 1830s, roughly two dozen local and absentee interests controlled the land business, 258 independent shippers, or "boatmen," hauling coal in 600 vessels, conducted the shipping business (Cushing, 1836, p. 32; Jones, 1908, pp. 131,135), and no less than 100 individual proprietors, comprised of master colliers, marginal petty producers, "fly-by-night" outfits, and speculators, managed the mining business (Anthracite Commission, 1834, pp. 270, 272; Taylor, 1855, pp. 362, 393). 3 In all, between 350 and 400 separate going concerns engaged in the Schuylkill coal trade in an average season prior to the Civil War, and probably more in good years. Despite what one authority has called the "grossest inefficiencies" and "distressing economic practices,"

Entrepreneurs or Corporations

this diverse class of entrepreneurs managed to produce vast amounts of coal, and "unlike independents elsewhere, they stood at its [the anthracite industry's] productive center" (Yearly, 1961, pp. 58, 64). The important point to make is that while hundreds of individual proprietors came and went very quickly, individual proprietors, as a class, proved to be quite resilient. With individual proprietors at the "productive center," the Schuylkill District dominated the anthracite coal trade for forty years, supplying roughly two-thirds of the nation's anthracite between 1825 and 1865.

Theoretical and Empirical Rationale

In the remainder of this paper, I support two propositions that challenge the orthodoxies of two otherwise rival theoretical traditions. The first proposition is that the historical arrangement described above originated in "political" struggle, not in market forces. The emphasis on politics defies the market bias held by economic historians of U.S. industry in general, and of the anthracite industry in specific. The second convention that I challenge holds that class struggle must take place between classes, or rather between the capitalist class and the working class. Following Roy (1997, p. 271), I define class in terms of property relations: "If class is defined as peoples' historically constructed relationship to the means of production, those relationships are embodied in the rights, entitlements, and responsibilities enforced by the state, that is, property." The relevant question here is whether or not conflict within classes, or between segments of the same class can be conceived as class struggle. Are class interests and class struggle rooted in the dichotomous condition of having and not having property, or can different segments of capitalists have different relationships to the ownership of the means of production, and therefore have different and even conflicting class interests? In this analysis, I show that property relations can vary among property owners, and that property rights are not uniformly distributed among capitalists. Variations in property rights, entitlements, and responsibilities can result in unequal economic opportunities in the form of market access and control, and access to capital. Indeed, such disparities in property within the capitalist class can foster perceptions of unfair competition, and cultivate distinct and hostile class interests and identities that lead to the formation of class segments. In Zeitlin's (1980, pp. 6-7) words, class segments are differentiated by their relatively distinct locations in the process of production and appropriation of surplus value. As A consequence, they may have specificpolitical economic

M A R K C. J E P S O N requirements and concrete interest in contradiction to those of other segments of the class .... Class segments, therefore, have the inherent potential for developing a specific variant of intraclass consciousness and common action in relation to other segments of the class.

I propose that the intra-class political struggles - between individual entrepreneurs and corporations - in the early anthracite trade were class struggles. While Schuylkill's individual proprietors and their corporate rivals were, as owners of the means of production, capitalists, they were also distinct segments of capitalists, with distinct conceptions of property. These are not mere quantitative distinctions. As I shall show, the defenders of individual proprietorship conceived of these property distinctions in stark moral terms that assailed the emerging set of corporate property rights as unfair privileges, in violation of individual property rights. 4 To conceive of the intra-class struggle between individual producers and corporations as a political struggle, necessarily implicates the state in this struggle. In the final analysis, the class struggle was a political struggle between individuals and corporations over the legalization of their distinct property relations. The practical goal of politics was, therefore, to persuade state legislators to recognize and routinize their property relations as law. The political task of legalizing property relations - of endowing them with the force of law - was especially crucial to the corporation, since unlike individuals, corporations could not exercise property rights, let alone exist, unless they were chartered by the state government. It was no accident, therefore, that the individual producers' political campaign against the corporation was focused on defeating charter petitions at the State House in Harrisburg.

Efficiency Theory and Class Formation

While the concept of politics holds a central place in the study of working-class formation, it is conspicuously absent in the study of business class formation. Most notable among business historians and economists, Alfred Chandler (1977, 1990) argues that the large corporation replaced individual proprietorship as the dominant mode of business ownership in the United States because corporate enterprise is more efficient than individual enterprise. The corporation, says Chandler (1977, p. 8), "first appeared, grew, and continued to flourish in those sectors and industries characterized by new and advancing technology and expanding markets." The economies of scale and increasing productivity yielded by technology endowed the corporation with a "powerful competitive advantage" over less-efficient "small traditional enterprise" (Ibid., p. 6, 244). 5 As industrial capitalism develops, individuals presumably become incapable of satisfying the necessary requirements

Entrepreneurs or Corporations

of large scale production and distribution, and must necessarily succumb to better equipped, better financed, and better managed corporations. 6 Empirical studies of anthracite development have, by and large, embraced this "efficiency" model of corporate development.7 More specifically, variations in the pattern of mine ownership are typically explained by variations in the cost of mining and shipping coal. Accordingly, most accounts of the early anthracite trade attribute the success of individual proprietorship in Schuylkill to its unique geology. As long ago as 1836, when the Schuylkill coal trade was still in its infancy, an article in the North American Review stated, "The Schuylkill region seems to have been marked by nature for individual enterprise."8 Consistent with econornistic explanations for the rise of the corporation, studies of anthracite development, and of mining in general, underscore the significance of capital and technology. Anthracite historians (e.g. Aurand, 1974; Binder, t974; Jones, 1914; Miller & Sharpless, 1985; Palladino, 1990; Roberts, 1901; Schaefer, 1977; Yearly, 1961) have uniformly embraced this outlook by attributing Schuylkill's atypical pattern of mine ownership to the district's favorable geology, which required only crude and inexpensive technology to mine, and, as a result, opened the mines to capital-poor individuals. In one form or another this naturalistic view of anthracite mine development has stood unchallenged for over a century and a half. Most recently, social historian Anthony Wallace (1987, p. 70) proclaimed: "The reason for the presence of so many small collieries [in Schuylkill]... was geology .... The steep inclinations and frequent undulations of the strata and eons of erosion, had produced many outcrops where coal could be mined cheaply and on a small scale." In fact, the geological and technological constraints on class formation were not as rigid as such conventional wisdom suggests. A comparison of the Schuylkill, Lehigh, and Wyoming districts reveals that the patterns of ownership (i.e. individual or corporate) originated independently of either the character of the coal strata, or the method of mining. Despite certain geological variations, opportunities for low cost extraction abounded in all three regions prior to 1840. All three possessed extensive anthracite deposits that could be mined by quarry, drift, slope, or shaft, and removed by simple "cottage industry" procedures (i.e. undercutting). In time, the technical requirements of pursuing the coal veins deep into the earth would limit the access of capital-poor producers. But the abundance of easily accessible surface deposits in all three districts kept anthracite mining within the reach of individual capital in the first four decades of the trade (i.e. 1820-1860). Another version of efficiency theory attributes the differences in class formation in anthracite mining to differing transportation costs. Given the need for capital-intensive improvements in transportation, the development of heavily capitalized corporations was, according to this view, essential for the commercial

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MARK C. JEPSON

development of these remote mining districts. 9 The unprecedented concession of both mining and shipping privileges to the LCNC and DHCC (in 1822 and 1825, respectively) was, therefore, considered necessary to induce capitalists to invest their capital on the risky canal projects, even if such privileges invariably resulted in regional mining and shipping monopolies. The Assembly's "extraordinary relinquishment of sovereignty," asserted the Pennsylvania Anthracite Coal Commission of 1834, was an inducement scarcelycommensuratewith the magnitudeand hazard of the enterprise.Few other men or other companies could have been found willing to commence the work upon less favorableterms, and much more extensiveprivilegeswould no doubt have been conferredby the state, had they been deemedessentialto the accomplishmentof the object.I Unlike the LCNC and the DHCC, the SNC was not permitted to engage in the coal trade, or to own or operate boats on its canal. 11 The Commission (1834, p. 195) concluded that mining privileges were not considered necessary to attract capital: "Had similar privileges been considered necessary to ensure the completion of the work, they would no doubt have been conferred b y t h e Legislature upon the Schuylkill Navigation Company?' The Legislature's economic justification for granting unlimited corporate privileges to the LCNC and the DHCC was founded on the myth that the mineral riches in the Lehigh and Wyoming districts would not have been developed had the companies been restricted to the canal business. Capital, by this logic, would have been scared off by the "howling wilderness" unless the state provided it with adequate security; that is, the tacit assurance of monopoly. Just the opposite was true. The fact that the SNC was able to raise the capital to construct the Schuylkill Canal is proof that special corporate privileges were not needed to attract investors. Moreover, after the success of the Erie Canal, private investment poured into canal construction throughout the northeastern United States. The subsequent construction of the Morris Canal, the Delaware and Raritan Canal, and the Union Canal by companies confined to the canal business by their charters, demonstrates that corporations would and could finance anthracite canals without additional state concessions. 12 The development of the Pennsylvania State canal system between 1826 and 1834, particularly the North-Branch of the Pennsylvania Canal and the Delaware Canal, provided yet another model of anthracite canal development. Contrary to the conventional wisdom, the state did not undertake these projects for the want or timidity of private capital. Corporate interest in both the Delaware and North Branch canals was strong before and after the state decided to develop them as "public works "'13 The lesson of these public and private works is that the development of both mines and canals was possible without special corporate privileges or monopoly protection.

Entrepreneurs or Corporations Argument

11

As a general proposition, I argue that the emergence of individual proprietors in industry requires a particular configuration of property relations, referred to here as "industrial segmentation" That is, for individuals to succeed against corporations, property relations which limit producers from operating in more than one branch of industry must first be established. By limiting the products and services firms can produce, and the markets in which firms can enter, such segmented relations significantly limit the organizational structure and size of firms. Moreover, segmentation of industry increases the individual's chances of entry by limiting capital requirements, and by making the separate branches economically dependent upon each other. If no limits are imposed on the sphere of economic activity, then corporations are free to exploit their greater capital resources to buy-out, force-out, or keep out individual competitors. 14 In the empirical analysis that follows, I find that the key political struggles that produced the divergent patterns of class formation in the early anthracite trade - individual proprietorship in the Schuylkill District and corporate monopoly in the Lehigh and the Wyoming districts - occurred in two historical phases. In the first phase (1815-1825), the political struggles for corporate privileges (property rights) by the three canal companies established two very different constellations of property relations. In the Schuylkill District, the Schuylkill Navigation Company's failure to win multiple charter privileges resulted in a segmented industrial structure that opened the mines to individual operators. In the Lehigh and the Wyoming districts, the LCNC's and the DHCC's success in winning multiple charter privileges (i.e. land-holding, mining, and shipping privileges) from the Legislature allowed them to monopolize the coal trade by creating economic barriers to entry. Whereas the struggles of the first phase involved the creation of property relations, the struggles of the second phase (1825-1860) involved their preservation. The LCNC and the DHCC monopolies, and Schuylkill's individuals, all sought to defend their nascent class regimes by defeating the charter petitions of mining companies in the state legislature.

ANALYSIS Phase One of Class Formation: The Canal Companies' Political Struggles for Corporate Privileges If economic necessity, in the form Of mining and transportation costs, was not the decisive factor in either the chartering of the canal companies or the formation

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MARK C. JEPSON

of classes in the early anthracite mines, then what was? The crucial difference between the chartering of the SNC and the chartering of the LCNC and the DHCC was not capital requirements or capital scarcity, but politics. The genesis of class formation in the anthracite mining can be traced to a single political decree: The Pennsylvania Legislature's rejection of the SNC's original charter petition in 1813. The reason the SNC did not have the same unlimited privileges as the LCNC and the DHCC, was not because it did not want them, but because it was denied them. In fact, the company's founder, Josiah White, had requested mining and shipping fights in the original charter petition. But White's plan to improve the fiver faced very determined opposition from all sides. Local representatives from Berks, Chester, Montgomery, and Schuylkill counties opposed the petition (Powell, 1978, p. 81). As early as 1811, White had alienated farmers in these rich agricultural counties of southeastern Pennsylvania by charging a fiftycent toll on each boat passing through his locks on the Schuylkill River (Shegda, 1952, p. 34). The farmers, and the merchants who bought their goods, became staunch opponents of White's improvements. They feared that White would attempt to make the river a private thoroughfare, and extort even higher tolls by monopolizing the traffic. Thus, as Powell (1978, p. 81) observes, "although citizens from these counties believed in the value of the project, they did not want it to be controlled by Josiah White." In 1815, "after three years of political bickering," the legislature finally incorporated the Schuylkill Navigation Company, but only because the company had by then, "passed into the hands of others with their own plans," and abandoned the request for landholding and mining privileges. Bitter, but not broken, White turned his ambitions east to the Lehigh District. In August of 1818, White and his associates formed the Lehigh Navigation Company to undertake improvements on the Lehigh River. But rather than petition the Legislature for a corporate charter, White only requested the right to make improvements on the fiver and charge tolls as compensation. This time, White met no political opposition. Whereas the Schuylkill Canal was destined to become a "major thoroughfare," pitting "many competing and influential interests," the Lehigh River flowed through more remote and unsettled country, and was virtually ignored by farmers and merchants (Hansell, 1992, p. 43). Moreover, the old Lehigh Coal Mine Company had already lost $30,000 trying to clear the river of the "sharp slabs of slate and rock" which "jutted out the channel.., like the jagged teeth of a prehistoric monster" (Korson, 1960, p. 33). The seeming futility of the Lehigh improvements worked to White's advantage in the state legislature. To some members, White's latest scheme to convert the Lehigh into a coal highway was more "chimerical" than threatening (Jones, 1908, p. 10). Even the chairman of the legislative committee which awarded the new company "sole jurisdiction of the river Lehigh," was said to have joked, "Gentlemen, you have

Entrepreneurs or Corporations

13

our permission to ruin yourselves (Anthracite Commission, 1834, p. 194). Using his own savings, and the funds he solicited from a small group of Philadelphia investors, White managed to complete the forty-six mile Lehigh Canal and to open the Summit Hill Mine in two years. But the costs of operating the mine and the canal far exceeded the revenue from coal sales and canal freight. On the verge of financial ruin, White was forced to go back to the Legislature in 1822, and request a corporate charter. 15 With creditors pressuring the company, and private investors fearing that they would be held legally obligated for the companies mounting liabilities, incorporation promised limited liability protection and an infusion of fresh capital. Fortunately for White, the attitude of Pennsylvania legislators towards chartering had changed from hostile to liberal in the decade following his first charter petition for the SNC. The catalyst for this new attitude was the completion of the Erie Canal in 1817. The following year, Samuel Breck, a merchant and state senator from Philadelphia, called upon the city's mercantile class to rally "in defense of our property," and to "counter-act these threatened evils," by building a vast network of canals which would rival the Erie Canal. 16 The specter of commercial isolation and decline aroused a "popular movement" in Pennsylvania, which supplied the LCNC with the political momentum it needed to obtain its unprecedented corporate charter in 1822. Under the pretext of Keystone economic sovereignty, Philadelphia capitalists, and their political representatives, ushered in a new and more permissive era of corporate chartering. If the spirit of state protectionism truly guided chartering at this time, why, then, in 1825, did the Pennsylvania Legislature charter the New York-based DHCC with unlimited corporate privileges? The charter of the DHCC was originally granted with the expectation that Pennsylvanian's would benefit from the Delaware and Hudson Canal. One key provision of the DHCC's Pennsylvania charter reduced the canal tolls allowed by its New York charter, and gave the merchants, farmers, and legislators of Lucerne County reason to believe that the Delaware and Hudson would operate as a public highway over which they could affordably ship their commodities to ports on the eastern seaboard (Powell, 1978, p. 126). But securing a charter in Harrisburg would require more than winning the support of the provincials. No charter could win approval from the legislature without the political support of the powerful Philadelphia delegation. In exchange for their support, Philadelphian's expected the new canal to flow south to Philadelphia along the Delaware River. The expectation was not unreasonable, since the company's founders had, eight years before, delivered several shipments of coal to Philadelphia along the same route. Indeed, in the DHCC's charter petition to the Pennsylvania Legislature, the company gave every indication that it would construct a slackwater navigation on the Delaware River, just as the SNC had done

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on the Schuylkill River. To be sure, the first seventeen miles of the Delaware and Hudson Canal did extend eastward from the company's mines at Carbondale to the Delaware River. One year into construction, however, the company abandoned the plan of constructing a slackwater navigation down the Delaware River to Philadelphia, and instead continued digging eastward into New York State, until the canal reached the Hudson River, 109 miles from its Pennsylvania head waters. Company officials claimed that they had changed the route because the Philadelphia coal market was already served by the Lehigh and Schuylkill canals. But the fact that the managers and engineers of the DHCC refused to disclose the actual route of the canal to the public during its construction suggests that the company had never intended for the canal to serve Philadelphia. By keeping the true destination of the canal a secret, the DHCC succeeded in avoiding a political backlash in Harrisburg that could have jeopardized its charter privileges (Powell, 1978, pp. 118, 127). In the end, the Delaware and Hudson Canal was to be a private highway and almost all of its traffic company coal bound for New York City. For the local commercial interests of Pennsylvania's northeastern counties, the promise of regional economic growth and prosperity was never fulfilled.

The Effect of Political Struggle on Property Relations and Economic Opportunity

So what is the significance of the politics of chartering for class formation in early anthracite mining? The charters of the canal companies were crucial because they legally defined the property relations that determined the scope of industrial operations and control in the mines. Forbidden by its charter from possessing land or mines, the SNC left the development of Schuylkill's mining business to independent operators, and built its bottom line solely on canal traffic and the tolls it generated. Unlike its mine-owning rivals, the SNC was compelled "to invite tonnage from every quarter and from every source" (Anthracite Commission, 1834, p. 187). In 1836, a writer for the North American Review (XII, 1836, p. 249) described the Schuylkill Canal as "an open highway, free to all the world, at regular rates of tolls.''17 Segmentation, or the division of mining, rail, boating, and canal operations into separate branches, made it affordable for individuals to ship coal to market, since they did not have to build their own transportation facilities. Unlike the SNC, both the LCNC and DHCC were mining companies, as well as canal companies, and profited chiefly from the sale of coal. In short, their dominant interests were in developing their own mines and marketing their own coal, not in collecting tolls on independent canal traffic. "In the true sense," observed Jones (1908, p. 90), the Delaware and Hudson was never a canal company, but

Entrepreneurs or Corporations

15

"more exactly, a coal company operating a canal." Likewise, the Lehigh Coal and Navigation Company built the Lehigh Canal "for the purpose mainly of transporting their own coal to market. ''18 Opening their waterways to independent coal producers and allowing the traffic to flow freely would have invited harmful competition against their own coal and undercut coal prices. As long as the D H C C and the LCNC possessed a stake in the mines, the purpose of the canals was, as another contemporary observer decried, to keep the coal supply "under a padlock" (Hazard's XVI, 1835, p. 86). 19 The "strong inducement" to "monopolize the trade" was transparent to the State Senate's Anthracite Commission (1834, p. 195): If they [canal companies] believe they can realize a greater profit by engaging themselves in a particular branchof trade than by relyingupon tolls accruingfrom the produceof others engaged in the same business, they will of course embark in the trade, and endeavor to monopolizeit. They will not be willing to furnish upon equal terms facilities to their competitors of the same trade, nor allow them upon even ground 'to plough with their own oxen'. Consequently, no separate class segments of landholders, boatmen, or mine proprietors emerged in the Lehigh and the Wyoming districts because the L C N C and the DHCC denied canal access to non-company coal. 2 While the two monopolies eventually "contracted" out some of their mines, the terms of the contracts subordinated the contractors to the control of the giant firms. Herein lies the historical significance of the charter struggles: Had the SNC succeeded in its political bid to mine and ship coal, it too could have, and probably would have, privatized its waters, erected a corporate monopoly of the district, and blocked access to individual mine operators.

Phase Two of Class Formation: The Intra-Class Political Struggle Against Corporate Charters
As necessary as the SNC's failed struggle for mining and shipping privileges was to the entry and ascendancy of individual proprietors in Schuylkill, nothing about the SNC's limited charter barred mining corporations from entering the Schuylkill district. The economic benefits (i.e. access to prime lands through affordable transportation) accruing from the SNC's charter limitations were not specifically intended for individuals; they were, instead, fortuitous outcomes with no permanent standing in law or custom. As the LCNC and D H C C had already demonstrated, if petitioners could amass enough votes in the state legislature, they could, at any time, obtain corporate charters with practically no legal limits on their economic activity. But if the promiscuous character of chartering posed a threat to the incipient class situation of the individual mine operators, it also

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made resistance to corporate chartering possible. As I shall now show, the state legislature became an arena for political struggle between charter petitioners and their opponents. Schuylkill's proprietors had to struggle to guard their nascent class position against corporate encroachment in the State Assembly at Harrisburg. Even with their immense economic leverage, the LCNC and the D H C C also had to resort to politics to protect their corporate monopolies.

The Ideological Foundation: The "Republican" Conception of Property 21

The first stirrings of anti-corporate sentiment in Schuylkill were aroused in the late 1820s by allegations of fraud and mismanagement against the district's "foreign" mining corporations. Though just seven in number, the corporate land and mining firms speculated on a much larger scale than the more numerous individual speculators, trading in thousands of acres of coal lands, and hundreds of thousands of dollars in stock (Bowen, 1852, pp. 176-178). In fact, the failure of four of the seven Schuylkill's chartered coal companies in under five years not only verified the excesses of particular companies, but validated the view that the corporate enterprise was intrinsically unqualified to carry on the mining trade. 22 Only because they survived their counterparts, the North American, the Delaware, and the Little Schuylkill coal companies were singled out for censure in a popular pamphlet written in 1833 by George Taylor, a writer for the Schuylkill Miners' Journal. Taylor's "treatise," entitled The Effects of Incorporated Coal Companies Upon the Coal Trade of Pennsylvania, accused Schuylkill's remaining chartered coal companies of conspiring to swindle their stockholders and ruin individual producers. For individual operators, the most intolerable aspect of incorporation was not corporate speculation, or the economic instability it caused in the market, but rather the special protection against this instability afforded to corporations by their charter privileges. In effect, the charter legally favored the worst managed and least economical producers with an unfair competitive advantage. "The grant of exclusive privileges" Taylor objected, is an infringementupon the right of all who are excluded, and directlytends to create a monopoly the favored party, being placed in a more advantagedposition, must in the end prevail over and drive the less favored from the field and become sole master of the trade .... Let the [coal companies] lay aside their corporate power and become subject to the liabilities and responsibilities of individuals, and they may one and all engagein the trade to the fullest extent of their means and pleasure.
-

No one in Schuylkill assailed mining corporations more than Benjamin Bannan. A mine operator himself, Barman purchased the ailing Miners's Journal in 1829, and served as the paper's editor-in-chief for the next four decades. At the core

Entrepreneurs or Corporations

17

of Bannan's anti-corporate thought was the Republican mistrust and resentment of privilege, rooted in Pennsylvania's recent colonial p a s t y In what would be the first of hundreds of anti-corporate editorials, Bannan laid the ideological foundation for subsequent attacks: They [corporations]are of exotic growth, and ours is an uncongenial soil for their transplantation .... Should we affordany countenanceor encouragementto institutions of this cast.., the inappreciable blessing of our free and happy governmentwould be perverted, a monied aristocracywouldrise up amongus by the unequaldistributionof wealth, which would provealike fatally destructiveof our commerceand our liberties- our moralrights wouldbe first invaded, and our political next" (Miners Journal, August28, 1830). Bannan further vilified mining corporations in the minds of operators by erasing any distinction between corporations and monopolies. For all practical purposes, all corporations were monopolies, since they were "nearly always fatal to individual efforts .... It is part of their general system t o . . . break down all individual competition... [and] swallow up all who come within the vortex of their operations" (Ibid., January 31, 1838). Schuylkill's early speculative ventures provided Bannan with ample ammunition to demonize corporations, but, as Schuylkill's arch-rivals, the LCNC and the DHCC came to exemplify the indivisibility of corporations and monopolies. The ideological task of conjoining the two was made easy by the fact that both companies controlled almost all anthracite production outside of Schuylkill. 24 Amplified by the national ascent of Jacksonian populism, the local outcries against corporate privilege resounded in Harrisburg. In fact, the 1833 resolution adopted by the State Senate which established the Anthracite Commission was, as the preface to the final report acknowledged, prompted by a "memorial of sundry coal dealers in the county of Schuylkill" (Anthracite Commission, 1834, p. 185). Moreover, the mine operators' replies to the Commission's survey left no doubt that they had closed their ranks and formed a sharp line of opposition: Of the twenty-eight responses contained in the final report, twenty-five unequivocally opposed chartered coal companies in Schuylkill, and the three dissenting opinions were lodged by representatives of the district's mining corporations. What is more, for want of space, the report admitted to excluding "many other communications.., received from individual coal dealers, concurring fully with the [anti-corporate] views above expressed" (Ibid., p. 250). In more or less disparaging terms, the operators restated Taylor's criticisms of mining corporations: Namely, how the preoccupation with stock prices resulted in irregular production and market instability; how distant and uninformed management led to extravagance, waste, and corruption; and how charter privileges unfairly shielded corporations from the volatility of the coal market. Samuel Lewis' statement, made on behalf of himself, and fellow operators, Burd

18

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Patterson, Frederick Hass, and Samuel Brooke, was typical of the responses submitted by the individual proprietors: The influence of incorporated companies with mining and trading privileges, is more inimical than beneficial to the general prosperity of a country. Their affairs are generally managed by a distant board of directors, many of whom are ignorant of the wants and capabilities of the countrythey operate in .... It is evidentlyin their interest that there shouldbe as few competitors in the market as possible, and as they have never been known to be over scrupulous about the means employed to attain their ends, every weapon that can be wielded by a powerful monied aristocracy, will be used to attain their object" (Ibid.)Y While the Schuylkill mine operators' fierce opposition to mining corporations was motivated by their economic interests, it drew heavily on Pennsylvania's heritage of Democratic Republicanism, and its glorification of individual enterprise. That they framed their anti-corporate message in Republican rhetoric was to be expected, since Republican thought dominated the political discourse of the nineteenth century (Babb, 1996, p. 1042). Attacks on corporate avarice were a routine aspect of Pennsylvania politics in the early nineteenth century, and no politician, Whig or democrat, could be found who was not a staunch advocate of the Republican doctrine (Hartz, 1948, p. 77). Under the doctrine, the extension of corporate privileges in trades customarily worked by individuals symbolized the collaboration between government and powerful private interests under British rule, when those with close ties to the colonial government received special property rights from the crown. Such charters not only violated the property rights of individuals, but surrendered the sovereignty of the people to a new corporate aristocracy. At best, the corporation was viewed as a necessary evil that should be confined to a few chosen fields requiring extraordinary amounts of capital, such as banking and insurance, but under no circumstances, manufacturing. 26 By the end of the 1830s, the political sway of republican tradition had begun to wane. Republicanism would continue to animate the populist struggles and movements by small business owners, farmers, and even industrial workers, into the next century, but as a theory of capitalist property relations it was rapidly being replaced by corporatism. From the 1830s onward, Pennsylvania legislators enacted no laws upholding a Republican conception of property, or curtailing the development of the private corporation. The "intense egalitarianism... [of] anti-charter dogma," recognizes Hartz (1948, pp. 69, 76), "made it an excellent polemic for orators and politicians, even though interest pressures in the state dictated an expansion of charter policy .... It is evident that the theory flourished long after there was any hope of it being accepted by the legislature or judiciary .... The pursuit of a rigorous anti-charter policy was an impossible political adventure." Given the widening rift between political rhetoric and political

Entrepreneurs or Corporations

19

reality in Harrisburg, Schuylkill's operators would have to do more than appeal to the moral sanctity of individual enterprise to resist corporate mining in the anthracite trade.

The Individual Proprietors' Anti-Corporate Political Struggles

The first significant display of class militancy by Schuylkill's individual operators was a legal challenge to the right of Schuylkill's mining corporations to operate in Pennsylvania under their out-of-state charters. At a large meeting held at Pottsville in January of 1833, a petition drafted by a committee of the operators called upon the legislature to dispossess the companies of their coal lands for violating the state's statutes of mortmain, which forbid the transfer or sale of Pennsylvania real estate to non-residents. Up to then, both the Delaware and the North American companies had evaded the law by holding their lands under deeds of trust, whereby legal title to the property was held by Pennsylvania trustees for the benefit of the companies. Fearing the forfeiture of their property, Schuylldlt's coal corporations moved swiftly to head-off the proprietors' attack by applying to Pennsylvania for charters, "partly on the grounds that their stock had passed into the hands of Pennsylvanians" (Yearly, 1961, p. 89). The move was bold, since it challenged the legislature's tradition of denying charters solely for mining purposes; the very tradition which had, after all, compelled the companies to obtain out-of-state charters in the first place. To ensure that this tradition was upheld, the individual operators sent a delegation to Harrisburg to rally the "large majority" of legislators who had, during the session, come out against the incorporation of mining companies (Taylor, 1833, p. 16). Undeterred by the numbers, the companies bided their time. Then, just three days before the end of the 1832-1833 session, after thirty-five legislators had taken an early leave of absence, and the opposing delegation of mine operators had returned to Schuylkill, "a clause incorporating the Companies, by referring to another act, was inserted in a library bill as an amendment, and passed through both branches of the legislature on one and the same day, the 6th of April" (Ibid.). When word of the vote reached Schuylkill, the mine operators' delegation was quickly dispatched to the capital, where it "vigorously supported" an "Act Relating to "the Escheat of lands held by Corporations without the License of the Commonwealth" (Yearly, 1961, p. 89). With the votes of those 23 members who had been absent for the passage of the charters, the bill became law, and, most significantly, applied to all corporations, including those chartered by Pennsylvania.27 Once again, however, political victory eluded the individual mine operators. Under the supposition that they had each performed "yeoman services

20

MARK C. JEPSON

in exploiting the virgin fields" (Ibid., p. 85), the legislature granted the sole waivers to the provisions of the Act to the Delaware and North American companies. 28 While the individual operators were unsuccessful in their attempts to rid the district of the companies, their struggles in the state legislature nevertheless weakened and marginalized the three companies. In contrast to the ten to thirty year charter duration granted to manufacturing companies, the charters of the North American and Delaware companies expired in five years. The Anthracite Commission (1834, p. 217) reassured individual proprietors that the companies would lose their corporate privileges at the end of this period: "They have yet four years to prosecute their business in their corporate capacities, and to close their concerns. Their charters will then expire, the individuals composing the companies be placed in possession of their lands, and be allowed to either discontinue or pursue the business upon equal grounds with other operators." The political struggles of 1833, as crucial as they were in securing a foothold, did not produce a sweeping law, which, once and for all, banned mining corporations in Schuylkill. The dominance of individual proprietorship was still contingent on the chartering process, and thus vulnerable to politics. In a legislature riven by sectional strife and lacking a fixed charter policy, politics was their only recourse. "During the thirties," states Yearly (1961, p. 89), "they spent thousands of dollars lobbying in Harrisburg in order to check the infiltration of charter-seekers into the Legislature. When the occasion arose to squelch such bills of incorporation, as it rather persistently did, they were able to convert their coal districts into antimonopoly petition mills." By far, the most lengthy and contentious of these attempts was executed in 1838 by one John Offerman. The matter gained particular notoriety and symbolism from the fact that the petitioner was himself a respected individual proprietor who had served as the first vice-president of the Coal Mining Association of Schuylkill County. 29 The "Offerman Affair" was a watershed in the struggle against mining corporations because it represented the first serious break in the ranks of the mine operators, and, moreover, a critical test of the operators' resolve to defend their domain, even against one of Schuylkill's original master colliers, and a fellow member of the Pottsville elite. Indeed, the element of betrayal embodied by the Offerman petition brought to bear the utmost wrath and reprisal against a local operator "foolhardy enough to tamper with the taboo of incorporation" (Yearly, 1961, p. 90). 30 If the corporate petition stood any chance of passage, Offerman first needed to have it sponsored in the state legislature by local representatives. But since both Daniel Krebs, Schuylkill's representative in the House, and Charles Frailey, Schuylkill's state senator, had always fought against charter petitions in the legislature, the outlook for Offerman's petition was not encouraging. Frailey's

Entrepreneurs or Corporations

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anti-corporate views, like Offerman's, were a matter of public record. "He had," Benjamin Bannan recollected, "previously proclaimed his opposition in county meetings .... So earnest and sincere in his opposition was he believed to be, in this region, he was sent on to Harrisburg to oppose them, his expenses paid, and time compensated for by the voluntary contributions of individuals (Miner's Journal, February 7, 1838). Krebs' had also shown himself to be an "irreconcilable opponent of coal companies" (Ibid., February 17 and February 21, 1838). Given this voting record, mine operators were caught off-guard when both Frailey and Krebs announced their support for Offerman's charter petition. Senator Frailey, the bill's chief sponsor, first introduced it in 1836 under the disguise of the "Cataract Company." Since no place or person in Schuylkill was known by that name, the bill was expected to pass unnoticed through the legislature. Before the bill reached a vote, however, the Miners' Journal exposed the identity of the petitioners, and defeated the scheme. In the following session, Frailey resurrected the bill under the new name of the "Buck Ridge Rail Road and Mining Company." This time, instead of being introduced as a bill itself, the petition was bundled with ten other petitions in an omnibus charter bill. The practice of exchanging local favors through "log-rolling" was routinely employed to counter opposition from rival sections. Pitted against their own representatives, the colliers were put in the awkward position of having to win political support from representatives of other counties, who had little or nothing to gain by supporting the colliers' parochial cause. Fortunately for the individual colliers, the Governor's office, was further removed from the system of mutual patronage which had turned the legislature into a "charter mill" (Hartz, 1948, p. 65). None exercised the veto authority against special acts of incorporation more vigorously than Governor Joseph Rimer (1835-1838), who denounced the legislature's enthusiasm for chartering as "ruinous" (Ibid., p. 66). Thus, when the bnndle of eleven petitions reached his desk on the final day of the 1837 session, Rimer returned the whole lot to the legislature unsigned. The executive veto killed the bill but not the petition. Frailey introduced the petition for a third time at the beginning of the next session. As with the first bill, the third bill contained only the single petition, but this time the proposed company was called the Offerman Rail Road and Mining Company. Since all ten of the other petitions were also re-introduced as individual bills, the coalition which had pushed the vetoed omnibus bill through the legislature was kept intact. "Defeated in solid column," Bannan mocked, "they have returned to the attack severally, in order to divide the attention and elude the vigilance of their opponents, each one playing off all the arts of stratagem and surprise that ingenuity can invent or fraud devise" (Miners' Journal, February 10, 1838).

22

MARK C. JEPSON

Deprived by Frailey and Krebs of political representation in Harrisburg, Schuylkill's mine operators decided to flood the legislature with petitions. The colliers organized a wave of meetings in several townships to protest what Bannan now called the "hydra-headed monster" (Ibid., January 31, 1838). In the ten days between January 31 and February 9, 1838, eight separate meetings were held in protest of the revised charter bill. The individual colliers held meetings at Pottsville on January 31, and on February 7, at Port Carbon on February 8, at Schuylkill Haven on February 6, and at New Caste on February 9 (Ibid., February 3, February 7, February 10, February 14). In an unusual show of sofidarity, Schuylkill's mine laborers sponsored three meetings of their own at Pottsville, Minersville, and Port Carbon on February 5 (Ibid., February 7, 1838, February 10, 1838). At the Pottsville meeting, the miners echoed their employers' remonstrance that "coal companies are entirely subversive of individual enterprise," and they also declared that the colliers' struggle embraced their own interests: "The Miners and Labourers have, generally speaking, realized a better competence for their labor from individual colliers than from the companies located in Schuylkill county, and know full well that these companies have for their object the depression, in a great measure, of the honest wages of a large number of the inhabitants of Schuylkill county" (Ibid., February 7, 1838). In total, the petitions drafted by the eight meetings gathered 3000 signatures (Ibid., February 21, 1838), or roughly half of Schuylkill's eligible voters. 31 "Public opinion," assured Bannan, "in no instance on any question has been more fully, unequivocally, and unanimously expressed, than in opposition to the increase in coal companies in this region" (Ibid., March 7, 1838). Despite the mine operators' enormous effort to defeat Offerman's charter petition in the legislature, Fralley and Krebs pushed the measure through their respective political bodies. Bolstered by the inter-sectional political alliance, negotiated in large part by Frailey, the Offerman Bill, andthe ten petitions that accompanied it, passed through the legislature once again, this time one-by-one. It seems no matter how much they petitioned the legislature, the operators could not undo the deal bartered by their own representatives. By April of 1838, the Offerman petition had found its way back to Governor Rituer, who once again served as the individual proprietors' last line of defense against mining corporations. Clearly frustrated by the legislature's ploy to wear down his resistance to coal corporations by submitting eleven bills instead of one, the Governor returned the bill to incorporate the Offerman company to the Senate with a stern message enumerating his objections to coal corporations: The incorporationof companiesof any kind to accomplishobjectswithin the reach of private enterprise, is a departurefrom the good old and safe rule of legislation of Pennsylvania.... The mining of coal.., is a businessnow well understood,and pro.fitablypursuedby thousands

Entrepreneurs or Corporations
of private citizens, whose rights and interests will be injured by the exercise of corporate powers and competition .... The law authorizing and regulating limited partnerships presents all the opportunity for the investment of capital, without risk to the remainder of the owners of property .... The desire to form local companies is generally produced by the mere spirit of speculation, or by some plan to dispose of a particular tract of land to great advantage .... I feel the utmost repugnance against any project that may have the influence of crippling or monopolizing the great coal trade of Pennsylvania which, I fear would be the effect of the general incorporation of coal companies" (Issued April 5, 1838. Reprinted in the Miners' Journal, April 25, 1838).

23

The Offerman Bill, in particular, warned the Governor, "contemplates the formation of a company for mining and dealing in coal in a region already opened by individual enterprise, and traversed by rail roads, and in which the coal trade is fully established .... Privileges of this kind, wielded by the combined influence of corporations, backed by a capital of $350,000... would form a dangerous interference in the active and flourishing coal trade of Schuylkill county" (Ibid.). Having already overturned Rimer's veto of a bill incorporating the Stafford Coal Company in Luzerne County, the legislature was not dissuaded by the Governor's anti-charter proclamation. If anything, the Governor's deepening intransigence to incorporation posed a challenge to the sectional interests which traditionally guided the conduct of state legislators, and which increasingly demanded greater and easier access to corporate charters from local representatives. In short, securing charters for influential constituents was becoming a requirement of office. The override of Ritner's veto of the Offerman bill was a clear indication that the political careers of Pennsylvania legislators were becoming dependent on corporate interests, and that Schuylkill was fast becoming an isolated pocket of anti-corporate resistance. Fortunately for the individual operators, the Offerman affair held a final irony: The protracted and bitter struggle to obtain the right to organize a mining corporation had robbed Offerman of the means to finance his venture. After nearly a year of battling back and forth with the legislature and the Governor, Offerman had squandered his personal fortune and lost the backing of his New York creditors (Yearly, 1961, p. 91). In the end, the legislative grant of the mine charter proved to he a pyrrhic victory. Offerman, it turned out, never exercised his costly corporate privileges, and succumbed to bankruptcy in 1842 (Luther, 1881, p. 51). Most of the credit for ruining Offerman was given to Governor Ritner, who, Bannan praised, "has proved himself to be the sword and the shield of the rights of the Colliers" (Miners' Journal, January 31, 1838). But while the Governor became a champion among Schuylkill's individual mine operators, his staunch anti-corporate stance was unpopular with the legislature, and especially with the powerful pro-corporate Philadelphia delegation,32 which had historically ruled

24

MARK C. JEPSON

over the less-populated sections of the state through a divide and conquer strategy. Ritner's cautious approach to incorporation, which placed strict limits on the number and the powers of corporate charters, opposed the interests of both Philadelphia capitalists, who increasingly viewed incorporation as a way to raise capital and minimize liability, and Pennsylvania's eastern counties, which depended on Philadelphia capital to develop local industry. By 1838, the populist Whig and Democratic coalition that had swept Ritner into office was already losing ground to forces more supportive of business incorporation. Even in Schuylkill, where the Schuylkill Canal and most of the coal lands were controlled by Philadelphians, support for Ritner was divided. 33 For Schuylkill's tenant mine operators, however, the Pennsylvania gubematorial race of 1838 became a referendum on chartering. Thus, when Ritner narrowly lost his bid for re-election,34 the mine operators lost their last and most faithful defender against mine incorporation in the state capital. That Ritner's successor, David Porter, observed no significant distinction between corporate enterprise and individual enterprise was cause for even greater alarm in Schuylkill (Hartz, 1948, p. 250). Given their fierce and relentless six-month campaign against Porter, which frequently included harsh attacks on his character (Miners' Journal, March 10, March 17, April 14, June 16 of 1838), the individual operators now faced the prospect of a hostile and vindictive Governor. With Ritner gone, and no one left in Harrisburg to veto charter petitions on their behalf, the mine operators now desperately needed to follow through on their pledge to unseat the local turncoats, Frailey and Krebs, and retum to office loyal representatives who would kill charter bills in the legislature, before they reached Porter's desk. Krebs apparently regarded his re-election as a lost cause, and opted to forego what would have undoubtedly been an uphill and vicious political fight. With the election of John Weaver to the State Assembly (Ibid., October 17, 1840), Schuylkill's local political bulwark was partially restored. Frailey, however, ran for re-election and won. Unlike, Krebs, whose jurisdiction was confined to Schuylkill County, Frailey's Senate district spanned several counties, diluting the political power of Schuylkill's colliers. While Frailey's political career survived the Offerman ordeal, the long and bitter struggle apparently discouraged the Senator from ever sponsoring another mining charter. Thus, with Offerman bankrupt and Frailey reformed, the individual operators could take some satisfaction in the fact that they had lost the battle but won the war against mining corporations. Although a small minority of Schuylkill's individual operators increasingly (i.e. in the 1840s and 1850s) expressed the concern that the district could not retain its pre-eminent position in the anthracite trade without incorporation of the mines, and the infusion of capital it promised, none dared to submit a charter petition after Offerman.

Entrepreneurs or Corporations The LCNC and the DHCC Defend Their Monopolies

25

The LCNC and the DHCC also fought many difficult political battles in defense of their class regimes. Both monopolies insisted that they had performed a vital public service by investing several million dollars towards the state's "internal improvements" (i.e. mines and canals). This "public" benefit, the companies claimed, entitled them to a reasonable return on their investments, which could only be obtained through monopoly protection. The rhetoric of mercantilism, however, was a thin veil for the financial problems that forced the LCNC and the DHCC into a struggle to preserve their corporate monopolies. From their inception, both companies were heavily in debt, and pressured by creditors and stockholders to combat the threat of competition and low coal prices. To some extent, the political struggle against economic rivals had already been won at the time the LCNC and the DHCC were incorporated. The unlimited charters of both companies legally entitled them to deny access to their canals through prohibitive routing and exorbitant tolls. The only hope for new companies was, therefore, if the legislature either awarded similar unlimited privileges to them, or forced the monopolies to open their canals to rival coal u'affic. During the first four years of the LCNC's operation, farmers and merchants in the northern counties occasionally criticized the company for its monopoly of the Lehigh River trade, but, insists Shegda (1952, p. 266), "the charges were not very serious." By 1824, however, "the attitude of the public toward the enterprise," notes Jones (1908, pp. 18-19), "was that the privileges were so extended that they ought never to have been granted." Merchants in both Philadelphia and the northeastern counties feared that the continued control of this vital north-south trade corridor by a single company, and especially a company encumbered by heavy financial liabilities, would not yield the lowest possible tolls on traffic, and would either inhibit commerce or divert it away from Philadelphia to more accessible eastern markets. In 1824, the representatives of Northampton County bordering the Delaware River called upon the friends of free navigation to act, "or we shall be like the people of Germany, not be able to pass our doors, without being obliged to pay Tax, Toll, or Tribute to some incorporated company" (quoted in Powell, 1978, p. 128). For the next two years, inhabitants from throughout the Delaware Valley organized meetings, and ratified petitions urging the legislature to stop the LCNC from blockfing the commerce between the northern and southern regions of the state (Ibid., pp. 128, 162n31). Between 1826 and 1830, the protests against the LCNC subsided while the state constructed the Delaware Canal. But the expectations of an alternate route were disappointed, and by the early 1830s, the merchants of the eastern counties along the Delaware were once again petitioning the legislature to dissolve the

26

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LCNC's monopoly of the Lehigh River trade. Citizen conventions were held at Allentown in May of 1832, and at Easton the following December to protest the LCNC's "oppressive" toll policy and "infamous" corporate privileges (Jones, 1908, p. 21). A committee appointed by the residents of Nescopeck Valley, at a meeting held in the city of Conyngham on July 4, 1833, alerted the State Senate that "the merchants of Wilkesbarre, have and are deserting the Philadelphia market and have actually made large purchases in the city of New York the present fall, because as they say they can send their goods cheaper and with much less embarrassment by the Hudson and Delaware canal and Carbondale, than by the Delaware and Manch Chunk [Lehigh] canal..." (Report of the Committee of the People of Nescopeck Valley,Anthracite Commission Report, 1834, pp. 278-279). In response to the pleas for toll relief, the legislature voted to grant a mining charter to the Beaver Meadow Railroad and Coal Company (hereafter BMRCC), and threatened to award carrying privileges to the new company if the LCNC did not reduce it tolls. The LCNC refused to reduce its tolls, and it's founder, Josiah White, dismissed the protests 'as "agitations by Philadelphia men, notorious land jobbers and speculators" (quoted in Hansell, 1992, p. 100). Determined to break the defiant monopoly, the BMRCC and its sectional allies once again appealed to the legislature for relief. In response to the numerous "memorials," the Senate Committee on Corporations investigated the matter and submitted its report in February of 1832. A majority of the Committee sided with the memorialists' complaint that the LCNC abused its charter privileges by charging excessive tolls, which acted as "an actual prohibition on all coal which is not owned by the Lehigh Coal and Navigation Company themselves" (Ibid.). The Committee recommended that if the LCNC refused to lower its toils, the state should charge the LCNC the same tolls to use the adjoining state-owned Delaware Canal. The hike would have more than tripled the company's cost of sending coal down the Delaware Canal to Philadelphia. (Ibid., pp. 179, 180). Frustrated by the Senate's reluctance to act on the Committee's recommendation, "citizens" throughout the eastern portion of the state once again organized "conventions" to protest the tolls on the Lehigh Canal (Jones, 1908, p. 21). 35 In the fall of 1833, a committee of the Conyngham Convention condemned the legislature for granting the LCNC a charter that awarded it exclusive jurisdiction of the Lehigh River, and reiterated the familiar complaint that the LCNC's tolls discouraged investment and trade:
No man would be foolish enough to invest money in canal or rail road stock while a company governed by such a system held in their possession and under their sole control the outlet of the counla'y to market. The owners of coal beds could not work their mines because the onerous tolls would advance the price of the commodity in the market so that it could not compete with coal from Schuylkill or the company's coal from the Mauch Chunk mine" (Ibid., p. 278).

Entrepreneurs or Corporations

27

By January of 1834, the unrelenting agitation by the sectional interests to the north and the south of the Lehigh Canal had finally begun to turn the political tide against the LCNC in the Legislature. One year after it was proposed by the majority of the Senate Committee on Corporations, the resolution to make the tolls for LCNC coal on the Delaware Canal equal to the tolls on the Lehigh Canal was introduced as a bill in the Senate. Fearing that the proposed three-fold increase in tolls on the Delaware Canal might plunge their struggling company into bankruptcy, the managers of the LCNC at long last yielded to the fundamental demand of its foes by reducing the toll on coal from $1.04 to $0.78 per ton for the following season (Ibid.). 36 As a result of the new toll policy, corporate investment flowed into the undeveloped fields of the Lehigh coal district. In the two years following the reduction, the BMRCC finally raised sufficient capital to complete work on its rail line to the Lehigh Canal, and by the end of the decade, 17 additional firms had requested charters to open mines in the Lehigh District (Hoffman, 1968, p. 110). The bitter political battles of the early 1830's had forced the LCNC to relinquish its monopoly, and to open its waters to independent coal producers. The enemies of the DHCC's monopoly of the Wyoming coal trade were no less numerous and no less determined than the enemies of the LCNC's monopoly. From the moment the DHCC began mining and shipping coal in 1829, its monopoly was the object of attack. In a petition submitted to the legislature in 1829, local "raftsmen" on the Lackawaxen and Delaware rivers complained that the damning of the rivers for the new canal obstructed their way, and so reduced the water level that rafting became impossible. 37 That same year, the United States Gazette of Philadelphia printed - under the pseudonym "Algonquin" - a detailed five-part series indicting the DHCC for mismanagement, excess, and fraud. 38 The following year, the DHCC's monopoly came under attack from the New York City press, which complained that the DHCC was using its monopoly to exploit consumers. 39 Despite growing consumer opposition to high coal prices, 4 a conflict of interest prevented the New York legislature from breaking-up the DHCC monopoly. As of January of 1829, the State of New York had loaned the DHCC a total of $800,000, and thus had acquired a strong financial stake in the prosperity of the company. To be sure, the development of mutual interests between the DHCC and the New York legislature began with mutual friends, chief among them was Governor DeWitt Clinton. Better known as the father of the Erie Canal, Clinton also helped the DHCC obtain its New York charter in 1823, and, as head of the New York Canal Commission, lobbied diligently for the DHCC's first state loan, and the favorable terms under which it was made (Lowenthal, 1993, p. 57). After Clinton's death in 1828, the DHCC formed an equally close association with his successor, and future U.S. president, Martin Van Buren. As a token of its appreciation, the DHCC sent a portion of the canal's first anthracite shipment

28

MARK C. JEPSON

to Albany for use by the Governor and the company's friends in the Legislature (LeRoy, 1950, p. 21). The DHCC also coveted close political ties with New York City, the destination of most of its coal. Since twelve of the DHCC's original thirteen managers were "persons of prominence and high standing.., in the New York community" (The Delaware and Hudson Company, 1925, p. 3), the company was favorably situated within the city's power structure. With the election of Philip Hone, the president of the DHCC, to the office of mayor in 1825, the association between the company and the city became official. Suspecting a conflict of interest, however, New York's Common Council forced Hone to resign as president of the company after just one year in office. Hone's relationship with the Council worsened after he evidently refused to relinquish his seat on the company's board of managers, and in December 1826, he chose to resign as mayor rather than sever his ties with the DHCC (Ibid., p. 33). The first attempt to break the DHCC's monopoly by actually entering the field was made by the Wallenpaupuck Improvement Company, incorporated by the state of Pennsylvania in April of 1830. In every respect except one, the new company's situation resembled that of the Beaver Meadow Railroad and Coal Company in the Lehigh district, chartered that same year. In order to market their coal, both companies needed to build feeder lines to the canals, whose owners opposed opening their waters to rival concems. The crucial difference, which caused the Wallenpaupuck to fail where the BMRCC bad succeeded, was the absence of an urban-rural political coalition, which had been so instrumental in pressuring the state legislature to help the BMRCC overcome the financial hurdles erected by the LCNC. Conspicuously absent were the "public conventions" and "citizen memorials," which, in the Lehigh District, had been organized by the BMRCC's Philadelphia promoters and the merchants and farmers from the towns and countryside neighboring the canal, all of whom stood to gain from lower tolls on the Lehigh Canal. "Fortunately for the D&H," states Lowenthal (1993, p. 56), "it had access to financial resources that the provincials could not match." Evidently, after only one year of operation, the monopoly still held the confidence of local commercial interests, who expected the canal to create a trade boom for the region. 41 It would be five years before another company seriously challenged the DHCC dominion of the Wyoming coal trade. In November of 1835, the Erie Railroad held a ground-breaking ceremony for a line stretching from the Erie canal, south to Pennsylvania's Delaware Valley (LeRoy, 1950, p. 54). Despite the public fanfare, financing for the railroad fell through and a decade passed before interest in the line was revived. The new engineers for the Erie threw out the original survey of the route, and decided to build the railroad along the course of the Delaware and Hudson Canal. Upon learning of the new route, the DHCC obtained

Entrepreneurs or Corporations

29

an injunction from a sympathetic local judge which prohibited the railroad from building it (Ibid.). Sensing opportunity, citizens of Wayne County in the northeast corner of Pennsylvania made "strenuous efforts" to convince the Erie to consider a route passing through their county, extending eastward through the Lackawaxen Valley to the Susquehanna River (Ibid.). When the proposal was put before a visiting delegation of the legislature, however, it was promptly rejected. "At each meeting called by these far-seeing citizens," adds LeRoy (1950, p. 54), "every proposal favoring the Erie was voted down." As it turned out, the DHCC had "'packed' the meetings with its employes [sic] and their friends" (Ibid.). That the DHCC had loaded the political dice against the Erie, and any other intruder, was further revealed by the corporate ties of Wayne County's own state senator, Charles Dimmick, who also happened to be an attorney for the DHCC (Ibid.). As a testament to the DHCC's political sway over the region, the route which the Erie was ultimately compelled to undertake was twenty miles longer and of a much steeper grade than the route that was defeated (Ibid.). When the Erie Railroad was finally opened for traffic in 1849, 14 years after its ground-breaking ceremony, it was "still not a serious competitor," and did not become a rival can'ier to the DHCC until after the Civil War, three decades after its inception. 42

CONCLUSION

The Myth of Corporate Efficiency: The Political Annihilation of Individual Enterprise

As stated in the introduction, the first object of this analysis has been to show how the politics of chartering had an independent and paramount effect on the extent and pattern of corporate development in early anthracite mining, and particularly on the absence of corporate development in the mines of the Schuylkill District. Critics of the political explanation would undoubtedly claim that the Schuylkill case is merely an exception to the rule, and further contend that it is an exception that proves the rule; that corporate development in large industry was inevitable, despite historical variations in particular industries. So while corporate development may have been delayed in Schuylkill by the individual proprietors political resistance, the corporation "ultimately" prevailed over the individual proprietorship as the dominant form of business enterprise in the anthracite industry. From this evolutionary perspective, Schuylkill's operators were fighting a lost cause, for it was only "a matter of time" before they were compelled to succumb to corporate mining. As more and more collieries dipped below the water level in the 1840s, and as the veins of the district's prized red ash were depleted,

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so the argument goes, Schuylkill began to lose its natural advantages over rival districts. Moreover, increasing inter-district competition from highly-capitalized and more efficient mining corporations supposedly depressed coal prices at a time when the individual colliers' production costs were rising. Given the operators unflagging opposition to incorporation, were they doomed to become the victims of the superior efficiency of mining corporations? Are the economic historians correct in their presupposition that capital for mine improvements obtained through incorporation was necessary for survival? Considering the dire geological and economic trends, Yearly (1961) contends that S chuylkill's individual operators' dogmatic adherence to individual enterprise, and the political opposition to corporate chartering it fostered, were irrational. Delusions of superiority and myths of Republicanism, he submits, blinded them to the increasingly harsh realities of anthracite mining. "Trapped by their own ideological peculiarities," decries Yearly (1961, p. 92), they became "victims of their own initial success." The economists' preoccupation with capital requirements is something of a red herring. The efficiency theory of corporate development is predicated upon the assumption that corporations in competing fields produced coal more cheaply than Schuylkill's individuals. I have found no evidence of lower production costs for the corporate operations, and the fact that most were worked by contractors and lessees using the same methods to dig coal as Schuylkill's individuals suggests that variations in costs between the districts were negligible. Moreover, economic and geologic surveys of the anthracite mining regions unanimously confirm that the industry, as a whole, was naturally averse to factory methods and machine mining. Coal corporations in rival districts were indeed a threat to Schuylkill's individual colliers, but not because of superior efficiency. The contentious corporate practice of dumping thousands of tons of coal onto the market, sometimes as much as $1.00 per ton below the going price was not a consequence of cost-savings from greater mine economy. Rather, the pattern of corporate price-cutting in the 1850s, especially by the giant mining and carrying companies in the Wyoming District, was reminiscent of the speculative schemes that plagued Schuylkill in the latter twenties. As before, the companies involved endeavored to parlay their corporate privileges into competitive gain in two ways. First, their financial capacity to string out loans, hide losses, and sell stock allowed them to unload coal at a loss over a longer period of time than individuals. Secondly, and more decisfve in the latter period, the combination of mining and carrying rights allowed the coal corporations to coerce smaller producers along the line to sell their coal directly to them below market price. As one who was relatively close to the scene, Luther (1881, p. 62) explains how the Delaware, Lackawanna and Westem Railroad, in particular, used its multiple privileges to extend its control at the expense of Schuylkill's producers:

Entrepreneurs or Corporations

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To obtain a monopolyin the market, the profiton the carriage of the coal becamethe main object, to which the product of the mines was made entirely tributary... By these periodical forced sales the mining interest as a specialty,its capital and the productof thousands of operativeshave been disregarded and sacrificed- made a subservientauxiliaryof a transportation companyand of its stockjobbing operations. The low prices at which these sales of coal were made - always below the cost of production, adding the tolls - amounted virtually in the reduction in the rate of transportation on the company's coal... The other coal companies and individual operators in the Lackawannaregion could not pay the prescribed toll on the railroad and deliver coal at Elizabethport in competitionwith the companywithout sustaining a heavy loss, and their only alternative, therefore, was to sell their coal to the companyat any price they were offered... In the exercise of its privilegeto both mine and transport coal that companythreatened destruction to individual enterprise in the Schuylkillregion. The crucial fact missing from this explanation is that the "privilege to both mine and transport coN" was a political creation. For the giant railroad companies to exercise control over the mines, they first had to secure the legal right to own coal lands from the legislature. Ironically, the abuse of these privileges by the LCNC and the D H C C in the 1820s had deterred the Legislature from extending can'ying and land owning privileges to other corporations. The political fire wall between these branches of the trade remained firm until 1850, when the Delaware, Lackawanna, and Weste m Railroad circumvented the ban by creating separately chartered land-holding subsidiaries. By allowing the holding companies to operate, the Legislature tacitly endorsed the railroads' seizure of the mines, and placed the corporation at a decided economic advantage over Schuylkill's producers. The events that followed were predictable. "The year 1851," says Yearly (1961, p. 162), "opened with a full-scale assault by the Lehigh Company and the great New York mining-carrying companies of the Lackawanna region on Schuylkill markets. Given the companies' advantage of being both miners and carriers . . . . they poured coal into the tidewater yards at greatly reduced prices. It was an act of cutthroat competition aimed at destroying what remained of Schuylkill's dwindling productive leadership." That Schuylkill's individual producers were able to withstand the concerted corporate attack on their markets is a testament to their own efficiency, though their market share declined steadily for the next ten years. After a brief wartime boom ended in depression, the beleaguered colliers yielded the burden of rescuing the trade to the miners' union. But, once again, the dominant corporations in the Lehigh and Wyoming distriCtS effectively resisted the Workingmen's Benevolent Association's campaign to organize miners and limit production (Luther, 1881, p. 68). The union suspensions in Schuylkill between 1868 and 1870, consequently, only exacerbated the shift in market share to the rival non-union districts. At this point, Schuylkill's own carrier, the Pennsylvania and Reading Railroad, decided to take matters into its own hands by petitioning the state legislature for landholding rights. Since Schuylkill was still the only district where the mining and transportation

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branches were legally segmented, the president of the Reading, Franklin Gowen, protested that landholding carriers in rival districts had an unfair advantage. After Gowen reportedly bought the necessary votes, the Legislature broke its forty-year covenant with the individual operators by caving-in to the Reading's demand for mining privileges. Over the next five years, Gowen used the new legal privilege to destroy the union and to buy-out the majority of the moribund producers. The rapid expropriation of Schuylkill's master colliers after the Civil War demonstrated in dramatic fashion how unlimited corporate charters were inimical to the entry and survival of individual proprietors. That is, when the property relations that had dominated the Lehigh and the Wyoming districts from the 1820s were finally imposed in Schuylkill in the 1860s, the result was the same. In the final analysis, individual enterprise in Schuylkill did not die from natural causes (i.e. market competition); it was annihilated politically by the state legislature at the behest of railroad corporations.

Theoretical Significance of the Deviant Case

The dual purpose of the deviant case analysis is, first, to show how and to what extent the dominant theory fails to explain the empirical exception; and secondly, to incorporate new variables into the explanation (Lipset, 1963, p. 436). The present analysis goes further by proposing an alternate explanation for class formation in industry. That is, the deviant case of Schuylkill suggests that corporate development is, essentially, a political contingency, not an economic necessity. But even if this political argument holds for Schuylkill, is it a valid explanation for other cases, or is the early anthracite industry merely an interesting historical fluke? After all, popular anti-corporate sentiments "do not appear to have had much influence in determining legislation. The readiness with which the legislatures of all the states created corporations for all sorts of purposes, whenever they were called for by individuals, in many cases granting the privilege of limited liability, shows that opposition to corporations a s such was insignificant" (Callender, 1902, p. 156). Given the strong undercurrent of Republican, anti-corporate sentiment in nineteenth century America, why were there not more cases like Schuylkill? Why did the issue of expanding incorporation in industry not create deep or lasting fissures, or opposing segments, in the capitalist class? At this point, I would only suggest that the relative absence of political conflict between individuals and corporations (i.e. the absence of political resistance to expanding incorporation) should not be interpreted as the absence of politics. Although the ascendancy of the corporation in industry was not typically met by militant political opposition from

Entrepreneurs or Corporations

33

individual entrepreneurs, a political argument for class formation subsumes not only political struggles against corporate development, but also political activity in favor of corporate development. Pennsylvania's expanding charter policy in the 1830s and 1840s was not simply a spontaneous expression of market forces, capitalist interests, or public opinion. Capitalists and their representatives in the legislature had to act politically to change the laws to privatize the corporation. Empirical evidence of the back-room deals, and of the business lobbying and graft that the newspapers of the day rumored to be rampant in Harrisburg is, for obvious reasons, elusive. 43 On the one side, Sellers (1991, p. 46) claims that "wholesale bribery" of state legislatures by corporate petitioners "fueled the chartering process." In the same vein, Nelson (1975, p. 54) adds that laws of incorporation had, by 1830, become "a tool by which those interest groups which had emerged victorious in the competition for control of law-making institutions could seize most of society's wealth for themselves and enforce their seizure upon the losers." On the other side, Roy (1997, pp. 72-73) claims that "the primary force to privatize corporations was not the corporations themselves," but "the advocates of laissez-faire." From the latter perspective, corporate business interests are viewed as passive beneficiaries of the independent political process. 44 Were corporate petitioners on the historical sidelines, while the politicians and judges legislated and ruled on their behalf? While it seems implausible that capitalists were in absentia during the so-called "market revolution," the record suggests that lawmakers were willing to do the bidding of corporate interests without direct pressure from capitalists. After 1840, state legislators did not have to be bribed or cajoled to support individual charters and general laws of incorporation because they had already been convinced that economic development and corporate development were indivisible. Sponsoring the charter petitions of their constituents was simply rational politics. With respect to corporate chartering, then, the maxim that "capitalists do not have to govern in order to rule" is apt. In either event, the overwhelming political support for chartering in state legislatures must have made the corporation look like an unstoppable juggernaut to individual entrepreneurs. With legislatures serving as "charter mills," the economic consequences for unchartered firms was clear. For individual entrepreneurs, the definition of economic realism had been reduced to two alternatives: incorporate, or be ruined by the those who did. Under the new economic rationality, corporate development became a requirement of economic development, and political resistance became irrational and futile. But the political apathy of individual entrepreneurs can not be attributed entirely to a sense of helplessness. For the corporate political campaign to succeed, the old "mercantilist" image of the corporation as an aristocratic and monopolistic

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institution had to be revised to appease the Republican convictions of independent producers. Hartz's (1948) seminal study of the ideological component of corporate development in nineteenth century Pennsylvania reveals how the corporation was redefined in "populist" terms. In effect, individual proprietors were led to believe that the extension of corporate property rights to themselves was in keeping with their Republican concept of property. General acts of incorporation were hailed as egalitarian and democratic measures, which extended corporate privileges to all, not just the rich and powerful. Incorporation promised to create a more equal economic playing field by giving thousands of small businesses access to capital and legal protections previously denied to all but a few large companies. Philosophically, the new laws of incorporation represented a triumph of economic liberalism because they bestowed property rights upon thousands of small business owners. Culturally, the new laws represented a bridge from the past to the present; they allowed individuals to leave behind their individual enterprises and to enter the new corporate world with a sense of expanding (not lost) opportunity. As with all laissez faire deregulation schemes, mass incorporation of business was expected to increase economic growth and competition, and thereby rescue small business from monopoly. The populist ideological justification that bestowed moral legitimacy on the new institution bore little resemblance to economic reality. In the second half of the nineteenth century, the new laws unleashed the forces of corporate concentration in U.S. industry with a vengeance. Indeed, historically, the consequences of eliminating legal restrictions on corporate activity have been anything but egalitarian. And yet, despite the economic harm invariably wreaked on small business by deregulation, big business has, time and again, been capable of invoking the laissez faire doctrine to mobilize the petite bourgeoisie behind the politics of deregulation.

NOTES
1. While preceded by many others, the shipment of 365 tons by the Lehigh Coal and Navigation Company to Philadelphia marked the beginning of regular shipments of anthracite coal, as well as, the regular collection of statistics. See Jones (1908, p. 12), Jones (1914, p. 14), and Walker (1924, p. 235). 2. Miners' Journal (January 11, 1851, January 12, 1856, January 14, 1860). After the LCNC's monopoly ended in 1837, only three other corporate producers opened mines in the Lehigh District in the ensuing decade (Hoffman, 1968, p. 111). In the Wyoming District, the Pennsylvania Coal Company replaced the DHCC as the number one producer in 1853, only to be superseded by the Delaware, Lackawanna, and Western Railroad in 1857. Throughout the decade, the three giants each controlled at least 25% of production, and as much as 39%, combining for over 80% of the total.

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3. Within the class of individual coal proprietors, large producers, or "master colliers," typically made up 20% of the total number of producers, and accounted for 50-60% of the region's annual coal shipments (Davies, 1985, p. 106; Yearly, 1961, pp. 65-66, 68). While all colliers were customarily referred to as "miners," master colliers did not actually dig coal themselves. Master colliers generally managed very large mine operations, sometimes consisting of several "colliery establishments" employing one-hundred miners or more. Petty individual proprietors made up the other 70-80% of Schuylkill's mine operators. While relatively numerous, petty producers probably produced no more than one-quarter of the district's annual production in the pre-Civil War period. The typical petty producer produced less than 10,000 tons annually (Taylor, 1833, p. 7). Small producers were also likely to be working miners, digging a single drift with a few partners or hired hands. Most small mines operated on a very irregular basis, depending on coal prices, and changed hands frequently. While petty producers and master colliers differed greatly in terms of the scale, regularity, and longevity of operation, the methods that both types of individual proprietors employed to mine coal were indistinguishable. 4. Schuylkill's individual mine operators were not alone. For much of the nineteenth century, petty proprietors and craft workers in many trades protested the rise of the business corporation (Babb, 1996). Anti-corporate attitudes were prevalent in nineteenth century America, and were part of what has become known as the ideology of producerism. What distinguishes the struggles of Schuylkill's producers from most other producerist protests is that they succeeded politically. 5. Similar arguments for technological determinism are advanced by Hounshell (1984), North (1981), Piore and Sabel (1984), Robinson and Briggs (1990), and Williamson (1981). 6. In the last two decades, efficiency theory has come under intensive criticism from "neoinstitutional" theory. A neoinstitutional explanation for class formation, shifts the theoretical focus away from the effects of intra-firm efficiency (i.e. cost reduction) and inter-firm competition to the stabilizing effects of the market institution (see DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Powell & DiMaggio, 1991). But while the two theories recognize different mechanisms for class formation, they predict essentially the same outcome - the inevitable ascendancy of the large corporation over the individual entrepreneur. For both theories, politics has no independent effect, and serve merely as a mechanism by which the corporation evolves. Under a truly contingent conception of political struggles, the "evolution of cooperation" presupposed by neoiustitutionalism is far from inevitable. 7. I have singled-out efficiency theory for criticism because it is the dominant theoretical framework for empirical studies of industrial development in the United States, and for mining, in particular. One seeming exception is a study by Bowman (1989). Bowman employs 'game theory" - a variant of neoinstitutionalism - to explain capitalist class organization (or rather disorganization, i.e. ruinous competition and chronic over-production) among operators in bituminous coal mining. Attempts by miners' unions, by rail carriers, and by government agencies to organize mine operators (i.e. regulate production and control prices) all failed because the incentives to compete (i.e. defect) overrode the incentives to cooperate. The capitalist cooperation and concentration that characterized most industries in the early twentieth century were thwarted by "natural" causes, such as regional differences in the quality of coal, and the vast size of bituminous coal deposits (spanning seven states). The sheer number and differing sizes of coal producers doomed cooperation, since there were always plenty of operators willing to dump cheap coal on each other's markets. Much like anthracite scholars, then, Bowman attributes the atypical pattern of

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capitalist class formation (competition, instability, and diversity) in bituminous mining to the peculiarities of geology. 8. Entitled, "The Coal Trade of Pennsylvania," reprinted in Hazard's XLII, January 1836 (p. 248). 9. In a pamphlet entitled Coal Corporations, published in 1830, advocates of incorporation argued, That a greater capital is requiredfor mining than can easily be collectedin a copartnery,is no longer a matter of doubt in Pennsylvania.This point is completelysettledby the Lehigh Coal and NavigationCompany... The companycould not procure the requisitecapital to carry on the coal trade, and founditself compelledto make a new applicationto the legislaturein 1822, to empowerit to hold coal lands. 10. The "towering" mountains of the Wyoming region, claimed the Commission, "presented an insurmotmtable barrier, and bid defiance to individual enterprise," but not to "a powerful and adventurous company... Without an act of incorporation, and the inducements of mining privileges, this country, now filled with active and enterprising population, and furnishing one of the best markets in Pennsylvania, would have remained for many years perhaps a barren waste" (Hazard's XIII, 1834, p. 194). 11. The charter itself stated that the SNC was authorized "to make, erect, and set up any damns, locks, or any other devises whatsoever, which they should think most fit and convenient to make a complete slack-water navigation from one end to the river to the other, so as to admit a safe and easy passage for loaded boats, arks, and vessels, up as well as down the river, or by means of such collateral sluices and locks as they might devise for the purpose" (Schuylkill Navigation Company, "Opinion of Counsel, on the right of the Schuylkill Navigation Company to make another Lock and Canal for the use of the Navigation at the Fairmount Dam," printed by Hazard's XI, 1833, p. 53). 12. On the Morris and Raritan canals see Jerome Cranmer, "Improvements Without Public Funds: The New Jersey Canals," in Canals in American Economic Development (1961, pp. 115-203). 13. After three decades of reasonably profitable operation, the state sold both canals to private interests (Powell, "The Pennsylvania Anthracite Industry, 1769-1976," Pennsylvania History 47, 1980, p. 6). 14. Case studies of medievat mining communitiesby Maurice Dobb (1947, pp. 242-250) and Max Weber (1984, pp. 178-191) provide rare insight into the effects of property. relations on class formation. For Dobb, the process of driving small producers from the tin mines of Cornwall and Saxony lasted between four and five centuries because of the enforcement of pre-capitalist mining codes enacted by associations of free miners under the auspices of local lords. Like Dobb, Weber argued that the gradual separation of mine owners (i.e. the "mining association") and mine laborers (i.e. the "mining community") in medieval mining communities was set into motion when free miners began violating their own egalitarian codes in the late thirteenth century. By the end of the sixteenth century, the working miners' guild had been transformed into a corporation of non-workers which "took a hand in hiring and paying workers as well as meeting of the advances and costs for the shafts, and set up an accounting for the group as a whole..." (Weber, 1984, p. 188). 15. The practice of petitioningfor a charter with a capitalization far in excess of the funds needed to conduct the mining business was not uncommon. The LCNC's simply did it in reverse. Like any pyramid scheme, the investors on the ground floor are made whole by the sale of the stock to the public, whereas the public stockholders have to wait for the company

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to yield dividends. The problem with most of these early mining corporations is that they were not in business long enough to produce dividends, let alone coal. In the LCNC's case, the company's first dividends were paid in 1836, fourteen years after it was incorporated. 16. In addition to Breck's pamphlet, Bishop (1907, p. 170) mentions that "numerous articles were published in the newspapers or were circulated in pamphlet form for the purpose of impressing upon the public the need of a canal to compete with New York." Also see Sketch of the Internal Improvements Already Made by Pennsylvania (1818), cited in Hartz (1948, pp. 11, 131). 17. While all three canal companies enjoyed state-sanctioned carrying monopolies in their regions, the LCNC and DHCC located the canal headwaters, and adjoining rail lines, in the middle of their own coal lands. They also priced would-be competitors out by setting prohibitive tolls on coal. The location and tolls of the Schuylkill canal were much more favorable. Toll rates by themselves were probably not sufficient to open or close the mines to individual proprietors, but when combined with exclusive legal control of both the commercial shipping business and the commercial shipping route, toll rates became a crucial component of a corporate policy to block canal access. Essentially, the only trade routes out of the Lehigh and the Wyoming districts were too costly to reach and too costly to use. 18. For the first two decades of operation, company records clearly show that the LCNC and the DHCC operated as coal companies. The bottom line of both companies was determined chiefly by the receipts from coal sales as opposed to receipts from canal tolls. 19. Both the LCNC and the DHCC eventually entered the coal shipping business, and the tolls on non-company coal quickly became their largest source of tolls, but still constituted only a small percentage of their total revenues. Selling their own coal remained their chief business (Delaware and Hudson Company, 1925, pp. 130-131; Hoffman, 1952, p. 111). 20. On the mining contracts let by the LCNC and the DHCC, see Delaware and Hudson Company (1925, p. 165), "Report of the Managers to the [LCNC] Stockholders," in Hazards XI (1833, p. 76), Hoffman (1968, p. 106), and Shegda (1952, p. 154). 21. My usage of ideology follows Geertz's (1973, p. 20) definition: "Whatever else ideologies may be - projections of unacknowledged fears, disguises for ulterior motives, phatic expression of group solidarity - they are, most distinctively, maps of problematic social reality and matrices for the creation of collective conscience. Whether, in any particular case, the map is accurate or the conscience creditable is a separate question..." 22. For instance, the agents of Little New York Company spent $6,000 on 200 acres of land, and proceeded to sell $80,000 of its $250,000 in capital stock to New York investors (Yearly, 1961, p. 39). After investing between $6,000 and $8,000 more for mining and canal boats, the agents returned to New York to sell the remaining $170,000 of stock allowed under their charter (Ibid.). After just four seasons in the field, the Little New York ceased operations. 23. See Bartlett (1919, p. 107) and Klein (1940, Chap. 4) on Pennsylvania's early political culture. 24. "In no instance is the vast discrepancy between incorporated monopolies and individuals more strikingly developed than in the different locations of the coal business. The Delaware and Hudson and the Lehigh Companies are monopolies to the fullest extent while Schuylkill is open to the enterprise of all" (Miner's Journal, August 28, 1830). For similar anti-corporate editorials by Bannan, see Miners' Journal May 30, 1829, November 21, 1829, February 13, 1830, February 27, 1830, August 14, 1830, September 25, 1830, February 19, 1831, May 2, 1840, June 6, 1840. 25. Twenty other individual operators signed their names to a total of nine statements, denouncing corporations to an equal or less or extent.

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26. The State Senate's Committee on Corporations ostensibly upheld the inviolability of individual enterprise by outlining the general criteria for incorporation in 1820: The incorporation of associations to carry on business within the reach of individual capital, by conferring on them extraordinary privileges and exempting them from the ordinary personal liabilities, is not only inconsistent with the dictates of sound political economy, but at open war with the principles of free government. The sound distinction in the incorporating of companies to accomplish works of great public utility, and those for the mere purpose of promoting objects within the sphere of individual enterprise has happily been adopted and pursued by the legislature of this state with few exceptions, and the instances of departure from this wholesome discrimination, furnish the slxongest evidence in favor of the wisdom of the general course of policy (Reprinted in Bishop, 1907, p. 187). 27. "... no corporation either of this state or any other state, though lawfully incorporated or constituted, can, in any case, purchase lands within this state, either in its corporate name, or names of any person or persons whomsoever for its use, directly or indirectly, without incurring the forfeitures of said lands to this commonwealth, unless said purchase be sanctioned and authorized by an act of legislature thereof..." ("Laws of Pennsylvania," Hazard's XI, 1833, p. 294). 28. The waivers were actually amendments (e.g. Section 2 and Section 3) to the law, "An Act Relating to the escheat of lands held by corporations, without the license of the commonwealth," Hazard's XI (1833, p. 294). 29. Offerman, in fact, had been the chief sponsor of George Taylor's anti-corporate pamphlet. A subscriber to the Miners' Journal (January 31, 1838) recalled, "Mr. Offerman was then one of the most zealous and uncompromising opponents of all Coal Companies." 30. While the proposed "Offerman Railroad and Mining Company" bore his name, Offerman had previously transferred ownership and control of the venture to the Delafield banking interests of New York City. Denied direct access to Schuylkill's booming anthracite trade by Pennsylvania's protective legislature, New York capitalists relied on local individuals to act on their behalf (Yearly, 1961, p. 90). 31. Based on the 1840 census of individual townships reported by Rupp (1844, pp. 248-297). 32. The delegation's leading advocate of the eleven charter bills in the House was John Spackman, who argued that "coal could not be furnished in sufficient quantities by individuals - that corporations were indispensably necessary in this country, where individual wealth was seldom great" (United States Gazette, March 25, 1838). 33. To some effect, Bannan used the Miners' Journal to advance the Whig Party platform. The Whigs were essentially a sect of the Democratic party, who revolted against Jackson's "executive tyranny" (i.e. the Central Bank) in 1834, and who always proclaimed to be the true followers of Jefferson. As a farmer himself, Rimer personified the yeoman heritage animating the Whig movement. Schuylkill, however, remained a democratic stronghold, especially after the massive influx of Irish immigrants after 1840. Regarding the increasing effect of ethno-religious divisions on voting patterns in Schuylkill County, see Gudelunas (1985, pp. 44-56). 34. Porter received 133,550 votes and Rimer 126,029; the former carried Schuylkill by less than 100 votes. The core of both Porter and Frailey's support resided in the newer townships in the western end of the county, where strong anti-corporate attitudes, so

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39

prevalent in Pottsville, never developed (Miners' Journal, July 20, 1839, August 10, 1839, October 5, 1839). 35. In May of 1832, a convention was held in Allentown to the south of the Canal, while in July, a convention of citizens of the northern counties met in Conyngham. A third convention met in December, but the location is not given (Jones, 1908, p. 21). 36. Suspecting that the toll reduction for 1834 would not lead to a permanent change in toll policy, the Anthracite Commission (1834, p. 196) urged the legislature to accept the LCNC's offer to purchase the canal. By the time the Commission presented its recommendation in March of 1834, criticism of the LCNC had subsided, and the political momentum for a state buy-out had dissipated (Shegda, 1952, p. 273). After eight years of building the largest public works project in the nation, the state of Pennsylvania had amassed a deficit approaching $25,000,000, and could scarcely afford the $3,000,000 asking-price for the Lehigh Canal (Bishop, 1907, p. 213). 37. The raftsmen remained free to carry on the river trade, but competition from the canal boats subsequently drove them from the region. See LeRoy (1950, pp. 17-18) and Wakefield (1965, p. 71). 38. Reprinted in the Miners' Journal, September 26, 1829. In 1831, two other widely circulated pamphlets attacked the DHCC. The first pamphlet was actually an anonymous letter, entitled "Exposition of the Objects and Views of the Delaware and Hudson Canal Company, signed by "Investigator" (reprinted in the Miners' Journal, April 2, 1831). The second represented the views of the Philadelphia backers of the Morris Canal (Bogen, 1940, p. 110). Reminiscent of Algonquin, both alleged that the weak financial position of the DHCC would invariably force the company to keep coal prices high. As Investigator charged, "Your pledge was that you would bring to market better and cheaper coal than had ever been brought before. Neither of these pledges are yet redeemed .... If the experience of 1830 does not bring you to a sense of justice to that public from which you have received such unexampled aid, I shall consider you, and so will all of our citizens, the most incorrigible speculators whoever partook of the public bounty." 39. The company had publicly vowed to reduce the retail price of its anthracite from $8.00 a ton in 1829 to $3.00 a ton in 1830 (Miners' Journal, November 21, 1829), but when the season opened in 1830, the price of its coal in New York City was still $8.00 a ton (Jones, 1908, p. 61). 40. In 1832, consumers responded to the high coal prices by forming the "New York Association of Consumers of Fuel," whose stated purpose was to "adopt measures to ensure the regular supply of fuel at fair prices" (Miners' Journal, March 10, 1832). 41. That same April of 1830, the state of New York chartered the Hudson and Delaware Railroad Company to construct a railroad linking New York City to the Lackawaxen Valley, at the heart of the DHCC's corporate territory. The Hudson and Delaware's New York charter and "detailed prospectus" gave every appearance of a serious contender (Delaware and Hudson Company, 1925, pp. 68-69), but by the summer of 1830, the proposed cartier was a memory. 42. In another less notable attempt to break the DHCC's control of the Wyoming District, the promoters of the Jefferson Railroad Company managed to sneak a charter bill through the legislature in 1851. But, like its predecessors, the company failed to secure financing for the project. Sixteen years later, in 1867, the Erie Railroad purchased the rights from the Jefferson Railroad Company to consmact part of the same route it had originally proposed twenty years earlier (LeRoy, 1950, pp. 64, 74).

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43. In 1846, the Doylestown Democrat characterized the corporate lobbyists in Harrisburg as "hungry cormorants" and "small parasites" (quoted in Hartz, 1948, p. 72). 44. Hartz (1948) also holds this view.

ACKNOWLEDGMENTS My thanks to the editors of Political Power and Social Theory for accepting this manuscript for publication, and to the reviewers for their invaluable feedback. I also wish to thank Professor Maurice Zeiflin at UCLA, whose comments and criticisms have always been honest, illuminating, and inspirational. I dedicate this work to my father, who taught the true meaning of class struggle to me.

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