Founding Corporate Power in Early National Philadelphia

Published by EH.NET (July 2007)

Andrew M. Schocket, Founding Corporate Power in Early National Philadelphia. DeKalb, IL: Northern Illinois University Press, 2007. xiii + 274 pp. $42 (cloth), ISBN: 978-0-87580-369-2.

Reviewed for EH.NET by Sean Patrick Adams, Department of History, University of Florida.

In January of 1827, citizens from Mount Carbon, Pennsylvania wrote a joint letter to the editors of the Miner’s Journal in nearby Pottsville to protest the influence of corporate mining enterprises in the anthracite coal fields of Pennsylvania. “This system of monopoly if not strangled in the cradle,” the letter went, “will one day render our republican form of government even worse than monarchy.” Even though Mount Carbon’s coalfields remained the province of individual proprietors, the threat of incorporated mining companies posed a worrisome threat to not just the individual miners, but to the future of the nation itself. In order to ram this point home, the letter concluded that if corporations were allowed to run unchecked in the area, then “we shall be the shadow without substance.” [1]

Such unbridled fear of incorporated enterprises seems na?ve, even quaint, to the ears of a modern American. In an era when anyone can incorporate for a small fee, it might seem absurd to argue that the corporate form of organization only serves as the vehicle for the rich and powerful. After all, entities ranging from ExxonMobil, international charities, and even local churches have incorporated these days. And yet, if you read about the emerging political struggles over environmental protection, health insurance, or the influence of political lobbyists and you’ll find “corporations” still the central targets for public condemnation. Throughout American history, then, the parallel development of an increasingly expansive democratic form of government and the intimidating concentration of economic power facilitated by business corporations appear to be at odds with one another. This is the specter that the Mount Carbon miners feared in 1827; in an era of expanding suffrage among the white male population, the opportunity for those same voters to prosper in the business world appeared limited by the growth of “soulless” corporations.

Andrew Schocket tackles this apparent paradox head on in his new book, Founding Corporate Power in Early National Philadelphia. Schocket argues that a “corporate class” of Americans stood at odds with democratic principles during the nation’s formation and that although weaker and less developed than their modern manifestations, corporate enterprises helped build the foundation for American economic growth during the Early Republic and beyond. Rather than view large corporations as an emergent force in the years following the Civil War, as most narratives of business history are wont to do, Schocket claims that “the founding and development of corporations and corporate power were bound inextricably with the founding and development of American democracy” (p. 13). In this regard, Founding Corporate Power is an innovative work that seeks to place the political origins of the corporation on equal footing with its economic utility. Schocket has produced a solid work of scholarship that chronicles the rise of corporations during the Early Republic and offers a provocative view of Philadelphia’s elites that formed them.

Founding Corporate Power injects some familiar and widely-known national figures like Robert Morris into a narrative that otherwise is quite narrowly focused on Philadelphia’s upper crust. Corporations in the Early Republic, Schocket argues, slipped into a no-man’s land between private and public initiative at a time when internal improvement projects and banking ventures lay beyond the ability of private proprietors. State officials wary of doing such business in the political realm only too happily passed off these activities to corporations like the Bank of North America or the Schuylkill Navigation Company. Although Schocket is careful to chronicle the strong opposition to the increased use of corporate chartering during this period, he finds that by the first decade of the nineteenth century, corporations and their creators became a permanent fixture on Philadelphia’s economic landscape.

Founding Corporate Power employs an interesting chapter structure which follows the use of the corporate form through various manifestations. After a few chapters establishing the origins of the corporation in Philadelphia, Schocket traces the institution’s impact upon banking, city governance, and canal construction. Along the way, a familiar cast of characters weaves their way through each distinct phase of corporate development. These actors cast a huge shadow over early Philadelphia. Joseph S. Lewis, for example, served on the boards of large banks, canal and insurance companies, and as chair of the Watering Committee he oversaw the construction of the city’s groundbreaking public works project, the Fairmount Waterworks. This interconnectivity was no coincidence and had a major impact on the city’s economic development. If corporations simply acted as big proprietors did, then we would expect them to compete not only with non-corporate firms, but also with each other. This, Schocket maintains, was not the case, as about 300 individuals emerged during the 1810s and 1820s as a distinct “corporate class.” He argues that successful cooperation between this “small corporate oligarchy of several hundred men” pushed Philadelphia’s economic development forward and allowed them “to put themselves in position to reap disproportionately the rewards of that growth, and to use their leverage to further their greater class, economic, and policy goals” (p. 173) Founding Corporate Power then ends with an eye toward the present-day ubiquity of corporate institutions. As the story of Philadelphia during the Early Republic demonstrates, corporations were hardly interlopers in the political and economic history of the United States; they were present at the creation.

Schocket’s exploration of the early corporation provides a much-needed corrective to the instrumentalist view sometimes employed by economists and economic historians. Far too often, the political nature of corporations drops from the equation as we focus on the many efficiencies brought by the corporate form, such as limited liability of shareholders or the ability to raise unprecedented sums of capital. Although at times his “corporate class” sometimes comes across as conspiratorial and self-serving, Schocket employs ample evidence to demonstrate the effective ways that these insiders negotiated the tangled web of Pennsylvania’s legislative and municipal political structure.

But in its zeal to demonstrate the self-interested agenda of Philadelphia’s corporate class, Founding Corporate Power may run afoul of some recent trends in economic history. The depictions of banks here offer a key example. In his recent work on antebellum banking in the United States, Howard Bodenhorn makes the case that American banks served as energetic and creative actors in constructing the financial system of the United States.[2] In his depiction of Philadelphia’s banking community, Schocket finds banks to be no less energetic, but with another purpose in mind. “Regardless of party,” he argues, “early republic banks were state-sanctioned institutions used by the rich to make themselves richer using methods that no elected legislature would ever undertake directly” (p. 84). The neo-Beardian implications of documenting a “corporate class” certainly adds a good historical counterbalance to overly theoretical models of economic growth. But the argument is less persuasive when framed in such stark terms, and at times Founding Corporate Power veers in this portentous direction.

The idea of a “corporate class” lording it over Philadelphia’s economy in the Early Republic is an interesting, if a bit overdrawn, approach to a familiar subject of scholarship. In addition to informing our view of Philadelphia’s early economic growth, Schocket’s work has implications for the modern day. Today’s global corporations seem less and less accountable to a single governing body and the multinational elites staffing those organizations probably have more in common with each other than fellow citizens lower down the socio-economic scale. Many critics wonder if nation-states ? no matter how democratic or well-meaning ? are even capable of regulating these new extra-national corporate bodies. As economic power outpaces the political authority to control its excesses, the Jacksonian visions of corporations as “soulless monsters” or “many-headed hydras” might haunt the public sphere once again. Were the good folks of Mount Carbon so far off the mark when they worried about becoming “shadow without substance”?

References:

1. Miner’s Journal (Pottsville, PA), 20 January 1827.

2. Howard Bodenhorn, State Banking in Early America: A New Economic History (New York: Oxford University Press, 2003).

Sean Patrick Adams is Associate Professor of History at the University of Florida. He is the author of Old Dominion, Industrial Commonwealth: Coal, Politics, and Economy in Antebellum America (2004) and is working currently on a project on the political economy of home heating in nineteenth-century America.