Published by EH.NET (July 2001)

Edward J. Balleisen, Navigating Failure: Bankruptcy and Commercial Society

in Antebellum America. Chapel Hill: University of North Carolina Press,

2001. xv + 322 pp. $49.95 (cloth), ISBN: 0-8078-2600-6; $18.95 (paper), ISBN:


Reviewed for EH.NET by Bradley A. Hansen, Department of Economics, Mary

Washington College.

The stories of successful entrepreneurs play a prominent role in American

economic history. Edward Balleisen reminds us that throughout history many

more businesses have failed than have succeeded, and that to understand

American economic history we need to understand how people have dealt with

commercial failure. Using a wide range of sources he attempts to reconstruct

the experience of commercial failure in antebellum America. Although the

intended audience appears to be primarily historians — Balleisen is assistant

professor of history at Duke University — economists should also read

Navigating Failure. Underlying the entire study is a concern with how

institutions affect entrepreneurship. Laws and norms related to credit always

involve a balancing act. If they are too lenient there is insufficient

incentive to repay and credit will be in short supply. If they are too harsh

entrepreneurs will be less likely to take risks. For those who would prefer to

take a more quantitative approach, Balleisen’s work also points the way toward

an underutilized source for economic and business history.

Though people now take bankruptcy for granted, for most of the nineteenth

century there was no bankruptcy law in the United States. When Congress passed

a bankruptcy law following the Panics of 1837 and 1839, insolvent businessmen

flocked to the courts to seek a discharge. In the two years that the law was

in effect over 40,000 people petitioned for bankruptcy. Balleisen begins his

study of commercial failure with a largely unexamined source: the records of

bankruptcy proceedings in the Southern District of New York under the 1841

Bankruptcy Act.

Balleisen readily admits that his sample of cases is not random. He is less

interested in rigorous statistical analysis than in constructing a “collective

biography.” His selection of cases is determined by the availability of

records that enable him to track the individual’s path to bankruptcy and then

to follow events after bankruptcy. Among the sources he utilizes are credit

reports, newspaper articles, court records, and local histories. Balleisen

sifted through such records for over 500 bankrupts. He combines this

collective biography with extensive reading of the popular literature. In the

story that emerges he emphasizes three themes: the changing meanings of

failure and economic independence, the importance of familial ties, and the

impact of widespread economic calamity.

He finds that many of these men (only nine of the bankrupts in his sample were

women) were brought to bankruptcy by the usual problems of new businesses:

lack of experience, inadequate capital, and failure to keep adequate accounts.

A few were brought to ruin by outright speculation, drinking, or living beyond

their means. Some, on the other hand, were relatively capable business people

brought down by the financial panics and depression of the late 1830s.

After bankruptcy, most sought to return to the ranks of business owners.

Balleisen’s conclusions regarding who was able to successfully return to the

ranks of the self-employed supports the work of Naomi Lamoreaux and others on

the importance of connections, particularly family connections, for merchants

and manufacturers. The ability to utilize family ties to reestablish credit

was often crucial to a successful comeback. There were some substitutes for

familial connections, such as valuable knowledge or skills. For example, R.

Hoe and Co., manufacturers of high quality circular saws and printing presses,

shut down for only one week and received new lines of credit as they were

going through bankruptcy. Some people were actually able to use their

experience of commercial failure to their advantage in such fields as credit


Balleisen also uses the popular literature of the time to relate changes in

the nature of commercial failure to changing attitudes toward economic

independence and economic failure. At the beginning of the nineteenth century,

sermons, short stories and novels extolled the kind of economic independence

that comes from owning one’s own business. At the same time they tended to

portray the failure to pay one’s debts as a moral failure. One cartoon from

the 1850s shows an insolvent businessman taking his morning walk while hiding

behind his wife’s skirts. Balleisen argues that the financial calamities of

the nineteenth century gradually altered people’s attitudes toward commercial

failure. People began to perceive that even men who had acted prudently might

become unable to pay their debts through no fault of their own. Although

self-employment remained the ideal, some people began to see a certain kind of

economic independence in salaried employment for a stable company, a freedom

from the constant risk of ruin faced by entrepreneurs.

One aspect of the story that might be a little confusing for those who have

not spent a great deal of time considering commercial failure is the use of

the terms failure and bankruptcy. In chapters three and four, Balleisen

provides an excellent description of bankruptcy law and how it differed from

state debtor-creditor laws, but he also chooses to be consistent with

colloquial usage and use the terms failure, bankruptcy and insolvency

interchangeably to refer to someone who cannot pay their debts. In legal

discussions, however, bankruptcy refers specifically to federal law dealing

with insolvency. Bankruptcy provides a pro rata distribution of a debtor’s

assets and a discharge for the bankrupt. State laws typically distributed an

insolvent debtor’s assets on a first-come- first-served basis and did not

provide a discharge. The term commercial failure, as Dun and Bradstreet use

it, refers to businesses that have been discontinued and failed to pay all

their debts. It does not count the many businesses that close with a loss to

their owners but not their creditors.

Making a distinction between bankruptcy, commercial failure and discontinuance

is more than just a matter of semantics; it emphasizes the extent of economic

failure. Of the businesses that are discontinued, only a small portion fail to

pay their debts. Of the businesses that fail to pay their debts only a small

portion end up in bankruptcy. Bankruptcy cases are just the tip of the iceberg

of economic failure. It would be interesting to see how a collective

biography of bankrupts compares to a collective biography of those who became

insolvent but did not declare bankruptcy, or a collective biography of those

who closed up shop but managed to pay their debts. It would, of course, also

be interesting to see how Balleisen’s collective biography would compare with

one of bankrupts under the 1867 bankruptcy law or the 1898 bankruptcy law.

Edward Balleisen has made a considerable contribution to our understanding of

commercial failure, but he would probably be among the first to admit that

much of the story remains to be told.

Bradley A. Hansen is assistant professor of economics at Mary Washington

College. His publications include “The People’s Welfare and the Origins of

Corporate Reorganization: The Wabash Receivership Reconsidered,” Business

History Review (Autumn 2000); and “Commercial Associations and the

Creation of a National Economy: The Demand For A Federal Bankruptcy Law,”

Business History Review (Spring 1998).