23. Abraham Lincoln establishes Protectionism (1860)

Lincoln is most often remembered for freeing the slaves, but many consider his contributions to business on an equal par. Lincoln, a former Whig, actually ran on a strong economic policy of American protectionism. Lincoln had been the first national candidate since Henry Clay to have the united support of the labor and manufacturers. That alliance would include the manufacturing districts of Illinois, Pennsylvania, Ohio, Kentucky, and Virginia that carried Lincoln to the presidency. It was no surprise that the Republican would be born at a 1856 convention in Pittsburgh. Lincoln carried industrial Pittsburgh’s Allegheny County by a record 10,000 votes. Lincoln called the concentration of votes in this manufacturing area “the State of Allegheny.” Pittsburgh had finally overcome the divides of the 1794 Whiskey Rebellion and turned solidly to the new Republican Party. Lincoln’s winning margins were similar in the iron districts of Ohio, where Iron Whigs and protectionist Democrats had found a new home in the Republican PartyIn western Virginia, the Pig Iron Aristocrats’ (iron manufacturers as they were known) support of the protectionist Lincoln split the state and created West Virginia. These Pig Iron Aristocrats had forged an alliance with iron labor as well. A strong pig iron industry was necessary for both management profits and labor employment. The German and Irish immigrants of the 1840s came for economic opportunity and they united with wealthy Scotch-Irish to form a new Republican machine in the iron districts of the middle states. Industry growth took priority over unionism and profits. These districts knew the recessions caused by free trade policies, believing the still lingering Panic of 1857 was a result of Democrat’s passing lower tariffs. As a result of war and protectionism, the pig iron industry would see great advances in technology. The Pig Iron Aristocrats were rewarded for their votes with the 1862 tariff act, which was the highest ever on pig iron at 32%. As the Pig Iron Aristocrats responded with massive investments in industry, the Congress moved the rate to 47% in 1864. The pig iron industry grew an amazing 65% during the Civil War. By the end of the war, the Pig Iron Aristocrats were a real national political force with wealth and the ability to employ tens of thousands. The American pig iron industry was the world’s greatest.
Besides technology, tariffs would drive pig iron production, and there is no demand such as that of war. As much as 25% of the union’s artillery (15% at Fort Pitt Foundry alone) was made in Pittsburgh. At least 80% of the union’s naval iron plate for ships. Most of the union’s armor plate was rolled in Pittsburgh. All of the artillery carriage axles and most railroad axles were forged in Pittsburgh. But most of the raw pig iron, however, came from Ohio. In 1860, Cleveland, Ohio had no iron foundries, but after the war, Cleveland had over 50 foundries. The Pig Iron Aristocrats were not only the ones who won the war, but also the ones who profited the most. The Republican tariffs assured a boom in national production for years to come. The great iron triangle of Ohio, West Virginia, and Pennsylvania saw growth as never before. The war would also simulate huge heaps in pig iron technology, railroads, and manufacturing. The huge profit margins in the pig iron related businesses assured those profits were poured back into the businesses. Just as important the pig iron end users such as the railroads experienced similar growth. The expansion of American industry during the war would be the infrastructure in place to make America the premier industrial nation. Lincoln took chances by promoting infant industries rather than buying off European sources. It proved not only smart business, but by war end the Union controlled its own destiny immune to foreign boycotts or pricing. In the end, Union manufacturing overwhelmed the South.
Lincoln used tariffs to raise money for the war as well, which was a basic use of tariffs as proposed by the Federalists earlier. Lincoln’s economic advisor, Henry C. Carey was a huge supporter of Clay’s American System. Carey became a key political ally of Clay, forming the Pennsylvania Society for the Encouragement of Manufacture, as well as the American Industry League. Carey was prolific writer in support of tariffs throughout his career. Carey requires some note because he was the most influential economist of the 1850s, 1860s, and 1870s. He was for easy money and strong tariff support; ideas supported by both Henry Clay and later in the 1890s by William McKinley. Carey understood the nature of the money supply as a stimulus, and supported the printing of greenback dollars. Today, of course, he would be considered an inflationist, but he argued while inflation hurt the bankers, it helped the manufacturers. He correctly identified the “enemy” as the eastern banking concerns as banking monopolists who favored importing and trade. Carey argued that these bankers were actually hostile to American industrial enterprise. Carey also predicted the banker’s takeover of the railroad industry to control trade. His writings foreshadowed the rise and dominance of J. P. Morgan in the McKinley era. Carey was the major influence on Lincoln’s tariff policy that would become the policy of the Republican Party for many decades. Carey’s disciples in the Congress such as “Pig Iron” Kelley, James Garfield, William McKinley and Thaddeus Stevens carried the protectionist banner in the time period between Henry Clay and Herbert Hoover. These men also demanded Congressional oversight to assure profits gained from tariff protection were invested back into the industry creating employment.
The Lincoln presidential victory of 1860 was by his success in the old “Iron Whig” districts of Ohio and the other Pig Iron Aristocracy districts in Pennsylvania, Maryland, Connecticut, and western Virginia. Lincoln’s protectionist assured these districts would remain Republican for many decades. The vote in these districts set new majority records as Lincoln’s protectionism played as well as his anti-slavery stand. The election would bring war to the nation, but prosperity to the iron districts of the North and the Midwest manufacturing districts. It would build a long-term Republican majority. The Congress passed the highest iron tariffs ever along with an increase in tariffs across the board. At the time the government’s main source of income was tariffs (not income taxes). Almost all industries benefited, but iron, glass, textile, and mining boomed. The protectionist representatives wrote the tariff bill, assuring iron received the highest level of protection. This political alliance would assure Republican protectionist policies for the next seventy years. Lincoln’s protectionism and policy of Amercian ecomonic growth would peak in 1890 with the McKinley Tariff Bill.

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Were the Pilgrims Capitalist Pigs?

1623 Privatization of the Plymouth Colony- The Roots of American Capitalism

The Plymouth Plantation while short-lived has a special place in the history American business history. The Plymouth colony of the Pilgrims started in the November of 1620. The Pilgrims were a group of Christian Separatists from the Anglican Church of England that have first moved to Holland, but found little freedom for their religious practices. The Pilgrims had left Holland to obtain freedom of religion, but they were financed by a group of wealthy venture capitalists, which hoped to use them to achieve a profit in the New World. These capitalists were a joint stock known as the Virginia Company of London having a royal charter issued in 1606. The Virginia Company had been behind the failed Jamestown colony, which by 1620 was paying some small dividends with a cash tobacco crop. The Virginia Company hoped for a similar trade profit in New England with furs, fish, and crops. The Pilgrims were considered by the company as indentured servants, although, the Pilgrims did negotiate a profit sharing deal after seven years. They initially argued against communal ownership but were left with no choice. The Pilgrims for their part never viewed themselves as indentured servants but as paying taxes to the company. It was an unclear and disputed vision, but all property was under communal ownership. Even the houses they built were considered communal property and could be reassigned. This initial model of ownership has been called both exploitative capitalism and communism. Contrary to some, the communal pact was not based on their religious beliefs but forced on the Pilgrims by the company. Privatization of property would prove to evolutionary in the colonies.
The Pilgrims came to New England on the Mayflower and Speedwell. In total there were 120 Pilgrims with a smaller group known as the “strangers.” The “strangers” were hired managers of the company, which included Myles Standish as the colony’s military leader and Christopher Martin as Royal Governor. The first year proved the most difficult, arriving in late fall with no growing season left. Nearly half the colonists died the first winter. It was only by the aid of the local Indians that allowed for a solid planting of corn in the spring. They managed to construct a common house for living quarters. William Bradford kept a dairy of the plantation (Of Plymouth Plantation), detailing social breakdown under the communal ownership system. Initially, the Pilgrims were forced to beg and steal from the Indians, but even the first planting and building of houses proved disastrous. Bradford described a culture of “free-riding.” Older, sick, young, and women soon excluded themselves from communal labor. Others tended not to pull their weight under the communal economic model. Even the most able men were soon angered by having to support free riding and reduced their effect. William Bradford decried the communal system as the root of the problem. Bradford noted in hiss dairy: “For the young men, that were the most able and fit for labor and service, did repine that they should spend their time and strength to work for other’s men’s wives and children without any recompense. The strong, or man of parts, had no more division of victuals and clothes than that of the weak and not able to do a quarter the other could; this was thought an injustice.”
The Pilgrims were surely aware of the limited success at Jamestown when the colonists were given a small plot of land to work as their own. By 1621, the Jamestown colony had limited private property but the communal system still required a tax on private earnings and a requirement for communal work of several months a year. Bradford and Plymouth faced a crisis point in the spring of 1623. The colony was down to four adult women and dependent on the Indians for daily survival. Bradford made the decision to fully convert to private property. Bradford reported the amazing success: “For it made all hands industrious. . . . The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability.” The new system made the colony profitable and would be the new model for future settlements. The system also proved compatible with their religious beliefs as the colonists give freely of their surplus to help the less fortunate. The model would augur the American system of capitalism and philanthropy. The taxation model of the colony would also be a model for government role in communal needs. Home ownership strengthened and motivated house building in the colony. It would also augur the failure of collectivized agriculture by 20th century communist nations.

America's Political Ghost

Today America’s Midwestern Democrats, big city Democrats, “Reagan” Democrats, Southern Republicans, heartland independents, conservative Democrats, and conservative Republicans, sometimes, feel something is missing. Part of their spirit is someplace else. The spirit is often alluded to by the line- “It’s the economy, stupid”. Few realize there is an American ghost in their spirit. These struggling and politically ambivalent Americans are dominant in the Ohio Valley, Western Pennsylvania, the heart of the industrial Midwest, industrial cities throughout America, and Western states. They feel the presence of a real ghost. That ghost is nationalistic and hard working. It is a spirit of ambivalence. It doesn’t feel fully comfortable in either of today’s political parties. It is confused by the economic arguments on free trade, wanting only to see America working. It is confused by America’s international role. While highly nationalistic, it often questions war as unnecessary involvement in others’ affairs. It is more economic than global. It believes in American exceptionalism and revels in American success at all endeavors. It is proud. It wants to buy American but often shops at Wal-Mart to save money. It believes America should always be bigger and better than the rest of the world. It believes in bigness as an American icon and is disappointed when a taller building, bridge, ship, or airplane is built elsewhere. It is that of the American worker and industry. It hates big business’s greed but is proud of its industrial might. That spirit finds pride in working for America’s industrial giants, but deplores their methods at times. American Big Business is a devil but it’s their devil. It believes that if a devil must be in charge, then it should be an American devil.
The spirit today is an amalgam of our American spirit. It is part of a forgotten political party. It was a spirit that was forced to divide over years for various issues. It is an alloy that no longer can reflect earlier and more basic political views. Today’s American spiritual amalgam is forged like Damascus steel by folding and hammering layers of issues into a sword. It often is strongly partisan but can find common ground in nationalism, yet that very nationalism can blind it. It is American but does not fit neatly into either of the beliefs of today’s political parties. It is a mainstream spirit and thus has two choices but feels there should be another. The other choice is America’s ghost, and it is layered in the fiber of today’s spirit. This ghostly spirit often sees presidents- Reagan, Kennedy, Truman, Eisenhower, Teddy Roosevelt, and FDR as their presidents. That spirit has forgotten heroes of Alexander Hamilton, Henry Clay, James Garfield, and William McKinley. Abraham Lincoln is a forgotten voice of that spirit. It is a ghost that haunts the steel valleys of Ohio and Pennsylvania, the coalmines of Illinois and West Virginia, the old factories of Michigan and Indiana, and the Connecticut Valley of New England. It has helped elect many of our presidents.
This restless and homeless spirit is that of America’s Whig Party. The Whig Party was born out of opposition to Andrew Jackson in 1832. Its platform, however, was economic bringing in a strange mix of opposites united by economic issues. This mix included Democrats, Anti-Jacksonians, Anti-Masons, “Know-Nothings,” abolitionists, and old Federalists. Similarly, its American economic approach fused diverse geographic regions such as New England, the Midwest, Mid-Atlantic, and the South. It united class lines such as rich and poor, blue and white collar, and union and owners. It formed economic alliances with opposing religious, social, class, and philosophical factions. The Whigs were passionate about dinner table issues, but they lacked the fire of the dominant social issues of the time. Its ghost, however, is purely economic and nationalistic as was its founding. The ghost is that of “bread and butter” issues. It is a ghost that punishes political parties that stray too far the bread and butter issues. It is a ghost awoken in hard times.

REBIRTH OF THE WHIG PARTY

Americans who believe like the early Federalist ,Alexander Hamilton, that government was a role to encourage economic development for the defense of the country, have no home in either political party today. The Democrats want government ownership and control. The Republicans hold stubbornly to the one world concept of “free trade.” The result is the valley of death for Americans who believe American prosperity comes first. The vision of Alexander Hamilton and Henry Clay’s “American System” brought us the Whig Party. The Whigs formed the political might in the Midwest manufacturing belt (from Chicago-Cleveland –Pittsburgh) and the New England Manufacturing crescent (Connecticut Valley, New York, and Boston), bonding management and labor into a common party. These manufacturing areas would propel the young Whig Abraham Lincoln to the head of the Republican Party and the presidency. American Manufacturing policy as Hamilton had envisioned would rule until the 1920s. Progressives in both the Democrat and Republican Party would reject this nationalistic view and slowly insert a world view which took hold after World War Two. There are Whigs emerging again in some factions of the Tea party and right wing Republicans such as Buchanan. Maybe this recession will lead more conservatives to reject the “Chicago and Austrian School” of “Free Trade” economics, which has dominated both parties and western world governments. (see William McKinley by Quentin Skrabec)
Read more about the American Whigs in my Iron Pantheon of American capitalists
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Alexander Hamilton Sept 18

Alexander Hamilton is truly the founding father of American Manufacturing. In 1794 he became the nation’s first Secretary of Treasury under George Washington. Hamilton, a Federalist, believed the Federal Government had responsibility for defense and the economic welfare of the nation. In fact, he saw them as interrelated and symbiotic. Unfortunately, neither political party today functions as a Hamiltonian advocate of American manufacturing. As an officer on General Washington’s staff, Hamilton saw battles lost for lack of American manufacturing capability. A true American conservative, Hamilton remains in “no man’s land” today because of his support of a national bank. Hamilton, however, realized that agrarian America lacked a means to supply capital to business. Private banks can perform that function today but then western cities lacked banks to grow industry. Hamilton believed (like Adam Smith) that defense industries needed tariff protection as well. Hamilton envisioned a manufacturing nation and that economic warfare would be part of America’s future. Hamilton’s founding ideas would be embodied in Abe Lincoln’s protectionist policy that dominated America for 80 years and ushered America into its Golden Era of Industry, science, and invention. Hamilton was always denounced by the Jeffersonians, Jacksonians, Democrats, and today by Republicans, but his economic ideas, especially support for a protective tariff and a national bank, were promoted by the Whig Party and after the 1850s by the newly created Republican Party, which hailed him as the nation's greatest Secretary of the Treasury.
See William McKinley: The Apostle of Protectionism by Quentin R. Skrabec
See my Wall Street J quote http://online.wsj.com/article/SB10001424052748703428604575418680197041878.html?mod=googlenews_wsj

The Pantheon

The American Pantheon is a result of years of research into the Golden periods of American business and capitalism. It has produced a number of iconic biographies. At the seat of Jupiter is President William McKinley, who developed a managed approach to American exceptionalism in manufacturing and industry. On his right side are business innovators such as H. J. Heinz, George Westinghouse, Andrew Carnegie, and Michael Owens. On the left there are William McGuffey, America’s educator, and Henry Clay Frick corporate organizer. The Pantheon of books includes tributes to the many developers of early industry in general (The Pig Iron Aristocracy, Boys of Braddock, and Iconic Lessons of Operations Management). The many industrial laborers are honored in the book A Genealogy of Greatness. Over twenty of these “gods of business” are interviewed and questioned about today’s problems in the book-Interviews with the Titans of Business.






















America’s greatest capitalists and industrialists – can lead the way back to greatness. The literary pantheon preserves the memory for our youth.


Read the full Pantheon
Other Books by Quentin R. Skrabec Jr., Ph.D (The Literary Pantheon)

The Boys of Braddock ISBN 0-7884-2516-1

George Westinghouse: Gentle Genius ISBN 978-0-87586-507-2

The Metallurgic Age ISBN 0-7864-2326-9

Michael Owens ISBN 978 1 58980 385 5

In Search of the Lost Grail of Middle Management ISBN 0-7618-2551-7

Glass in Northwest Ohio ISBN 13 978-0-7385-5111-1

Labor Productivity and Profits ISBN 0-7414-3890-9

St. Benedict’s Rule For Business Success ISBN 1-55753-254-0

Iconic Lessons in Operations Management ISBN 0-7414-2893-8

Saintly Lessons and Divine Concepts for Business ISBN 156072845-0

William McKinley: The Apostle of Protectionism ISBN 978-0-87586-577-5

A Genealogy of Greatness ISBN 978-1-934209-46-2

The Pig Iron Aristocracy ISBN 978-0-7884-4515-6

Interviews with the Titans of Business ISBN 0-7414-4536-0

H. J. Heinz: A Biography ISBN 978-0786441785

William Holmes McGuffey ISBN 978-0875867267

Henry Clay Frick

A Manufacturing Manifesto ISBN 978-0741453310

Quentinskrabec.com
Theironpantheon.com
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Henry Clay Elected to Congress September 4

Henry Clay of Kentucky was elected to Congress on 1812, September 4. Alexander Hamilton, Henry Clay, and Matthew Carey can be considered the founding fathers of American manufacturing. They believed the government was responsible for creating an economic environment for manufacturing. Clay in 1825 introduced his “American System,” which stated that no political system could last without a government backed economic foundation. Clay argued for a system of protective tariffs to promote manufacturing, government investment in manufacturing infrastructure, and government backed banking and capital for manufacturing. Henry Clay would be a force in manufacturing politics until his death in 1852, and the founder of the Whig Party, which would dominate future manufacturing centers of Western Pennsylvania, Ohio, Illinois, and New England. Clay’s “American System” would be the basis of American manufacturing dominance for over hundred years.

see Amazon.com search Skrabec for references

August 8 Edison's Mimeograph

Edison patented his mimeograph on this date. There is much research today on bringing back the creativity of the Edison period of 1850 to 1920. Most are focusing on shortcomings in our education system and lack of critical thinking today, but few look to the structural and infrastructure of our society. Edison often spent months researching the potential economic gains of an invention before launching a research project. Financial rewards drive invention, and taxes are a deterrent. Capital gain taxes are also a deterrent. Capitalism is the driver of invention. Edison like Westinghouse, Bell, Bessemer, and others of the period were driven by the rewards of inventing. Another problem is declining corporate income as imports flood in. Companies are not willing to invest in long run research as they struggle in declining markets. The great Republican tariffs of the 1800s assured a future market for glass, steel, electrical, and manufacturing in the 1800s, allowing companies invest confidently in the future.
A Manufacturing Manifesto ISBN 978-0741453310 go to Amazon --also search “skrabec” on Amazon

July 30 Henry Ford's Birthday

Henry Ford more than anyone knew creativity and capitalism had a symbiotic relationship---both dependent on each other. Ford created his own network of creative friends including Thomas Edison, Bucky Fuller, George Washington Carver and many more.
Greenfield Village remains today a "Mecca" for manufacturers, inventors,educators, and artists--- it should be an annual pilgrimage-- read my industrial biographies of H J Heinz and William McGuffey

Myth of the Month- small business "creates" most jobs in US---- yes but Big Business creates most small business-- for every one job in big business-- 10 are created in small business

Moon Landing July 20

The Founding manufacturing fathers such as Alexander Hamilton and Henry Clay believed government had two roles -- defense and promoting manufacturing!
the 1820 canal system, a National Bank, and a railroad system an our space program were successful applications of that vision.
see A Manufacturing Manifesto on Amazon

July 14 Bastelle day

all revolutions are not equal- the American Revolution gave us capitalism -- the French Revolution gave us socialism

thought for the day-- the only example of free trade is that between Michigan and Ohio

July 12 is the day Alexander Hamilton died! he was America's first manufacturing founders!