This is the sixth in my series of posts about the five businessmen the History Channel profiled in a terribly inaccurate and un-historical TV miniseries titled The Men Who Built America. I’m writing these posts in response to several comments and e-mails from TV viewers who have expressed interest in a more accurate version of the story. (Click here to see all Al’s columns on the program and its subjects.)
Post #6: Vanderbilt Crosses the Atlantic
In April of 1855, in the middle of his feud with Garrison and Morgan, Vanderbilt announced the opening of a trans-Atlantic ship line. He called it the European Line. His ongoing fight over Accessory Transit may have made the Commodore a little gun-shy about publicly traded companies; he created the European Line as a private company. Although the great majority of Atlantic traffic was still being carried by sailing ships at that time, Vanderbilt focused exclusively on steamships.
Vanderbilt was not by any means a pioneer in the trans-Atlantic steamship business. The first ocean-going steamship in history was the Savannah, launched by a group of Southern investors in 1819. Like all the steamships that would follow over the next few years the Savannah was a hybrid; it had a mast with a few sails to take advantage of favorable winds and supplement the power of the steam engine.The ship was a failure; it was converted to pure sail power right after its first round trip across the Atlantic.
More practical steamships would take up the route starting in 1839. In 1840 Canadian Samuel Cunard launched his Cunard Line, which continues in business today, having been purchased by Carnival Cruise Lines in 1998. From that time forward steam-powered vessels would gradually take market share away from the sailing lines, until steamships came to dominate after the Civil War.
The Cunard line enjoyed a large financial subsidy from the English government, and Vanderbilt was initially reluctant to compete with it. In 1845 the US Government offered an even larger subsidy to American steamship lines that would agree to carry US Mail to and from Europe, and a couple of small one-ship lines were formed to take advantage of the offer. In 1850 Edward Collins opened his Collins Line with three ships operating between New York and Liverpool, in direct competition with the Cunard line.
Starting in 1845, the Irish Potato Famine created a surge in immigration to the United States. In 1846 William Ford, whose son Henry would be born seventeen years later, joined the ranks of starving Irishmen crossing the Atlantic in search of a better life. William settled in the Detroit area, near a brother who had immigrated earlier. Nearly a million Irish would come to America before the famine ended in 1852. It is likely that William Ford came over on a sailing ship, as did the great majority of immigrants of that era, but it is possible that he came over on a Cunard steamship.
In 1848 a poor Scottish weaver named William Carnegie brought his family, including twelve year old son Andrew, the future steel industry titan, across the Atlantic in a sailing ship called the Wiscasset. The elder Carnegie was a skilled craftsman who had made a middle class living as a weaver before the Industrial Revolution made his skills obsolete. On the voyage to the New World, young Andrew volunteered to assist the sailors on the ship in various ways and peppered them with questions about how the ship worked. He made himself so popular that the seamen shared their Sunday dinners with him. When the Carnegie family settled in Pennsylvania thirteen year old Andrew went right to work in a sweatshop, his school days over.
As young Andrew Carnegie went to work changing spools of thread in a cotton mill in Pittsburgh, William Rockefeller was indicted for rape in Moravia, New York. The indictment must have been a shameful experience for William’s son, nine year old John D. Rockefeller. (The elder Rockefeller also had a habit of abandoning his family for months at a time, and would abandon them for good when John D. was around seventeen years old.) Also in 1848 an eleven year old John Pierpont Morgan entered Hartford Public High School in Hartford, Connecticut. Morgan’s father was the rich and urbane banker Junius Morgan, who had very little in common with the three Williams who sired Ford, Carnegie, and Rockefeller.
Getting back to Vanderbilt, the trans-Atlantic shipping business didn’t look ripe to him until 1855. As in all his other ventures, the Commodore waited to enter the market until the commercial potential was proven, then used state of the art technology and astute management to squeeze out a profit at the expense of his competitors. In 1854, as he was preparing to enter the fray, he made it publicly known that he was willing to operate a trans-Atlantic steamship line on a subsidy of less than half of what Collins was getting.
Collins came to Vanderbilt’s office for a meeting in November of 1854, and urged the Commodore to ask the governnment for at least as big a subsidy ($33,000 per trip) as he was getting. This kind of collusion between competitors was perfectly legal in those days, but it did Collins no good. When Collins told him that it would be impossible to turn a profit without the large subsidies he was getting, Vanderbilt was characteristically rude in reply. “Then you have got into a business that you don’t understand,” said the Commodore. The meeting ended on that note.
Confident in the ability of his ships and captains to operate more efficiently than the Collins Line, he penned a letter to the US Postmaster General in February of 1855, in which he offered to carry the mail for a subsidy of only $15,000 per voyage.
Government officials, then as now, made their decisions for political reasons. Collins’ cronies in the US Congress voted to ignore the good deal Vanderbilt was offering the taxpayers, and continue the much larger payout to Collins. President Pierce vetoed the pork-for-Collins bill, saying that it violated “the soundest principles of public policy.” When the Congress maneuvered around the President’s veto to maintain Collins’ subsidy, Vanderbilt went into business without government support of any kind.
To avoid direct competition with Britain’s Cunard Line, the Commodore eschewed British ports and ran his ships between New York and Le Havre, a French port city just a few miles northeast of where the D Day Invasion would land during World War II. Despite the lack of a subsidy, he undercut Collins prices. His ships crossed the Atlantic faster than Collins’. Business was brisk from the beginning.
Many of the ships Vanderbilt and his rivals ran had iron hulls. It’s a common misconception that the Monitor and the Merrimack, the two Civil War battleships that fought their famous naval battle in 1862, were the first two iron clad ships in maritime history. In reality what made the Monitor and Merrimack signficant is that they were the first military vessels to utilize thick iron armor to protect them in battle. (In his History of the English Speaking Peoples, Winston Churchill said that as soon as news of the battle of the ironclads reached Europe “it was realized that all the war-fleets of the world were obsolete.”)
Iron-hulled commercial vessels had been steaming across the oceans for many years before the Monitor-Merrimack battle. In of 1839, the same year John D. Rockefeller was born in a three room shack in a small town in New York, an iron-hulled commercial vessel crossed the Atlantic for the first time. By the time the Commodore entered the trans-Atlantic trade in the mid-1850’s iron hulled steamships were commonplace.
In August of 1856 the political winds finally started blowing against Collins; Congress notified him that it would cancel his subsidy in six months. In February of the next year the government terminated Collins’ subsidy and entered into a contract with Vanderbilt for delivery of the mail. The Collins line stopped operating almost immediately. In 1858 all the assets of the Collins line were sold at a sheriff’s auction, the proceeds going to the company’s creditors. With less competition, Vanderbilt’s European Line really began to prosper.
In 1857 Vanderbilt joined the board of directors of the New York and Harlem Railroad, in which he was already a major stockholder. By this time he held significant blocks of stock in several other railroads as well. For several more years he would divide his time between his shipping and rail, but with an ever-greater emphasis on rail.
With the outbreak of the Civil War Vanderbilt quickly lost interest in the shipping industry. When the Confederate Navy started attacking any ship that carried cargo to or from Northern ports, Vanderbilt brought his nautical pursuits to an end, although the “Commodore” nickname would stick with him for the rest of his life.
Next week’s post will look at Vanderbilt’s career in rail, up through the end of the Civil War.
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