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Great Richmond Terminal A study in businessmen strategy and business strategy HC
Great Richmond Terminal
A study in businessmen strategy and business strategy
By Maury Klein
Hardcover
323 pages
Copyright 1970
Contents
Prefacevii
I The Lay of the Land
II The Players30
III The Twilight of Territorial Strategy55
IV The Tail and the Dog: Transformation
of Danville, 188o-188686
V The Perils of Expansion: The East Tennessee
Experience, 188o-1886115
VI "Conservatism" Challenged: The Central of Georgia,
188o-1886146
VII The Politics of Consolidation173
VIII A Beast with Many Heads203
IX The Old Order Passing235
X Out of Many, One259
Conclusion: The Terminal Experience in Retrospect285
Appendixes295
I Selected Data from the Richmond & Danville Balance
Sheet297
II Selected Data on Richmond Sc Danville Operations298
III Selected Data from the East Tennessee, Virginia &
Georgia Balance Sheet299
IV Selected Data on East Tennessee, Virginia & Georgia
Operations300
V Selected Data from the Central of Georgia Balance Sheet301
VI Selected Data on Central of Georgia Operations302
Bibliography303
Index311
MAPS
facing page
i. Richmond & Danville System, 1885io8
2. East Tennessee, Virginia & Georgia System, 1886140
3. Central of Georgia System, 1887141
4. Richmond Terminal System, 1890214
Tables
1. Selected southern railroads and their presidents, 1865-18808
2. Dominant personalities in selected southern railroads, 1880-
189313
3. Growth of selected southern railroad systems as measured by
total assets15
4. Richmond & Danville floating debt, 1867-188064
5. Component systems in the Associated Railways of Virginia
and the Carolinas103
6. Securities acquired by Danville from Terminal in dumping
operation, 1886107
7. Selected data on operations of the East Tennessee system,
1877-1884133
8. Comparison of the East Tennessee's capital structure before
and after the reorganization plan of 1886143
g. Selected data on operations of the Central of Georgia and
Southwestern railroads, 1880-1886168
10. Distribution of stock in the Central of Georgia, South-
western, Georgia, and Atlanta & West Point railroads in 1885172
1. Participants in the Georgia Company syndicate190
12. Holders of Georgia Company stock participating in the sale
to the Richmond Terminal, October 26, 1888206
13. List of directors present and voting at selected Richmond Terminal directors' meetings considering the purchase of
Georgia Company securities210
14. Selected financial data on the Central of Georgia main sys-
tem, 1888-1891225
15. Results of operations on auxiliary roads controlled by the
Richmond & Danville Railroad, 1881-1891229
16. Comparative adjustments of selected securities under the
Olcott and Morgan plans274
17. Comparison of selected provisions from the Olcott and
Morgan plans276
Preface
PERHAPS no other period of southern history is at once more familiar and more obscure than the post-Civil War era. Indeed the very ease with which the term "New South" and all it connotes come to mind betrays the lack of specialized scholarship on the subject; broad generalizations flourish best where little detailed information exists to contradict them. While much study has been given the postwar period, most of it has concentrated upon either the reconstruction era or upon basic social and political themes. Relatively little attention has been devoted to economic development, even though most historians stress the importance of changing economic patterns in explaining the emergence of the New South.
Especially has the process of economic development been ignored. Thomas D. Clark and Albert D. Kirwan's recent volume, The South since Appomattox, devotes only a scant chapter to postwar industrial activity, and even C. Vann Woodward's classic Origins of the New South allots but two of its penetrating chapters to the subject. The main problem seems to be one of purpose: historians of the period have been interested in economic development not as a problem in itself but rather for the light it sheds upon certain significant changes in other aspects of southern society. Thus, the general impact of economic activity is deemed important and given proper consideration while the process by which it occurred remains outside the pale of most investigations.
Surely this set of priorities can be challenged. The whole notion of a "New" South is at heart an economic concept referring to the gradual movement of the region away from a staple crop economy toward a more diversified (and therefore industrialized) economy. The social, political, and intellectual ramifications of this movement were immense and permeated every aspect of southern life. For that reason the process of industrial development could not help but exert a shaping influence, especially since its basic assumptions and effects often ran counter to southern tradition. The continuous interaction between the process of industrialization and the institutions of a fundamentally agrarian society, if examfined closely, can tell us a great deal about the complex adjustments made by the South after its defeat.
In any such study close attention must be paid to the businessmen who gave the South its entrepreneurial leadership. Heretofore the nebulous spirit of the New South has for the most part been identified with its most conspicuous and articulate spokesmen, namely, journalists like Henry W. Grady or the host of politicians who advertised the vast potential of the South and urged its exploitation. Such men were important as propagandists and for the political and legal aid they rendered, but they rarely performed the vital functions of promoting and organizing enterprises and mobilizing the capital needed to carry them out. These and other critical tasks were left to the businessmen, who constitute the key element in the industrialization of the South. Yet little has been written about these businessmen either individually or as a group, and even less has been said about their motives, tactics, and goals. Hence they remain shadowy figures whose activities are by default ascribed to some variation of regional patriotism on one hand or to the Robber Baron syndrome on the other. In truth one can gain a clearer picture of them from literature than from the scholarly investigations that have been made.
The purpose of this study, then, is to illuminate the process of economic development by focusing upon the railroad industry in general and a specific case history, the Richmond Terminal, in particular. Ideally such a study ought to include a detailed examination of the complex interactions between economic activity and all pertinent social and political institutions. Limitations of space and talent, however, compel a more modest objective, namely, the nature of the economic activity itself and the role played by the entrepreneurs who shaped it. The emphasis given this aspect of the problem can be justified by the lack of attention it has received in the past and by the large body of existing literature on other aspects of southern development.
It may be argued that the railroads were not a very representative industry in the southern experience and therefore offer little insight into the general process of economic development. Even if this were true, and I am most unwilling to admit that it was, the railroads would still constitute a logical starting point for any inquiry into southern industrialization. For one thing, they were the first sizable industry to arise in the postwar era and therefore the first to confront the major problems of organization, administration, mobilization of capital, and a host of others. Although the strategies and tactics that evolved in the transportation sector do not precisely fit other sectors, the basic patterns and attitudes learned there did exert considerable influence.
The railroads were a vital sector not only because they came first but because they paved the way for massive investments in other industries and enterprises. On this point a survey of the careers of individual financiers was necessary. As this study will show, most southern rail entrepreneurs either invested in transportation to protect prior interests in other industries or, more commonly, went from the railroads to such sequential investments as mining, cotton mills, real estate, express business, manufacturing, and industrial development of all kinds. In this manner the railroads triggered and fostered industrial activity throughout the South and provided not only transportation but a formidable group of experienced and talented financiers willing to extend their southern commitments.
By the end of the century many of these businessmen had virtually abandoned their railroad enterprises in favor of other and more lucrative sectors. Whatever their individual motives and goals, however, nearly all of them shared one original assumption: that transportation held the key to the South's future economic development and must therefore receive top investment priority. As the study suggests, this original commitment gradually evolved from a developmental to a speculative investment as southern railroads ceased to be profitable enterprises. By that time, however, a basic transportation system had been erected, and new opportunities arose to claim the financier's attention and capital.
The study has been organized to show this basic pattern of development. The first chapter suggests a working hypothetical framework in which the development of southern railroads in general took place during the period from 1865 to 1893. The second chapter presents some biographical sketches of the more important and representative figures connected with the systems that eventually were included in the Richmond Terminal. This background information seems especially important to an understanding of the diversity of interests and motivations that led men to invest in southern transportation; it also seeks to rescue several colorful and fascinating individuals from the oblivion to which they have been consigned by more general surveys.
Chapter III traces the postwar history of the three Terminal systems prior to 188o, a significant turning point in the history of each company. The remaining chapters discuss in detail the rise and fall of the Terminal and its component systems. Throughout the study I have tried to focus upon the process of development as it was shaped by the decisions of individual businessmen. The crucial assumption here is that development occurred by a process of accretion, and that the decision-making process makes no sense unless it is viewed alongside the viable alternatives available at the time. Wherever possible I have discussed these alternatives and the reasons for their ultimate rejection. By examining these entrepreneurial motivations closely it is hoped that a fresh perspective will be thrown upon the whole process of southern industrial development.
In this light it is important to keep in mind that the Richmond Terminal itself constituted one possible response to the problems posed in the transportation sector. To be sure the Terminal has an intrinsic interest of its own. As one of the nation's first pure holding companies it offers a fascinating insight into the evolution of corporate and financial institutions, to say nothing of the social consequences posed by its creation. In this study, however, I am concerned with the Terminal primarily as the most ambitious and spectacular attempt to resolve pressing difficulties in southern transportation. To understand the Terminal's history is to understand the strengths and limitations of the most popular alternative chosen by southern rail leaders during the late nineteenth century.
Nor is the Terminal's significance limited to the past, for the reorganization of 1893 transformed it into the Southern Railway Company, which remains the dominant system in the South. Fairfax Harrison, past president and legal historian of the Southern, once noted that "the territory south of the Ohio and the Potomac, and east of the Mississippi rivers is perhaps more nearly served by the Southern Railway System than is any other territory of like extent served by any other single system." That observation holds true nearly seventy years after its recording.
One final point may be worth making even though it is pursued only implicitly here. In surveying the economic plight of the South in 1865, it is hard to overlook the region's resemblance to more recent emerging and underdeveloped nations. It suffered from a monolithic and somewhat primitive staple economy that had resisted diversification for decades. It lacked capital, skilled labor, technological know-how, and an entrepreneurial tradition, all of which were needed to exploit the untapped resources that were available. Defeat in battle aggravated these difficulties and left the South without credit or even an operating financial system. Emancipation and the ordeal of reconstruction rendered the social and political atmosphere uncertain for more than a decade. Finally, the unmeasurable legacy of bitterness, despair, and frustration wrought by the war threw a constant cloud over the whole process of economic rehabilitation.
There were, of course, many ways in which the South differed from most emerging nations. Despite the deep cultural schism, it shared a common tradition and heritage with its conqueror. It possessed an educated and energetic elite which, though weakened numerically and financially by the war, could provide strong leadership. More important, the war spawned a generation of impoverished but aggressive young men eager to make their fortunes and receptive to the opportunities and rewards of industrialization. And if the traditions of the region resisted surrender to the triumphant industrial order, its natural resources invited exploitation. There existed in the South rich mineral deposits, a large if unskilled labor supply, and easy access to outside markets via water transportation and a rail system that, once recovered from the ravages of war, could service the entire region efficiently. The general postwar poverty and eventual restoration of conservative local government would do much to ensure such inducements as political cooperation, low tax rates, and other concessions.
The effect of these conditions was to lead the postwar South down the now familiar road to economic colonialism. The critical need for capital and experienced entrepreneurial leadership tended to open the control of most major industries to the hands of "outsiders," and the increasing scale of economic activity further hastened the decline of local control. As many historians have pointed out, this process reduced the South to an economic colony of the North, whose financial leaders reaped most of the benefits. In short, economic development of the South followed the same exploitative pattern as took place in the imperial subjugation of foreign countries. To many unreconstructed rebels the North seemed no less a foreign power than Italy did to the Ethiopians, and their resentment ran deep.
This fairly standard description needs two important qualifications, both of which pertain to the process of economic development. First of all, the South's colonial bondage was actually part of a changing economic environment that involved the entire nation. The major issue here may not be northern exploitation of the South so much as the marked decline in local control of firms and industries and the rise of absentee ownership as the scale of operations grew. This trend was in no way unique to the South although conditions there certainly favored it. Secondly, the "northerners" assuming control over southern enterprises often prove at second glance not to be northerners at all but transplanted southerners. As the biographical discussion suggests, the geographical origins of the entrepreneurs appear less important than such factors as individual motivations and training, prior experience, and even generation in explaining the process of economic development.
These are only some of the issues raised by a consideration of the South as an underdeveloped region. To what extent its history can prove helpful in explaining the problems and patterns faced by modern nations remains a controversial question, but one thing is certain: the most satisfactory answer lies in a fuller understanding of the process by which economic development took place and a closer examination of the men who did the job. It is my hope that this volume will provide a helpful step in that direction.
MAURY KLEIN
Kingston, Rhode Island
June 4, 1969
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