Financial History Issue 125 (Spring 2018) - Page 28

By Amanda Porterfield
Corporations play a major role in the organization of American life . In both their commercial and non-profit forms , corporations are everywhere . Much of the food and information we ingest , many of the things we use and most of the services provided to us by religious institutions , medical centers and universities come to us through corporate forms of social organization . Enthusiasm for corporate forms of organization intensified in the first decades of the new United States as independence from British rule led to broader access to corporate charters , and opportunities for commercial and religious growth abounded .
Beginning with the rapid increase in state-issued charters in the 1790s , corporations became primary vehicles of national organization . An 1829 article in the American Jurist and Law Magazine explained , “ Multitudes of companies with corporate powers for banking , insurance , manufacturing , building bridges , roads and canals have been created in all parts of our country , and form one of the striking features of our social system .”
A decade later , the French traveler Alexis de Tocqueville observed : “ In no country in the world has the principle of association been more successfully used , or unsparingly applied to a multitude of different objects , than in America .” Tocqueville noticed that even children at play organized themselves into companies , creating rules for governing their games and punishing infractions . Tocqueville also noticed the galvanizing effects of organizational thinking . “ When an opinion is represented by a society , it necessarily assumes a more exact and explicit form ,” he observed . “ An association unites the efforts of minds which have a tendency to diverge , in one single channel , and urges them vigorously towards one single end which it points out .”
Previous page : Portrait of Alexis de Tocqueville ( 1805 – 1859 ), the French traveler who observed : “ In no country in the world has the principle of association been more successfully used , or unsparingly applied to a multitude of different objects , than in America .”
Aided by government procedures for implementing contracts , the scale of corporate enterprise in the early United States soon surpassed that in Britain , which had led the world in corporate organization and industrial development in the 18th century . In the wake of a disastrous episode of financial speculation in the early 18th century , the British Parliament ’ s socalled Bubble Act had outlawed jointstock companies without royal charters of incorporation . This legislation slowed corporate growth in Britain until 1825 , when the act was repealed . Corporate development in France also lagged behind that of the United States ; in 1791 , during the French Revolution , the French Republic rescinded all corporate charters , and when corporations returned under Napoleon , they operated under strict government regulation . With major implications for the future , commercial corporations grew faster in the United States than anywhere else in the world during the first half of the 19th century , with American law and corporate organization leading the development of corporate enterprise elsewhere .
In the United States during this period , established churches were losing their legal standing , and state governments severed the formal connections to God those churches had represented . In this gradual process of religious disestablishment , churches came to occupy much the same ground as commercial corporations in relationship to state governments .
A new symmetry emerged between religion and commerce based on voluntary contracts . As corporate organizations in both arenas multiplied , legal reason and contract law facilitated expansion in both spheres , along with the flow of ideas and practices between them . Commercial and religious institutions transformed American life together , with religious organizations operating in the forefront of developments in print media , urban planning , interregional organization and ideas about personhood , while commercial organizations expedited advances in industrial organization that transformed relationships among people , removing them from face-to-face contact with the people who made the shoes they wore or produced the cotton they spun .
In human terms , the gap between the rational system of American governance and ordinary life could be disturbing . While corporations had legal standing as artificial persons , real persons could be bought and sold as property , a cruel reality that exposed both the power and the dark undercurrents of legal reasoning . Constitutional protection for slavery was the price that southern leaders exacted for joining the American union , and the price they continued to demand as slavery expanded .
Article I , Section 9 of the Constitution made it unlawful for Congress to restrict the “ Importation of such Persons as any of the States now existing shall think proper to admit ” until 1808 . Article 4 protected the ownership of property moved across state lines , which implied and was consistently interpreted to mean that slaves did not become free by moving to a state where slavery had been abolished . Article I , Section 2 counted slaves as three-fifths of a person for purposes of apportioning state representation in the House of Representatives , where all bills of revenue and spending originated .
As historian George Van Cleve summarized the result of these protections , the Constitution “ gave all the ‘ head start ’ slavery needed to escape from significant federal control until its continued expansion became politically uncontrollable — a raging torrent that leaped the banks of the political river .”
With slavery its driving force , the volume of cotton produced in the United States expanded exponentially between 1790 and 1859 , from 1.2 million to 2.1 billion pounds , feeding American textile mills and 80 % of Britain ’ s cotton industry by the 1830s . Driving this growth , the slave population increased from under 700,000 in 1790 to almost four million in 1860 .
The dramatic expansion of slave labor also contributed to financial disaster , as demand for more and more output from slaves flooded the economy in cotton , contributing to the decline in cotton prices that accelerated pressures on slave labor , wage labor , capital investment and credit systems . Panic fueled by these pressures brought American manufacturers and many small investors to their knees
26 FINANCIAL HISTORY | Spring 2018 | www . MoAF . org
By Amanda Porterfield Corporations play a major role in the organization of American life. In both their commercial and non-profit forms, corporations are everywhere. Much of the food and information we ingest, many of the things we use and most of the services provided to us by religious institutions, medical centers and universities come to us through corporate forms of social organization. Enthusiasm for corporate forms of organization intensified in the first decades of the new United States as independence from British rule led to broader access to corporate charters, and opportunities for commercial and reli- gious growth abounded. Beginning with the rapid increase in state-issued charters in the 1790s, corpora- tions became primary vehicles of national organization. An 1829 article in the Ameri- can Jurist and Law Magazine explained, “Multitudes of companies with corporate powers for banking, insurance, manufac- turing, building bridges, roads and canals have been created in all parts of our coun- try, and form one of the striking features of our social system.” A decade later, the French traveler Alexis de Tocqueville observed: “In no country in the world has the principle of association been more successfully used, or unsparingly applied to a multitude of different objects, than in America.” Toc- queville noticed that even children at play organized themselves into companies, cre- ating rules for governing their games and punishing infractions. Tocqueville also noticed the galvanizing effects of orga- nizational thinking. “When an opinion is represented by a society, it necessarily assumes a more exact and explicit form,” he observed. “An association unites the efforts of minds which have a tendency to diverge, in one single channel, and urges them vigorously towards one single end which it points out.” Previous page: Portrait of Alexis de Tocqueville (1805–1859), the French traveler who observed: “In no country in the world has the principle of association been more successfully used, or unsparingly applied to a multitude of different objects, than in America.” Aided by government procedures for implementing contracts, the scale of cor- porate enterprise in the early United States soon surpassed that in Britain, which had led the world in corporate organization and industrial development in the 18th century. In the wake of a disastrous epi- sode of financial speculation in the early 18th century, the British Parliament’s so- called Bubble Act had outlawed joint- stock companies without royal charters of incorporation. This legislation slowed cor- porate growth in Britain until 1825, when the act was repealed. Corporate develop- ment in France also lagged behind that of the United States; in 1791, during the French Revolution, the French Republic rescinded all corporate charters, and when corporations returned under Napoleon, they operated under strict government regulation. With major implications for the future, commercial corporations grew faster in the United States than anywhere else in the world during the first half of the 19th century, with American law and corporate organization leading the devel- opment of corporate enterprise elsewhere. In the United States during this period, established churches were losing their legal standing, and state governments severed the formal connections to God those churches had represented. In this gradual process of religious disestablish- ment, churches came to occupy much the same ground as commercial corporations in relationship to state governments. A new symmetry emerged between reli- gion and commerce based on voluntary contracts. As corporate organizations in both arenas multiplied, legal reason and contract law facilitated expansion in both spheres, along with the flow of ideas and practices between them. Commercial and religious institutions transformed Ameri- can life together, with religious organiza- tions operating in the forefront of devel- opments in print media, urban planning, interregional organization and ideas about personhood, while commercial organi- zations expedited advances in industrial organization that transformed relation- ships among people, removing them from face-to-face contact with the people who made the shoes they wore or produced the cotton they spun. 26    FINANCIAL HISTORY  |  Spring 2018  | www.MoAF.org In human terms, the gap between the rational system of American governance and ordinary life could be disturbing. While corporations had legal standing as artificial persons, real persons could be bought and sold as property, a cruel reality that exposed both the power and the dark undercurrents of legal reasoning. Constitutional protection for slavery was the price that southern leaders exacted for joining the American union, and the price they continued to demand as slavery expanded. Article I, Section 9 of the Constitution made it unlawful for Congress to restrict the “Importation of such Persons as any of the States now existing shall think proper to admit” until 1808. Article 4 protected the ownership of property moved across state lines, which implied and was con- sistently interpreted to mean that slaves did not become free by moving to a state where slavery had been abolished. Article I, Section 2 counted slaves as three-fifths of a person for purposes of apportioning state representation in the House of Rep- resentatives, where all bills of revenue and spending originated. As historian George Van Cleve sum- marized the result of these protections, the Constitution “gave all the ‘head start’ slavery needed to escape from significant federal control until its continued expan- sion became politically uncontrollable — a raging torrent that leaped the banks of the political river.” With slavery its driving force, the vol- ume of cotton produced in the United States expanded exponentially between 1790 and 1859, from 1.2 million to 2.1 billion pounds, feeding American textile mills and 80% of Britain’s cotton industry by the 1830s. Driving this growth, the slave population increased from under 700,000 in 1790 to almost four million in 1860. The dramatic e ͥͱٔ)ͼɥѕѼͅѕȰ)́ȁɔɔ)ɽͱٕ́ѡ䁥д)ѽɥѥѼѡѽ)ɥ́ѡЁɅѕɕɕ́ͱٔ)Ȱ݅ȰхٕѵЁ)ɕЁѕ̸AՕѡ͔ɕ̴)ɕ́ɽ՝Ёɥՙɕ)͵ٕѽ́Ѽѡȁ