Commodore Vanderbilt
and the
Steamship Industry

by Burton W. Folsom, Jr. (1987)
Chapter 1 of The Myth of the Robber Barons.


For two generations historians have been arguing about the effects of entrepreneurs on American industry. Whether the entrepreneurs were Robber Barons, industrial statesmen, or irrelevant to growth still seems to be disputed even after shelves of books have been written on the subject.[1] Maybe we can find a useful line of reasoning by looking at one of America's first large-scale businesses, the steamship industry. It was mechanized in the early 1800s; and, during that century, it was in the vanguard of technological change. Steamboating was also highly competitive and soon became large in scale. Furthermore, a look at the steamboat industry allows us to study entrepreneurs in the comparative context of the whole industry. Only then can we see how different entrepreneurs responded to different challenges and who, if any, made creative contributions to industrial growth.[2]

A key point about the steamship industry is that the government played an active role right from the start in both America and England. Right away this separates two groups of entrepreneurs - those who sought subsidies and those who didn't. Those who tried to succeed in steamboating primarily through federal aid, pools, vote buying, or stock speculation we will classify as political entrepreneurs. Those who tried to succeed in steamboating primarily by creating and marketing a superior product at a low cost we will classify as market entrepreneurs. No entrepreneur fits perfectly into one category or the other, but most fall generally into one category or the other. The political entrepreneurs often fit the classic Robber Baron mold; they stifled productivity (through monopolies and pools), corrupted business and politics, and dulled America's competitive edge. Market entrepreneurs, by contrast, often made decisive and unpredictable contributions to American economic development.[3]


Every schoolchild is taught that Robert Fulton was the first American to build and operate a steamboat on New York waters. When his Clermont sauntered four miles per hour upstream on the Hudson River in 1807, Fulton opened up new possibilities in transportation, marketing, and city building. What is not often taught about Fulton is that he had a monopoly enforced by the state. The New York legislature gave Fulton the privilege of carrying all steamboat traffic in New York for thirty years.[4] It was this monopoly that Thomas Gibbons, a New Jersey steamboat man, tried to crack when he hired young Cornelius Vanderbilt in 1817 to run steamboats in New York by charging less than the monopoly rates.[5]

Vanderbilt was a classic market entrepreneur, and he was intrigued by the challenge of breaking the Fulton monopoly. On the mast of Gibbon's ship Vanderbilt hoisted a flag that read: "New Jersey must be free." For sixty days in 1817, Vanderbilt defied capture as he raced passengers cheaply from Elizabeth, New Jersey, to New York City. He became a popular figure on the Atlantic as he lowered the fares and eluded the law. Finally, in 1824, in the landmark case of Gibbons v. Ogden, the Supreme Court struck down the Fulton monopoly. Chief Justice John Marshall ruled that only the federal government, not the states, could regulate interstate commerce. This extremely popular decision opened the waters of America to complete competition. A jubilant Vanderbilt was greeted in New Brunswick, New Jersey, by cannon salutes fired by "citizens desirous of testifying in a public manner their good will." Ecstatic New Yorkers immediately launched two steamboats named for John Marshall. On the Ohio River, steamboat traffic doubled in the first year after Gibbons v. Ogden and quadrupled after the second year.[6]


The triumph of market entrepreneurs in steamboating led to improvements in technology. As one man observed, "The boat builders, freed from the domination of the Fulton-Livingston interests, were quick to develop new ideas that before had no encouragement from capital." These new ideas included tubular boilers, to replace the heavy and expensive cooper boilers Fulton used. Cordwood for fuel was also a major cost for Fulton, but innovators soon found that anthracite coal worked well under the new tubular boilers, so "the expense of fuel was cut down one-half."[7]

The real value of removing the Fulton monopoly was that the costs of steamboating dropped. Passenger traffic, for example, from New York City to Albany immediately dropped from seven to three dollars after Gibbons v. Ogden. Fulton's group couldn't meet the new rates and soon went bankrupt. Gibbons and Vanderbilt, meanwhile, adopted the new technology, cut their costs, and earned $40,000 profit each year during the late 1820s.[8]

With such an open environment for market entrepreneurs, Vanderbilt decided to quit his pleasant association with Gibbons, buy two steamboats, and go into business for himself. During the 1830s, Vanderbilt would establish trade routes all over the northeast. He offered fast and reliable service at low rates. He first tried the New York to Philadelphia route and forced the "standard" three-dollar fare down to one dollar. On the New Brunswick to New York City run. Vanderbilt charged six cents a trip and provided free meals. As Niles' Register said, the "times must be hard indeed when a traveller who wishes to save money cannot afford to walk."[9]

Moving to New York, Vanderbilt decided to compete against the Hudson River Steamboat Association, whose ten ships probably made it the largest steamboat line in America in 1830. It tried to informally fix prices to guarantee regular profits. Vanderbilt challenged it with two boats (which he called the "People's Line") and cut the standard New York to Albany fare from three dollars to one dollar, then to ten cents, and finally to nothing. He figured it cost him $200 per day to operate his boats; if he could fill them with 100 passengers, he could take them free if they would each eat and drink two dollars worth of food (Vanderbilt later helped to invent the potato chip). Even if his passengers didn't eat that much, he was putting enormous pressure on his wealthier competitors. Finally, the exasperated Steamboat Association literally bought Vanderbilt out: they gave him $100,000 plus $5,000 a year for ten years if he would promise to leave the Hudson River for the next ten years. Vanderbilt accepted, and the Association raised the Albany fare back to three dollars. Such bribery may be wrong in theory, but it had little effect in practice. With no barriers to entry, other steamboaters came along and quickly cut the fare. They saw that it could be done for less, and they saw what had happened to Vanderbilt for doing it. So almost immediately Daniel Drew began running steamboats on the Hudson until the Association paid him off too. At least five other competitors did the same thing until they, too, were bought off. It's hard to figure who got the better deal: those who ran the steamboats and were bought out, or those who traveled the steamboats at the new low rates.[10]

Meanwhile, Vanderbilt took his payoff money and bought bigger and faster ships to trim the fares on New England routes. He started with the New York City to Hartford trip and slashed the five-dollar fare to one dollar. He then knocked the New York City to Providence fare in half from eight to four dollars. When he sliced it to one dollar, the New York Evening Post called him "the greatest practical anti-monopolist in the country." In these rate wars, sometimes Vanderbilt's competitors bought him out, sometimes they went broke, and sometimes they matched his rates and kept going. Some people denounced Vanderbilt for engaging in extortion, blackmail, and cut-throat competition. Today, of course, he would be found "in restraint of trade" by the Sherman Anti-trust Act. Nonetheless, Vanderbilt qualifies as a market entrepreneur: he fought monopolies, he improved steamship technology, and he cut costs. Harper's Weekly insisted that Vanderbilt's actions "must be judged by the results; and the results, in every case, of the establishment of opposition lines by Vanderbilt has been the permanent reduction of fares." The editor went on to say, "Wherever [Vanderbilt] 'laid on' an opposition line, the fares were instantly reduced; and however the contest terminated, whether he bought out his opponents, as he often did, or they bought him out, the fares were never again raised to the old standards." Vanderbilt himself later put it bluntly when he said: "If I could not run a steamship alongside of another man and do it as well as he for twenty percent less than it cost him I would leave the ship."[11]


In the 1840s, improving technology changed steamboats into steamships. Larger engines and economies of scale in shipbuilding led to changes in size, speed, and comfort. The new steamers of the mid-century were many times bigger and faster than Fulton's Clermont: they were each two decks high with a grand saloon and individual staterooms for first-class passengers. When full, some of these new steamships could hold almost 1,000 passengers, and they also had space for mail and freight. These ships were sturdy and were built to cross the Atlantic Ocean. The New York to England route would be the first to open up the steamship competition; the New York to California line (via Panama) would soon follow.[12] Rapid overseas trade was a new concept, and this reopened the debate for federal aid to eager steamboat operators. Fulton was gone, but others like him argued for government subsidies and contracts. Political and market entrepreneurs on both sides of the Atlantic would fight for control of the seas.

Actually, Englishmen, in 1838, were the first to travel the Atlantic Ocean entirely by steam. The open environment was quickly altered when Samuel Cunard, a political entrepreneur, convinced the English government to give him $275,000 a year to run a semi-monthly mail and passenger service across the ocean. Cunard charged $200 per passenger and $.24 a letter; the $.24 for the mail didn't cover the cost of Cunard's shipping, and that's one argument he had for a subsidy. He also contended that subsidized steamships gave England an advantage in world trade and were a readily available merchant marine in case of war. Parliament accepted this argument and increased government aid to the Cunard line throughout the 1840s.[13]

Soon, political entrepreneurs across the ocean began using these same arguments for federal aid to the new American steamship industry. They argued that America needed subsidized steamships to compete with England to provide a military fleet in case of war. Edward K. Collins, a classic political entrepreneur, exploited these higuments with a self-serving plan. If the government would give him $3,000,000 down and $385,000 a year, he would build five ships and outrace the Cunarders from coast to coast. Collins would deliver the mail, too; and the Americans would get to "drive the Cunarders off the seas." Collins appealed to American nationalism, not to economic efficiency. Americans would not be opening up new lines of communication because the Cunarders had already opened them. Americans would not be delivering mail more often because the Collins's ships, like Cunard's, would sail only every two weeks. Finally, Americans would not be bringing the mail cheaper because the Cunarders could do it for much less.[14]

Once the Senate established the principle of mail subsidy, other political entrepreneurs asked for subsidies to bring the mail to other places. Soon Congress also gave $500,000 a year for two lines to bring mail to California: an Atlantic line to get mail to Panama and a Pacific line to take letters from Panama to California. As in the case of Cunard, Collins and the California operators, all argued that a generous subsidy now would help them become more efficient and lead to no subsidy later.[15]

Congress gave money to the Collins and California lines in 1847, but they took years to build their luxurious ships. Collins, especially, had champagne tastes with taxpayers' money. He built four enormous ships (not five smaller ships as he had promised), each with elegant saloons, ladies' drawing rooms, and wedding berths. He covered the ships with plush carpet and brought aboard rose, satin, and olive-wood furniture, marble tables, exotic mirrors, flexible barber chairs, and French chefs. The state rooms had painted glass windows and electric bells to call the stewards. Collins stressed luxury, not economy, and his ships used almost twice the coal of the Cunard line. He often beat the Cunarders across the ocean by one day (ten days to eleven), but his costs were high and his economic benefits were nil.[16]

With annual government aid, Collins had no incentive to reduce his costs from year to year. His expenses, in fact, more than doubled in 1852: Collins preferred to compete in the world of politics for more federal aid than in the world of business against price-cutting rivals. So in 1852 he went to Washington and lavishlv dined and entertained President Fillmore, his cabinet, and influential Congressmen. Collins artfully lobbied in Congress for an increase to $858,000 a year (or $33,000 each for twenty-six voyages--which came to $5.00 per ocean mile) to compete with the Cunarders.[17]

Meanwhile, Vanderbilt had watched this political entrepreneurship long enough. In 1855 he declared his willingness to deliver the mail for less than Cunard, and for less than half of what Collins was getting. Collins apparently begged Vanderbilt not to go to Congress. He may have offered to help Vanderbilt get an equally large subsidy from Congress if only he wouldn't open the transatlantic steamship trade. But Vanderbilt had told Collins and Congress that he would run an Atlantic ferry for $15,000 per trip, which was cheaper than anyone else could do.[18]

So in 1855, Collins, the subsidized lobbyist, began battle with Vanderbilt, the market entrepreneur. Collins fought the first round in Congress rather than on the sea. Most Congressmen, former Whigs especially, backed Collins. To do otherwise would be to admit they had made a mistake in helping him earlier; and this might call into question all federal aid. Other Congressmen, especially the New Englanders, had constituents who benefitted from Collins' business. Senator William Seward of New York stressed another angle by asking, "Could you accept that proposition of Vanderbilt['s] justly, without, at the same time, taking the Collins steamers and paying for them?" In other words, Seward is saying that we backed Collins at the start, now we are committed to him, so let's support him no matter what. Vanderbilt, by contrast, warned that "private enterprise may be driven from any of the legitimate channels of commerce by means of bounties." His point was that it is hard for unsubsidized ships to compete with subsidized ships for mail and passengers. Since the contest is unfair from the start, the subsidized ships have a potential monopoly of all trade. But Collins' lobbying prevailed, so Congress turned Vanderbilt down and kept payments to Collins at $858,000 per year.[19]

Vanderbilt decided to challenge Collins even without a subsidy. "The share of prosperity which has fallen to my lot," said Vanderbilt, "is the direct result of unfettered trade, and unrestrained competition. It is my wish that those who are to come after me shall have that same field open before them." Vanderbilt's strategy against Collins was to charge only $.15 for half-ounce letters and to cut the standard first-class fare $20, to $110. Later he slashed it to $80. Vanderbilt also introduced a new service: a cheaper third-class fare in the steerage. The steerage must have been uncomfortable people were practically stacked on top of each other but for $75, and sometimes less, he did get newcomers to travel.[20]

To beat the subsidized Collins, Vanderbilt found creative ways to cut expenses. First, he had little or no insurance on his fleet. He always said that if insurance companies could make money on shipping, so could he. So Vanderbilt built his ships well, hired excellent captains, and saved money on insurance. Second, he spent less than Collins did for repairs and maintenance. Collins' ships cost more than Vanderbilt's, but they were not seaworthy. The engines were too big for the hulls, so the ships vibrated and sometimes leaked. They usually needed days of repairing after each trip. Third, Collins, like Cunard in England, was elitist with his government aid. He cared little for cheap passenger traffic. Vanderbilt, by contrast hired local "runners", who buttonholed all kinds of people to travel on his ships. These second and third class passengers were important because all steamship operators had fixed costs for making each voyage. They had to pay a set amount for coal, crew, maintenance, food, and docking fees. In such a situation, Vanderbilt needed volume business. With third-class fares, Vanderbilt sometimes carried over 500 passengers per ship.

Even so, Vanderbilt barely survived the first year competing against Collins. He complained, "It is utterly impossible for a private individual to stand in competition with a line drawing nearly one million dollars per annum from the national treasury, without serious sacrifice." He added that such aid was "inconsistent with the … economy and prudence essential to the successful management of any private enterprise."[21]

Vanderbilt met this challenge by spending $600,000 building a new steamship, immodestly named the Vanderbilt, "the largest vessel which had ever floated on the Atlantic Ocean." The Commodore built the ship with a beam engine, which was more powerful than Collins' traditional side-lever engines. In a head-to-head race, the Vanderbilt beat Collins' ship to England and won the Blue Ribbon, an award given to the one ship owning the fastest time from New York City to Liverpool. By 1856, Collins had two ships - half of his accident-prone fleet - sink (killing almost 500 passengers). In desperation, he spent over a million dollars of government money building a gigantic replacement; but he built it so poorly that it could make only two trips and had to be sold at more than a $900,000 loss.[22]

Even Collins' friends in Congress could defend him no longer. Between Collins' obvious mismanagement and Vanderbilt's unsubsidized trips, most Congressmen soured on federal subsidies. Senator Judah P. Benjamin of Louisiana said, "I believe [the Collins line] has been most miserably managed." Senator Robert M. T. Hunter of Virginia went further: "the whole system was wrong; … it ought to have been left, like any other trade, to competition." Senator John B. Thompson of Kentucky said, "Give neither this line, nor any other line, a subsidy. … Let the Collins line die. … I want a tabula rasa the whole thing wiped out, and a new beginning." Congress voted for this "new beginning" in 1858: they revoked Collins' aid and left him to compete with Vanderbilt on an equal basis. The results: Collins quickly went bankrupt, and Vanderbilt became the leading American steamship operator.[23]

And there was yet another twist. When Vanderbilt competed against the English, his major competition did not come from the Cunarders. The new unsubsidized William Inman Line was doing to Cunard in England what Vanderbilt had done to Collins in America. The subsidized Cunard had cautiously stuck with traditional technology, while William Inman had gone on to use screw propellers and iron hulls instead of paddle wheels and wood. It worked; and from 1858 to the Civil War, two market entrepreneurs, Vanderbilt and Inman, led America and England in cheap mail and passenger service.[24]

The mail subsidies, then, actually retarded progress because Cunard and Collins both used their monopolies to stifle innovation and delay technological changes in steamship construction. Several English steamship companies experimented with iron hulls and screw propellers in the 1840s, but Cunard thwarted this whenever he could. According to Royal Meeker, The mail payments made it possible for the Cunard company to cling to an out-of-date and uneconomical type of steamer. Both the Admiralty and the Post Office departments refused to permit mail steamers to use the screw propeller until long after other lines had adopted it. … Without government aid to inefficiency, the Cunard Company would have been compelled to adopt improvements in order to compete with other and more progressive lines.

Cunard also refused to introduce a third-class rate. So, when William Inman came along in the 1850s with his iron ships and third-class fares, he practically knocked Cunard out of business. After 1850, Inman and other newcomers kept the pressure on Cunard. They experimented with oscillating cabins (to reduce the impact of the swaying of the ship), compound engines (to increase the ship's speed and decrease its fuel consumption), and twin propellers. Cunard's subsidy kept him from having to innovate and protected him from errors of judgment that would have ruined his competitors.[25]

In America, Collins, like Cunard, chose wood and paddle wheels for his ships. Americans were slower to turn to iron ships because their costs of iron construction were higher than those in England. Still, American engineers had been experimenting with iron hulls and screw propellers during the 1840s, partly because iron was more durable in handling the big engines built after 1840. Collins apparently considered using iron, but he was no innovator. So he ended up using wood hulls for his powerful engines, and his ships were not as safe or as seaworthy because of that. With Collins using wood, American steamship operators feared switching to iron. They had little margin for error because their chief competitor was subsidized. Yet in 1851, Vanderbilt became one of the first Americans to build and run iron ships (he used them on his California route). But it wasn't until Collins' subsidy expired in 1858 that Americans began experimenting with iron hulls in a serious way.[26]

This delay in experimenting with iron meant that iron ships could not be much of a force during the Civil War. John Ericsson, who in 1862 built the iron-hulled Monitor, had been promoting the advantages of iron ships since 1843. But in 1847, when Collins decided to use wood for his subsidized fleet, only Vanderbilt dared to risk more experiments with iron hulls. The irony here is that one of the central arguments for subsidizing Collins was that his fleet would be usable in case of war. Yet his outmoded wooden ships - even the ones that didn't sink - would have been helpless against ironclad opponents. And we wouldn't have needed them anyway because Vanderbilt gave his 5,000-ton ship, the Vanderbilt, as a permanent gift to the United States during the Civil War. He even offered to personally sink the Confederate's Merrimac, asking only that everyone stay "out of the way when I am hunting the critter." He never got the chance; and, partly because of the Collins subsidy, the U.S. never got the chance to blockade Confederate ports with an iron fleet, Who knows whether or not that would have shortened the war? It certainly would have relieved those who feared that the Confederates would buy iron ships from England. And it would have relieved the Secretary of War, Edwin Stanton, who worried that the Merrimac would go on a rampage, sail up the Potomac unmolested, and blow the dome off the Capitol.[27]


Vanderbilt was also cast as a market entrepreneur in his battle for the steamship traffic to California. Two California lines - the U.S. Mail Steamship Company and the Pacific Mail Steamship Company - started mail delivery in 1849 with $500,000 per year in federal aid. As happened with Collins, these mail contracts were not opened for bidding; they were a private deal between the Post Office and the two steamship companies. At first the two lines charged company rates: $600 per passenger from New York to California, via railroad over Panama. As the gold-rush traffic increased, Vanderbilt became convinced that more gold could be made in steamships than in the hills of California even without a subsidy. Vanderbilt chose not to challenge the subsidized lines directly through Panama; instead he built a canal through Nicaragua. It took Vanderbilt a year to deepen and clean out the San Juan River in Nicaragua, but it was worth it because the Nicaraguan route was 500 miles shorter to California. So Vanderbilt agreed to pay the Nicaraguan government $10,000 a year for canal privileges. He then slashed the California fare to $400 and promised all passengers that he would beat the rival steamships to the gold fields. He even offered to carry the mail free. After a year of rate-cutting the fare dropped to $150; yet Vanderbilt and his competitors apparently were still making money.[28]

Such a development tells us a lot about the subsidy system. The California lines originally got a half-million dollars a year from the government; then they charged people $600 to get to California. Yet Vanderbilt, with no outside aid, ran a profitable line to California by charging passengers only $150 and carrying the mail free. He hoped that doing this would expose his subsidized opponents and end their federal aid. But the California lines, like Collins, artfully pleaded to Congress for a subsidy even larger (which they needed to beat Vanderbilt). And they got $900,000 a year to compete with the more efficient Vanderbilt.[29]

In the next stage of the subsidy saga, Vanderbilt had his canal rights revoked by the Nicaraguan government in 1854. Behind this movement was William Walker, an American with a bizarre mission. Walker shipped a small army into Nicaragua, overthrew the existing government, proclaimed himself the president and revoked Vanderbilt's canal rights. Since Vanderbilt's canal company was chartered in Nicaragua, the American government was technically not obligated to help him. So the enraged Vanderbilt put his ships on the Panama route, instead. There he competed head to head against the California mail carriers. He then cut the fare to $100 ($30 for third class) and swore he would beat the subsidized California lines and any new line in Nicaragua that Walker might help establish.[30]

The operators of the California lines were typical political entrepreneurs: they did not want to compete with a market entrepreneur like Vanderbilt. So they bought him out instead by paying him most of their subsidy if he promised not to run any ships to California. Vanderbilt demanded and received $672,000, or 75 percent, of the $900,000 annual subsidy. But more than this, he wanted his Nicaragua canal back. So he dabbled in Central American politics and helped get Walker overthrown. Unfortunately for Vanderbilt, his canal had been permanently destroyed during Walker's coup; but since he had the pay-off money from the California lines, he ended up with a profit anyway.[31]

Congress was astonished when it learned what the California lines were doing with their $900,000 subsidy. In 1858 Senator Robert A. Toombs of Georgia said that he admired Vanderbilt: his "superior skills," Toombs said, had exposed the whole subsidy system. "You give $900,000 a year to carry the mails to California; and Vanderbilt compels the contractors to give him $56,000 a month to keep quiet. This is the effect of your subventions. … [Vanderbilt] is the king-fish that is robbing these small plunderers that come about the Capitol. He does not come here for that purpose." Toombs' conclusion: end the mail subsidies.[32]

Many people, though, were more critical of Vanderbilt than of the subsidies. They looked at Vanderbilt's tactics, instead of his influence on the market. One court later called Vanderbilt's actions "immoral and in restraint of trade." TheNew York Times compared Vanderbilt to "those old German barons who, from their eyries along the Rhine, swooped down upon the commerce of the noble river and wrung tribute from every passenger that floated by."[33] From Vanderbilt's standpoint, the California lines were the ones "in restraint of trade." Their subsidies gave them an unfair advantage over all competition, and they used this advantage to charge monopoly rates to passengers. As for the "swooping" metaphor, Vanderbilt "swooped down" and "wrung tribute" from the subsidized lines, not from "every passenger." Every passenger, in fact, paid lower fares to California because Vanderbilt's competition had slashed the fares permanently.[34] And, of course, if there had been no government subsidy, there would have been no Vanderbilt payoff. Vanderbilt ran his California lines as a personal investment and charged passengers less than one-fourth the fare that the subsidized lines had been charging. Congress, however, had committed its support for political entrepreneurs. And the annual $900,000 subsidy proved to be so large that the California lines could give three-fourths of it to Vanderbilt and still make money. Without Vanderbilt, this political entrepreneurship might have gone on much longer.

This clash between market and political entrepreneurs changed the competitive environment of American steamboating. Between 1848 and 1858, the American government paid the two California lines and Edward Collins over eleven million dollars to build ships and carry mail. Vanderbilt, by contrast, engaged these men in head-to-head competition free of charge. Largely because of Vanderbilt, Congress, in 1858, ended all mail subsidies. Afterward, Vanderbilt and others carried the mail only for the postage; and the passenger rates after 1858 were still competitive: only $200 to California, far below the original monopoly rate of $600.[35]

Vanderbilt's victory marked the end of political entrepreneurship in the American steamship business. We didn't end up with perfect free trade, but we were closer to it than we ever had been. In this environment, Americans found railroads to be more profitable investments than steamships. So, after the Civil War, Vanderbilt and others sold their fleets and spent their money building railroads. The percentage of American exports carried on American ships dropped from sixty-seven to nine percent from 1860 to 1915, but that was no problem. England's comparative advantage in shipping lowered America's cost for freight, mail, and passenger service throughout these years. And since the English were anxious to buy America's grain, Vanderbilt took his steamship profits and built his New York Central Railroad over one thousand miles out to Chicago and other midwestern cities. When Vanderbilt shipped midwestern grain to New York and had it boarded on English ships to be sold in Liverpool, both countries were finally doing what they could do best. By Vanderbilt's death in 1877, he had been a central figure in America's industrial revolution, both in steam and in rails. He also was worth almost $100 million, which made him the richest man in America.[36]

This study of American steamboating focuses on the market and the impact different entrepreneurs had on the market. If we look at the issue this way, we can sort out two distinct groups: political and market entrepreneurs. Robert Fulton, Edward Collins, and Samuel Cunard cannot be lumped with Thomas Gibbons, Cornelius Vanderbilt, and William Inman. They are two separate groups with different attitudes toward innovation, technology, price-cutting, monopolies, and federal aid. In the steamship industry, political entrepreneurship often led to price-fixing, technological stagnation, and the bribing of competitors and politicians. The market entrepreneurs were the innovators and rate-cutters. They said they had to be to survive against subsidized opponents. Some of them were personally repugnant (Vanderbilt disinherited his son and placed his own wife in an asylum; Gibbons tried to horsewhip one of his rivals), but they advanced their industry and cut passenger fares permanently. Since Vanderbilt ended up as the richest man in America, perhaps the federal aid was a curse, not a blessing, even to those who received it.


  1. The literature on the "Robber Barons" controversy is extensive. For a good description of the various arguments, see Glenn Porter, The Rise of Big Business, 1860-1910 (Arlington Heights, III.: AHM Publishing Corporation, 1973).
  2. No recent historian has systematically traced the history of the Amer- ican steamship industry. Two older histories are David B. Tyler, Steam Con- quers the Atlantic (New York: D. Appleton-Century Co., 1939); and John G. B. Hutchins, The American Maritime Industries and Public Policy, 1789-1914 (Cambridge, Mass.: Harvard University Press, 1941).
  3. Modern historians have usually de-emphasized entrepreneurs in de- scribing American industrial development. For a more detailed look at this dichotomy between political and market entrepreneurs, see my book Urban Capitalists (Baltimore: Johns Hopkins University Press, 1981). See also Maury Klein, "The Robber Barons," American History Illustrated (October 1971), 13- 22.
  4. Fulton's monopoly rights are clearly spelled out in a pamphlet entitled The Right of a State to Grant Exclusive Privileges in Roads, Bridges, Canals, Navigable Waters, etc. Vindicated by a Candid Examination of the Grant from the State of New York to and Contract with Robert R. Livingston and Robert Fulton for Exclusive Navigation (New York: E. Conrad, 1811). For a good description of the steamboat monopoly, see Maurice G. Baxter, The Steamboat Monopoly: Gibbons .Ogden, 1824 (New York: Alfred A. Knopf, 1972), 3-25. See also John S. Morgan, Robert Fulton (New York: Mason/Charter, 1977), 178-88.
  5. Baxter, Gibbons v. Ogden, 25-26; and Robert G. Albion, "Thomas Gib- bons" and "Aaron Ogden," Dictionary of American Biography, 20 vols. (New York: Charles Scribner's Sons, 1928-37). 7.242-43; 8:636-37 (hereafter cited as DAB). The best studies of Vanderbilt are Wheaton J. Lane, Commodore Vanderbilt: An Epic of the Steam Age (New York: Alfred A. Knopf, 1942); and William A. Croffut, The Vanderbilts and the Story of Their Fortune (Chicago: Belford Clarke, 1886). A more recent study of the whole Vanderbilt family is Edwin P. Hoyt, The Vanderbilts and Their Fortunes (Garden City, N.Y.: Doubleday, 1962).
  6. Chief Justice Marshall's written decision has been reprinted in John Roche, ed., John Marshall: Major Opinions and Other Writings (Indianapolis: Bobbs-Merrill, 1967), 206-25. A lively account of the Gibbons o. Ogden case is in Albert J. Beveridge, The Life of John Marshall, 4 vols. (Boston and New York: Houghton, Miflin and Co., 1916-19), 4:397-460. See also Baxter, Gibbons v. Ogden, 37-86; David W. Thomason, "The Great Steamboat Monopoly," American Neptune 16 (January and October 1956), 23-40, 279-80; George Dangerfield, "Steamboats' Charter of Freedom: Gibbons vs. Og. den, " American Heritage (October 1963), 38-43, 78-80; and Robert G. Albion, The Rise of New York Port (New York: Charles Scribner's Sons, 1939), 152- 55. For a newer study, see Erik F. Haites, James Mak, and Gary M. Walton, Western River Transportation: The Era of Internal Development, 1810-1860 (Bal- timore: Johns Hopkins University Press, 1975).
  7. David L. Buckman Old Steamboat Days on the Hudson River (New York: Grafton Press, 1907), 53-55.
  8. Lane, Vanderbilt, 43-49; Morgan, Fulton, 179, 187; and Albion, New York, 152-55.
  9. Lane, Vanderbilt, 47, 50-51.
  10. Albion, New York, 154-55; and Lane, Vanderbilt, 56-62.
  11. Harper's Weekly, March 5, 1859, 145-46; Lane, Vanderbilt, 50-84, 231; Albion, New York, 156-57.
  12. Sailing ships (called "packets") and clipper ships were still competitive carriers of freight (not passengers) before 1860. Their reliance on wind, not coal, made them cheaper, if not faster. During the 1850s, clipper ships captured a lot of trade to the Orient. The most thorough account of steam- ships is William S. Lindsay, History of Merchant Shipping and Ancient Com- merce, 4 vols. (London: Sampson, Marston, Low, and Searle, 1874). See also Hutchins, The American Maritime Industries, 348-62.
  13. For a good history of the Cunard line, see Francis E. Hyde, Cunard and the North Atlantic, 1840-1973 (Atlantic Highlands, N.J: Humanities Press, 1975). See also Tyler, Steam Conquers the Atlantic 142-45; Royal Meeker, History of the Shipping Subsidies (New York: Macmillan, 1905), 5-7; Hutchins, American Maritime Industries, 349; and Lindsay, Merchant Shipping, 4184. For an excellent critique of shipping subsidies, see Walter I. Dunmore, Ship Subsidies: An Economic Study of the Policy of Subsidizing Merchant Marines (Bos- tons: Houghton, Mifflin and Co., 1907), esp. 92-103.
  14. Congressional Globe, 33rd Congress, 2nd session, 755-56. Cunard later began weekly mail and passenger service. See also Tyler, Steam Conquers the Atlantic, 136-48; and William E. Bennet, The Collins Story (London: R. Hale, 1957).
  15. For a defense of mail subsidies, see "Speech of James A. Bayard of Delaware on the Collins Line of Steamers Delivered in the Senate of the United Staes, May 10, 1852" (Washington: John T. Towers, 1852). See also Thomas Rainey, Ocean Steam Navigation and the Ocean Port (New York: D. Appleton and Co., 1858). For other views of the subsidies, see Lindsay, Merchant Shipping, 4:200-03; Hutchins, American Maritime Industries, 358-62; and Dunmore, Ship Subsidies, 96-103.
  16. French E. Chadwick, Ocean Steamships (New York: Charles Scribner's Sons, 1891), 120-22; John H. Morrison, History of American Steam Navigation (New York: W. F. Sametz and Co., 1903), 420-23; and N. A., "A Few Suggestions Respecting the United States Steam Mail Service" (n. p., 1850), 9-17.
  17. Tyler, Steam Conquers the Atlantic, 202-14; and George E. Hargest, History of Letter Post Communications Between the United States and Europe, 1845-1875 (Washington: Smithsonian Institution Press, 1971).
  18. Congressional Globe, 33rd Congress, Appendix, 192. See also Lane, Van- derbilt, 143-44.
  19. President Franklin Pierce vetoed the Collins subsidy bill. He argued that the effect of such a "donation . . . would be to deprive commercial enterprises of the benefits of free competition, and to establish a monopoly, in violation of the soundest principles of public policy, and of doubtful compatibility with the Constitution." Congressional Globe, 33rd Congress, 2nd session, 1156-57. But Congress got the whole subsidy back for Collins later in a Navy appropriations bill. See Tyler, Steam Conquers the Atlantic, 225-29; Lane, Vanderbilt, 143-48; Hutchins, American Maritime Industries, 367; Dun- more, Ship Subsidies, 92-103; and Roy Nichols, Franklin Pierce (Philadelphia: University of Pennsylvania Press, 1958), 377. For Seward's comment, see Congressional Globe, 33rd Congress, Appendix, 301.
  20. New York Tribune, March 8, 1855; Lane, Vanderbilt, 147-48, 150.
  21. Lane, Vanderbilt, 147-48. In a letter to the New York Tribune, March 8, 1855, Vanderbilt complained that the Collins subsidy was "paralyzing private enterprise, and in fact forbidding it access to the ocean."
  22. Lane, Vanderbilt, 148-51, 167; Tyler, Steam Conquers the Atlantic, 238-41.
  23. Congressional Globe, 35th Congress, 1st 5 sion, 2526, 2827, 2843. See 1so Tyler, Steam Conquers the Atlantic, 231 - 46; James D. MeCabe, Ir, Gree also nos (Philadelphia: G. MacLean, 1871); and Meeker, Shipping Subsides, 156.
  24. Lane, Vanderbilt, 151-56; and Meeker, Shipping Subsidies, 5-20.
  25. Meeker, Shipping Subsidies, 10-11; Henry Fry, The History of North At. intic Steam Navigation (New York: Charles Scribner's Sons, 1896), 12-53, 77-78, 81; and Hyde, Cunard, 27-34.
  26. Robert Macfarlane, History of Propellers and Steam Navigation (New York: George P. Putnam, 1851); Tyler, Steam Conquers the Atlantic, 117-18, 138-42; Lane, Vanderbilt, 93-94.
  27. Congressional Globe, 33rd Congress, Appendix, 354-55; Tyler, Steam Conquers the Atlantic, 128-32, 138-42; Lane, Vanderbilt, 175-78.
  28. Earnest A. Wiltsee, Gold Rush Steamers (San Francisco: Grabhorn Press, 1938), 50-89; Lane, Vanderbilt, 85-107; Hutchins, American Maritime Industries, 359-60.
  29. Hutchins, American Maritime Industries, 359-63.
  30. Lane, Vanderbilt, 108-38; Wiltsee, Gold Rush Steamers, 112-51.
  31. Lane, Vanderbilt, 123-24, 135; and William D. Scroggs, "William Walker," DAB, 19:363-65.
  32. Congressional Globe, 35th Congress, 1st session, 2843-44.
  33. Lane, Vanderbilt, 124, 136.
  34. In 1855, with Vanderbilt paid off, the California lines raised the New York to San Francisco fare from $150 to $300. They also doubled the steerage fare from $75 to $150. Many passengers-real and potential--were angry, but one point needs to be made. This fare was only one-half of what it was before Vanderbilt arrived. The effect of Vanderbilt's competition was to shrink the fare from $600 to $150; when he left, it was still only $300. For the California lines to have raised the fare any higher would have probably meant two things: first, a decline in the number of passengers wanting to go to California; second, the appearance of a new rival ready to cut fares and capture what traffic was left. Since the California lines had only one-fourth of their subsidy left, they could ill-afford the arrival of another Vanderbilt, so they kept the fares moderately low. See Wiltsee, Gold Rush Steamers, 21-26, 55-56, 139-42, 149.
  35. Meeker, Shipping Subsidies, 156.
  36. Harry H. Pierce, Railroads of New York: A Study of Government Aid, 1826-1875 (Cambridge, Mass.: Harvard University Press, 1953), 14-16; George Rogers Taylor, The Transportation Revolution (New York: Harper and ROw. 1951), 128-31; Julius Rubin, Canal or Railroade Writation and Innovation in Response to the Erie Canal in Philadelphia, Baltimore, and Boston (Philadelphia: American Philosophical Society, 1961); Douglass C. North, Growth and Wel- fare in the American Past (Englewood Cliffs, N.J.: Prentice-Hall, 1974). After the vi war, vanderbilt sold his steamships and began building the New York Central Railroad from New York to Chicago. Vanderbilt again had to battle political entrepreneurs (this time city councilmen and state legislators) in New York who demanded bribes from Vanderbilt before they would approve of a right-of-way for his railroad. But Vanderbilt never took his eyes off the main task: building the best railroad and delivering goods at the lowest possible prices. He spearheaded America's switch from iron to steel rails, standardized his railroad's gauge, and experimented with the four track system. He improved roadbeds and rolling stock and cut his cost in half in seven years - all the time maintaining an eight percent dividend to stockholders.


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