Freeman

ARTICLE

The Scranton Story

AUGUST 01, 1988 by BURTON FOLSOM

Burt Folsom is Associate Professor of History at Murray State University. This article is adapted from his book, Entrepreneurs vs. The State, published by Young America’s Foundation, Suite 808, 11800 Sunrise Valley Drive, Reston, VA 22091.

In the first few decades of the nineteenth century, the English dominated the world’s iron markets. They had developed the first blast furnaces, invented the puddling techniques to purify molten iron, and had skilled workers eager to compete on a world market. With this large head start over U.S. producers, the English, by the 1830s, were providing all of America’s iron rails, and all the cast-iron water pipes, as well as iron-tipped plows, locks, and nails. By 1840, dozens of Americans were experimenting with different types of fuels, ores, and blast furnaces, trying to produce Amer-ican-made iron.

During the 1840s, in Pennsylvania’s Lackawanna Valley, George Scranton, his brother Selden, and their cousin Joseph Scranton became the first Americans to mass-produce iron rails. Two things are striking about the Scrantons’ success: First, the Lackawanna Valley, with its thinly scattered, low-quality ore deposits, was hardly a natural setting for manufacturing. Second, in the competition for urban growth, the winning city of Scranton did not exist until the 1840s. Nearby Wilkes-Barre and Carbondale had the advantages of age and wealth, until Scranton overcame them.

The migration of the visionary Scrantons to northeast Pennsylvania began in 1839, when William Henry, a trained geologist, scoured the area looking for the right ingredients for iron-making—water power, anthracite coal, iron ore, lime, and sulphur. He found these elements near Wilkes-Barre, the oldest, largest, and wealthiest city in northeast Pennsylvania. Wilkes-Barre’s leaders, though, were cautious: they preferred to ship coal safely down the Susquehanna River, not to risk their fortunes on unproven iron. So Henry went about 20 miles east into the wilderness of the Lackawanna Valley, and looked over the land in this area. It had some water power and lots of anthracite; he also found small quantities of iron ore and lime, so he falsely assumed they existed there in abundance.

Playing a hunch, Henry took an option to buy 500 acres of land at present-day Scranton and built a blast furnace on it. At first he sought the necessary $20,000 for the scheme from New York and England; but the high risk of his daring experiment frightened away even the hardiest of speculators. Finding greater faith within his family, Henry received support from his son-in-law, Selden Scranton, and Scranton’s brother George, both of whom were operating the nearby Oxford Iron Works in Oxford, New Jersey. Originally from Connecticut, the wide-ranging Scrantons tapped their credit lines and picked up additional capital from their first cousin, Joseph Scranton; his brother-in-law. Joseph C. Platt; and friends, Sanford Grant and John and James Blair, who were merchants and bankers in Belvidere, New Jersey. These entrepreneurs, whom we will call the Scranton group, raised $20,000 in 1840 and spent the next two years building a blast furnace and digging the ore and coal to make iron.

Making iron, they quickly discovered, required more entrepreneurship than they had originally expected. The local ores and limestone were limited and of poor quality. They had chosen the wrong location, but it was too late to sell out and switch, so they searched eastern Pennsylvania and New Jersey for the right combination of ores and limestone.

Only the local coal lived up to expectations, and this was available in other areas with established cities closer to the lime and ore. When the Scrantons made their iron, they brought their lime and ore on boats from Danville, Pennsylvania, about 30 miles up the Susquehanna River right by the mansions on the River Common in Wilkes- Barre, and over land almost 20 miles to Scranton.

The high costs of transportation and the unexpected purchases of ore and lime almost ran the Scrantons into bankruptcy; then George Scranton came up with a plan to convert the pig-iron into nails. Such a bold venture into manufacturing would not be cheap. The need for a rolling mill and a nail factory upped the ante to $86,000. Desperate for credit, George Scranton coaxed some of this money from New Yorkers. Yet this jeopardized the family’s ownership. So he placed his greatest reliance on other members of the Scranton group: longtime friends John and James Blair invested money from their bank in New Jersey, and Joseph Scranton sent funds from his mercantile business in Augusta, Georgia. By 1843, George Scranton got his $86,000, kept control within the family, and began making nails for markets throughout the East Coast.

The nail factory failed miserably. First, no rivers or rails helped market its product. Dependent on land transportation, the Scrantons transferred the nails on wagons east to Carbon-dale and west to the Susquehanna River, and from there shipped them to other markets. Second, no one wanted the Scrantons’ nails because they were of poor quality. The low-grade ores in the Lackawanna Valley provided only brittle and easily breakable nails.

Faced with bankruptcy, the Scrantons contemplated the conversion of the nail mill into a rolling mill for railroad tracks. Experienced Englishmen still dominated the world production of rails in the 1840s; no American firm had dared to challenge them. After floundering in the production of nails, however, the Scrantons decided that a lucrative rail contract might be the gamble that could restore their lost investment.

As luck would have it, in 1846, the nearby New York and Erie Railroad had a contract with the state of New York to build a rail line 130 miles from Port Jervis to Binghamton, New York. When Englishmen hesitated to supply the Erie with the needed rails, the Scrantons had their chance. They traveled to New York and boldly persuaded the board of directors of the New York and Erie to give their newly formed company the two-year contract for producing 12,000 tons of T-rails. They promised to Supply rails more cheaply and quickly than the British. Impressed with the Scrantons and desperate for rails, the directors of the New York and Erie advanced $90,000 to the eager Scrantons to construct a rolling mill and to furnish the needed track.

The construction of the mill and the making of thousands of tons of rails seemed impossible. The contract called for the Scrantons to supply the Erie with rails in less than twenty months. The Scrantons first would have to learn how to make the rails they promised to provide. Building the blast furnaces would come next. Then they would have to import some ore and much limestone into the Lackawanna Valley to make the rails. Finally, be cause they lacked a water route to the Erie line, they would have to draft dozens of teams of horses to carry finished rails from their rolling mills scores of miles through the wilderness and up mountains to New York, where the track was to be laid. it is no wonder the New Yorkers wanted to back out at the last moment. Yet somehow, in less than a year and a half, the Scrantons did it. On December 27, 1848, just four days before the expiration of the Erie’s charter, the Scrantons fulfilled their contract and completed the rail line.

The Effect of Low Tariffs

An interesting feature of the Scrantons’ achievement was that they built their rails during a time of low tariffs. Some businessmen have always argued that their government should place high tariffs on imports to protect local manufacturers against foreign competitors. Yet, in 1846, the year the Scrantons began making rails, Congress passed the Walker Tariff, which lowered duties on imported rails and other iron products from Eng land. George Scranton said he actually liked the lower tariff for two reasons. First, the Scranton price of $65 per ton of rail was already fixed and was competitive with English prices. In any case, Scranton estimated his firm would be earning $20 per ton profit, so the tariff was not needed. Second, the low tariff meant that the Scrantons could buy their raw materials—pig iron, rolled bars, and hammered bars—more cheaply. This, Scranton hoped, would lay the foundation for his firm to be the strongest on the continent for years to come.

Many Americans were amazed that an iron works located in the middle of a wilderness, with no connecting links to outside markets, could build and deliver 130 miles of rails to a railroad in another state. The Scrantons did not want to have to duplicate this feat, so they did two things to improve their location: first, they started building a city around their iron works; second, they began building a railroad to connect their city to outside markets. That way they could ship rails anywhere in the country and also export the local anthracite, which could be sold as a home-heating fuel.

With the confidence of New York investors, the Scrantons proposed two railroads: the Liggett’s Gap, and the Delaware and Cobb’s Gap. The Liggett’s Gap line, running from Scranton 56 miles north to connect with the Erie at Great Bend, would permit Scranton to supply coal to the farms in the Genesee Valley in upstate New York; the Delaware and Cobb’s Gap route, running 64 miles east to the Delaware River at Stroudsburg, would give the Scrantons a potential outlet for coal to New York City. By backing two lines, the Scrantons gave them selves two markets for Lackawanna Valley coal. The building of a railroad, then, was a logical sequel to the Scrantons’ superb iron works. The railroad itself became a market for Scranton iron; it provided an outlet for Scranton coal; and it promoted trade for Scranton city.

Building the two railroads was no cinch. Some of the terrain was mountainous: even after using gunpowder to level the hills, the grade was still steep in places. Also, George Scranton had to negotiate some delicate right-of-way problems with farmers who were over-valuing their land. Of course, the Scrantons were using their own homemade rails for the line, but this still ran into costs. For all of this, the Scrantons needed more New York capital, but they had to be careful. They wanted to be entrepreneurs, not pawns of the New Yorkers. The Scrantons had to make sure they retained a guiding interest in their projects. This they did.

The two railroads were surveyed and built between 1850 and 1853; they both were consolidated into one line, the Delaware, Lackawanna, and Western Railroad (hereafter Lackawanna Railroad) with George Scranton as its first president. In 1853, flushed with success, the Scrantons also incorporated their iron works as the Lackawanna Iron and Coal Company (hereafter Lackawanna Company) with $800,000 in stock; they elected Selden Scranton as president.

The building of America’s premier iron works and railroad was an amazing feat of collective entrepreneurship. The Scranton group became unified behind a vision of mass-produced rails, the creating of a city, and the laying of rails from its borders east and north to outside markets. As individuals, the members of the Scranton group had few of the skills and little of the capital needed to fulfill this vision; but collectively they did. They had to have outside cash, but their confidence and unity of purpose impressed New York investors and convinced them the Scrantons could do the job.

Not everyone wished the Scrantons well. And this made their success story even more remarkable. First, there was the generally negative reaction from leaders in Wilkes-Barre, who thought the rise of a new city would threaten their hegemony in northeast Pennsylvania. The Scrantons logically tried to secure loans in Wilkes- Barre, the oldest and largest city in the area. But the businessmen there rarely helped, and they often hurt. For example, in the 1850s the Scrantons tried to get a charter for their railroad from the state legislature; Wilkes- Barre’s politicians thwarted the Scrantons because the new rail line threatened Wilkes-Barre’s trade dominance along the Susquehanna River through the North Branch Canal.

Not only did politicians in Wilkes-Barre hamper iron production and delay rail completion, they prevented the Scrantons’ emerging industrial city from becoming a county seat. The new city of Scranton happened to be situated in the eastern end of Luzerne County. But wily politicians in the county seat of Wilkes-Barre used state- wide influence to delay for decades the creation of a new county. Even the prestige and influence of George Scranton in the Pennsylvania Senate and U.S. Congress during the 1850s could not force the division of Luzerne County. So while the Scrantons were trying to promote their new town as a center of industrial opportunity, the town’s administrative business was being diverted to the county seat of Wilkes-Barre.

Possibly even more damaging than the opposition from Wilkes-Barre’s politicians was the hostility of many farmers near Scranton. These old settlers liked the prospects of improved transportation to get their crops to market, but many did not want to see industrialization transform their rustic community. Even before the Scrantons arrived, several of these farmers had formed a committee to denounce them.

The squabbles with the old settlers regularly kept the Scrantons from fully attending to their iron works. Recognizing this problem early, the Scrantons donated land and labor to help build them a church. Through a company store, the industrialists enthusiastically traded goods and produce with nearby farmers. Desperate for credit, though, the Scrantons were barely surviving in the early 1840s and had to seek extensions on local loans.

Disputes with the old settlers over land and credit persisted as the Scrantons verged for years on bankruptcy without successfully producing nails or rails. Feuding seems to have been commonplace. Even when the Scrantons finally received the rail contract from the Erie, many farmers withheld the use of their mules and horses to prevent delivery of the rails; others charged exorbitant prices. Under these conditions, one can hardly argue that the location of Scranton was inevitably destined for urban glory.

Promoting a New City

When the iron works and the railroad succeeded, the Scrantons then promoted the growth of their new city. Their correspondence shows that they clearly viewed industrial and urban growth as symbiotic. Their investment in real estate and housing multiplied in value after the success of their iron works and the arrival of a railroad. The Scranton group originally bought a 500-acre tract for $8,000 in 1840. As mere coal land that acreage was worth at least $400,000 by the mid-1850s. As improved land much of it was worth even more. The Serantons had laid out streets, sold lots, and built mansions for themselves and company houses for their workers.

Unlike the leaders in Wilkes-Barre and Car-bondale, the Scranton group created an open environment for their city and actively recruited investors to come. To do this effectively, they went to the state legislature in 1866 and secured wide city limits of almost twenty square miles, which at that time included mostly farm and timberland. They incorporated this large space to fulfill their vision of their city’s future, in which they saw many more industries, homes, and parks. The space was needed to plan all this properly.

Wilkes-Barre’s leaders, by contrast, wanted to limit immigration and preserve their closed society. They intentionally settled for small city limits of 4.14 square miles and did not even incorporate this much land until five years after the Scrantons did so. This made urban planning in Wilkes-Barre difficult, and it also hindered the preventing of fires and the controlling of epidemics.

All this creates the impression that, once the iron works and the railroad were established, and once the city of Scranton was incorporated, the Scranton group had it made. But this was not the case; in fact, most of the Scranton group did not die rich, and two died very poor.

William Henry, the original leader of the group, left the city in the 1840s after some bad investments. Henry had energy and vision but little patience and endurance; he died embittered and impoverished in 1878. Sanford Grant, the first owner of the company store, wilted when faced with business competition and industrial risk. Selling his stock, he left for safer business climes in Belvidere, New Jersey, where he lived, without ulcers or wealth, until his death in the 1880s. Displaying greater fortitude than Grant, Selden Scranton became the first president of the Lackawanna Company; five years later, though, he and his brother Charles left to operate a blast furnace in Oxford, New Jersey. Their ironmaking talents ultimately failed them; Seldon declared bankruptcy in 1884 and died shortly thereafter.

George Scranton, the early leader and driving force behind coal and railroad development, had more faith and perseverance than most of the others. He amassed $200,000, built a fine mansion, and served as U.S. Congressman from northeast Pennsylvania. George, however, still lost some of his fortune during the Panic of 1857 and had to sell much of his stock in the Lackawanna Railroad at reduced value. Plagued with health problems from overwork during the rugged days of the 1840s, George died in 1861 at age 49.

Three other members of the Scranton group never abandoned their vision of manufacturing rails and building a city; they achieved fabulous success and wealth. On top was Joseph Scranton, who said at the start, “I have no fears of the ultimate success [of the iron works] . . . I have invested in it. Should remain till it is doubled or lost as the case may be.” Twenty-seven years later, Scranton was president of the flourishing Lackawanna Iron and Coal Company and was worth $I,100,000, making him the wealthiest man in northeast Pennsylvania. His brother-in-law and next-door neighbor, Joseph C. Platt, was superintendent of the Lackawanna Company and was worth $220,000. Right behind Joseph Scranton with $910,000 was his friend James Blair, who had backed the Scrantons from nails to rails. Blair held a substantial amount of stock in both the iron works and the railroad; he then expanded and started Scranton’s first trolley company.

Some people point to such wealth, and the absence of it in other households, and argue that the state should redistribute it, or at least tax it at high rates. It hardly seems fair, they might say, that some people should have so little, while three men—Joseph Scranton, Joseph Platt, and James Blair—should own close to ten per cent of all the wealth in the city (according to the data in the 1870 Federal census). What we need, according to this view, is an active state to transfer income, chop up inheritances, perhaps even to impose equality of condition.

To argue this way is to miss a key point: Scranton’s founders, as entrepreneurs, created something out of nothing. They created their assets and created opportunities for others when they successfully bore the risks of making America’s first iron mils. Without them, almost everybody else in the region would have been poorer. The amount of wealth in a region (or a country) is not fixed; in 1870, Scranton, Platt, and Blair got the biggest piece of the economic pie, but it was the biggest piece of a much larger pie—made so by what they did when they came to Pennsylvania 30 years earlier.

When the Scrantons came to the Lackawanna Valley, it was a poor farming region with no close ties to outside markets. In 1850, according to the Federal census, no one in the Lackawanna Valley was worth more than $10,000. In 1870, after the Scrantons had established their city and their iron works, 33 families in Scranton alone were worth at least $100,000; and one was already a millionaire. Thousands of other families were Working their way toward better lives. The Scrantons’ iron works and railroad were the means to this end.

Some people look at the results of splendid entrepreneurship and say that someone else might have come along later and done the same thing. We can see how improbable this is in the Scranton case. The wealthy leaders in the older, more prosperous city of Wilkes-Barre, for example, shunned manufacturing for years and often tried to thwart the Scranton’s plans. If the Scrantons had not come along, much of the iron ore in central Pennsylvania and New Jersey probably would have been exported to Philadelphia, Pittsburgh, or New York, where more abundant capital eventually would have taken the risks of making manufactured goods. Northeast Pennsylvania would have been left in the dark.

To be sure, the anthracite in the Lackawanna Valley was already attracting New York investors: but they came only to get coal, not to build cities and make the region prosper. Without dedicated local entrepreneurs, the Lackawanna Valley, like so many mining regions, would have enjoyed only fleeting and limited prosperity. The entrepreneurs in New York would have bought the coal land cheap, supplied transportation to the region, collected their profits, and left the exporting area full of deserted mines and ghost towns.

Creating Opportunities

Let’s look at the different opportunities the Scrantons, as entrepreneurs, created for others. First, the people in northeast Pennsylvania, especially those with capital to invest, now had new and better opportunities available. Scranton, in fact, became a magnet for entrepreneurs in nearby towns, except for Wilkes-Barre. Investors in the nearby county seats of Montrose and Towanda came to Scranton and set up the city’s fast two banks. From nearby Honesdale came Scranton’s first large-scale flour miller. From Carbondale came the presidents of both of that city’s banks, a locomotive builder, a stove maker, a coal operator, and the mayor. Not all of these men won fortunes, but several did, and their investments helped diversify Scranton’s economy and made it one of the fastest growing cities in America in the late 1800s.

Another group of winners were the many local farmers who held on to their land and sold it later as coal land. All they had to do was watch others do the work of establishing the region’s export. After this, they cashed in. The Scrantons bore the risks of making rails from imported ore; then they risked building a railroad to connect the Lackawanna Valley to New York City. All the farmers had to do was keep their land and watch it rise in value—from $15 an acre in 1840 to $800 an acre in 1857. In just 17 years, then, a 160-acre farm increased in worth from $2,400 to $128,000. Some of these locals even ended up richer than the wealthiest of the Scrantons.

Even the poorest immigrants sometimes got rich in Scranton. The growth of Scranton from a farming hamlet in 1840 to 45,000 people in 1880 brought thousands of immigrants to town. Many of them worked in the factories and improved their lives; they saved a little money and bought their own homes. Some of them had the talent and vision to rise to the top. In 1880, of Scranton’s 40 most prominent businessmen, measured by memberships on boards of directors, nine were immigrants.

Some of these rags-to-riches immigrants were clearly among the most successful men in Scranton. Thomas Dickson, for example, came to America from Scotland and began work as a mule driver. Soon he was making engines, boilers, and locomotives for the Scrantons; he ended up as president of the Delaware and Hudson Railroad. Another immigrant, John Jermyn, came to Scranton in 1847 from England and began working for the Scrantons for 75 cents a day. Soon he was managing coal mines and was putting what little money he earned into coal land and real estate with a knack that amazed everyone. The critical risk in his career came in 1862, when he leased some abandoned mines northeast of Scranton. Defying the skeptics, Jermyn bought new ma chines and fulfilled a contract for one million tons of coal. He then tripled his contract and was on his way to becoming the largest independent coal operator in the Lackawanna Valley.

Because of the Scrantons, thousands of Americans had new opportunities in life. If they could just capture the Scrantons’ vision, they had a chance to succeed. One life that was made anew was that of Joseph J. Albright, the uncle of Selden Scranton. Albright was in business near Nazareth, Pennsylvania, and went bankrupt in 1850, when he was nearly 40 years old. He had to sell all his furniture at a sheriff’s sale and deal with creditors from two states.

The Scranton group came to Albright’s rescue and gave him a job as coal agent for their railroad. Soon Albright caught the Scrantons’ vision. He was patient and invested wisely: he bought stock in the Scrantons’ iron and coal company; he then joined them in building the city’s gas and water system. On his own, he invested in a company to mill flour and in a firm to make locomotives. By 1872, he was worth half a million dollars and was elected president of the largest bank in the city. He had become a believer in Scranton and wanted to help the city that had given him a chance; when he died he deeded his home to the city and gave $125,000 to build a major public library.

Not everyone joined the Scranton team. Phillip Walter, another relative from Nazareth, resisted an elaborate courtship by the Scrantons in 1852. He told them he was reluctant “to pull [up] stakes and move” from “my long cherished home” because “I might fail.” Winnowing out the conservative and the weak at heart, Scranton seems to have attracted a select set of venturesome leaders to guide its industrial growth.

Fostering an Open Environment

In building their city, the Scrantons consciously promoted entrepreneurship. The securing of wide city limits was part of this effort. They believed their city would grow, and they diligently planned its expansion. Along these lines, the Scrantons and their allies established a board of trade in 1867 to promote the industrial development of their city. They installed an innovative Welsh immigrant, Lewis Pughe, as the board’s first president. The board actively recruited industry and even secured a law granting all new corporations tax-free status for their first ten years in Scranton.

In this open environment, Scranton grew as a manufacturing center and attracted many capitalists who were willing to take different types of risks. This made for a combination of inventiveness and creative entrepreneurship. For example, Henry Boies came to Scranton from New York in 1865 and founded the successful Moosic Powder Company; then he perfected a gunpowder cartridge that reduced the death and injury resulting from carelessness in mining explosions. Boies seemed to court risky ventures and had failed twice before coming to Scranton. Once he had made his fortune in powder, the credit lines were open, and he went to work inventing a flexible steel wheel for locomotives. He started the Boies Steel Wheel Company in 1888 to manufacture his patented invention.

Another innovation that succeeded in Scranton was Charles S. Woolworth’s five-and-ten-cent store. Born in upstate New York, Woolworth, his brother Frank, and partner, Fred M. Kirby, experimented in the late 1870s with the opening of specialty stores featuring largely five-and-ten-cent merchandise. Shoppers were often skeptical of the first stores opened in Harrisburg, Lancaster, and York, Pennsylvania. In 18’80, however, when Charles Woolworth set up a five-and-ten-cent store in Scranton, the idea caught on. Sales in Scranton were a modest $9,000 the first year, but the Woolworths and Kirby had laid the foundation for an empire, and Charles had found himself a new home in Scranton. A decade of brisk sales in Scranton encouraged Woolworth to start branch stores in New York and Maine in the 1890s. Kirby, meanwhile, started a profitable store in Wilkes-Barre. Soon Woolworths was selling nationally, and became a major American corporation. In Scranton, Woolworth joined with other local entrepreneurs in founding the International Textbook Company, which employed thousands of people to sell textbooks throughout the nation.

The introduction of electricity in the I 880s brought out the best in Scranton’s entrepreneurs. They didn’t produce Thomas Edison, but they did have Merle J. Wightman, who designed and built one of the frost electric motors to run trolley cars. Scranton became one of the first cities in the nation to have an electric trolley system. Other Scrantonians adapted electricity to coal mining. In 1894, they founded the Scranton Electric Construction Company, which perfected and manufactured electrical apparatus (e.g., mechanical drills, locomotive hoists, and mining pumps) for use throughout the anthracite coal fields.

Scranton did not emerge inevitably as a center for manufacturing trolley motors, locomotive wheels, or textbooks. Nor was there any particular reason why Scranton should have become a major headquarters for directing a chain of five-and-ten-cent stores. Other cities throughout America had the location and transportation facilities needed for these industries. Even the making and distributing of electrical mining equipment could have been done in Wilkes-Barre or in anthracite towns other than Scranton. A key to Scranton’s success seems to have been the presence of aggressive entrepreneurs, who had a philosophy of openness and a commitment to growth. As the spiral of growth in industries, services, and population persisted, the city of Scranton, which was founded on a hunch, became one of the 40 largest cities in the country by 1900.

A lot can be learned from the story of the Scrantons. The first lesson is that entrepreneurs are needed to create wealth;’ when they succeed, others then have the chance to build on what they started. If we look at the later history of Scranton, we also can learn a second lesson: that it is hard for those on top to stay there in the generations that follow. An inheritance can be transferred; but entrepreneurship, talent, and vision cannot be. The industrial city of Scranton saw lots of movement down the ladder of social mobility, as well as up.

This can be seen if we look at what happened to the Scranton economic elite of 1880—those men who made up the first generation of the city’s industrial leadership. I collected data on the 40 men in Scranton who, by 1880, held the largest numbers of corporate directorships and major partnerships. These 40 men dominated all of Scranton’s major industries. Several were millionaires; and all had access to credit and contracts, which seemingly should have insured the success of their children in Scranton, which spiraled in population from 45,000 in 1880 to 137,000 in 1920.

As founders and developers of the Scrantons’ vision, these forty entrepreneurs had much to give their children. Blessed by the luck of the draw, these fortunate offspring could choose almost any career, with the security that only wealth can bring. Raised in Victorian mansions rife with servants, they often had doting parents to give them private-school education, college if they wanted, or specialized training in engineering or industry. If these children did not prosper, they could fall back on hefty inheritances. Also, as they matured, they could take advantage of Scranton’s thriving marketplace to make even more money. By 1920, the sons of Scranton’s 1880 leaders had ample opportunity to succeed their fathers as the pacesetters of Scranton’s business world.

Fathers and Sons

Yet they did not. Few went hungry, but most could not come close to matching their fathers’ achievements. Only nine of the forty economic leaders in 1880 had even one son, son-in-law, or grandson who 40 years later was an officer of even one corporation in Scranton. In short, the fathers and sons provide a stunning contrast.

Why the sons did so poorly is complicated. Some of the reasons for this startling breakdown lie in the general problem of family continuity. Six families didn’t have any sons; seven others had too many—which splintered the family wealth into small pieces. In a very few cases, some sons left Scranton for business ventures elsewhere. Often the sons chose not to go into business: they led lives of brief and precarious leisure.

The fragmentation of some of Scranton’s larger family fortunes seems remarkable. For example, brothers Thomas and George Dickson between them held the positions of president of a national railroad, president of the largest manufacturing company in northeast Pennsylvania, president of an iron company in New York, and vice president of the largest bank in Scranton, as well as directorships of many large companies. Yet only one of Thomas Dickson’s three sons went into business; and, under his leadership, the Dickson Manufacturing Company went out of business. George Dickson’s only child, Walter, became a salesman and held no corporate influence. The four sons of multimillionaire James Blair were nonentities, Only one of Blair’s sons appears to have been gainfully employed, and his job was that of assistant cashier in his father’s bank.

Even the Scrantons of Scranton were almost extinguished. George, Selden, and Joseph Scranton were the founding fathers of American rail making, but only one of their sons showed entrepreneurial skill. Selden was childless, and went bankrupt in any case. George was worth $200,000 when he died; but his sons, James and Arthur, became men of leisure, not entrepreneurs.

Joseph’s son William gave business a try, but his story was often sad. Joseph was president of the Lackawanna Iron and Coal Company from 1858 until his death in 1872. But during these years, the New Yorkers bought up so much stock that William was not allowed to succeed his father as company president. Young William was restless as a mere local manager, so he studied the new Bessemer process in Europe and returned to start his own Scranton Steel Company in 1881. The city’s low tax on new industries gave him an edge over the larger Lackawanna Company, but the older company won the competition and absorbed his enterprise in 1891. William did prove to be a very capable builder and operator of the Scranton Gas and Water Company. He and his son, Worthington, ran this company profitably and, in 1928, Worthington sold it for $25 million.

Dissolution and Decline

Some of the sons of Scranton’s early industrialists literally squandered fortunes. Benjamin Throop, an early settler, had become a millionaire in coal land and urban real estate. His surviving son had, at best, modest business skills, and when he and his wife died prematurely in 1894, the 83-year-old Throop undertook the task of rearing his only grandchild, five-year-old Benjamin, Jr.

The elder Throop died shortly thereafter, but young “Benny” inherited a $10,000,000 fortune. Young Throop married into a prominent local family and, having no financial worries, served in World War I, but by that time his wife had divorced him and he seems to have lost any interest that he might have had in gainful employment or in the city of Scranton. During the 1920s, like a character from an F. Scott Fitzgerald novel, he spent most of his time in Paris indulging champagne tastes in cars and women. Throop died in 1935, in his mid-forties, of undisclosed stomach ailments, after apparently dissipating his grandfather’s entire fortune.

Throop was a rare but not unique example of dissolution. Given the tradition of partible inheritance, many of the sons of economic leaders knew that they never would have to work, and so they became men of leisure with no business interests.

Passing the Torch

Of course, not all of Scranton’s early industrialists had downwardly mobile sons. Nine of the 40 top capitalists in the Scranton of 1880 had passed the torch of leadership from father to son by 1920. In any randomly selected group of forty families, of course, some would produce sons or have sons-in-law with a flair for business. It is improbable, however, that nine of forty randomly chosen families would have corporate officers as sons. This merely shows that industrial leaders are much more likely than other groups in the population to father corporate officers. It does not show continuity of economic leadership because more than three-fourths of the industrial families of 1880 in Scranton failed to continue a line of corporate succession in the following generation.

While most of the sons of entrepreneurs stumbled, a variety of new immigrants in Scranton saw their opportunities and took them. By 1920, for example, Andrew Casey, an Irish liquor dealer, had become a bank president and a hotel magnate. Michael Bosak, a Slovak immigrant who started life as a breaker boy in the 1880s, owned banks, a manufacturing company, and a real estate firm in Scranton in 1920. Few had the talent and vision to build such empires, but those who did picked up where the city’s founders had left off.

Scranton, in a sense, was America’s first manufacturing city. It marked the spot where America began to gain its independence from British iron. During the next generation, Scranton became a showcase of remarkable entrepreneurship and industrial growth. In this relatively open environment, Scranton’s economic order was fluid: upward mobility for the poor existed side- by-side with downward mobility for the rich. Entrepreneurs were prized possessions for cities and for the nation; but their vision, talent, and drive were hard to transfer from generation to generation. Most of the families of Scranton’s early industrialists died out as entrepreneurs; they didn’t inherit their fathers’ vision and turned over the city’s economic leadership to newcomers.

And so the cycle goes—which means that if Scranton is typical, then two seemingly contradictory generalizations about the rise of big business are both true. First, a small constantly changing group of entrepreneurs consistently held a large share of the nation’s wealth. Second, the poor didn’t get poorer, and the rich didn’t get richer either.

ASSOCIATED ISSUE

August 1988

ABOUT

BURTON FOLSOM

Burton Folsom, Jr. is a professor of history at Hillsdale College and author (with his wife, Anita) of FDR Goes to War.

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