Introduction
Business historians have long identified the railroad industry of the mid- to late nineteenth-century United States as the birthplace of the modern corporation. Alfred Chandler famously claimed that it was the challenge of scale and distance—the need to manage millions of dollars in assets and thousands of workers over thousands of miles of territory—that prompted railroad leadership of the 1840s and 1850s to develop the management practices and organizational forms that characterized the large corporation and made it the most efficient coordination mechanism of production of industrial-age goods and services. In this article, I argue that modern management and organization originated in the US military prior to the Civil War. All the characteristic coordination mechanisms of the large firm: staff and line hierarchies, divisional and departmental structure, and bureaucratic systems of information gathering, surveillance, and control, were developed by agents of the state years before they were adopted by private entrepreneurs on the railroads. Perhaps this should not be surprising, given that the Department of War was managing tens of thousands of officers, soldiers, and civilian employees and millions of dollars of funds and fixed property, spread out over thousands of miles of territory, when railroad technology was in its infancy.
Military and accounting historians including Charles F. O’Connell, Jr., Mark R. Wilson, Keith Hoskin, and Richard Macve have already demonstrated how aspects of modern corporate management originated in the military. Their archival evidence makes a compelling case for the role of officers of the US Army Corps of Engineers and Topographical Engineers, Department of Quartermaster General, US Military Academy at West Point, and associated arsenals in developing a sophisticated management philosophy and practice on which railroad officers would draw.
In this article, I provide a more comprehensive survey of the development of modern management and organization in the US military, from the reforms made by leadership in the Department of War beginning in 1817 to the logistical successes of the Quartermaster’s Department of the US Army in the mid-nineteenth century. In doing so, I reframe the military as an organization tasked with the efficient production of violence as an intermediary service in the economic processes of agro-industrial production. I outline the administrative innovations made by the Secretary of War following the War of 1812 and identify the Quartermaster’s Department, which was tasked with many of the same functions as the railroads and thus dealt with similar management issues, as an important forerunner of the modern business corporation.
The identification of early American military leaders as the originators of modern corporate management is important not only because it provides a correction of Chandler’s identification of railroad entrepreneurs as the sole authors of modern management, but also because it illustrates the importance of organized violence in the economic history of the United States. In the early-to-mid nineteenth-century US, military activity was directed primarily toward a form of territorial expansion best described as “continental colonialism,” where colonialism is defined by sociologist Julian Go as a direct form of imperialism: “a sociopolitical formation wherein a central political authority…exercises unequal influence and power over the political…processes of a subordinate society, peoples, or space.” Continental colonialism occurs when colonies are established outside of the authority’s original political borders but contiguous to them.Footnote 1 Two important components of continental colonialism in the early nineteenth-century United States were the use of military force or threat of force in acquiring control of land managed by Indigenous Nations and in enforcing the enslavement of Black workers and communities employed on that land.Footnote 2
A third component, examined here, was the development of the organizational and management technology necessary to produce the sustained exercise of force against colonized and enslaved populations across a continent. In a 2005 working paper, Hoskin and Macve ask why early railway managers would have gone to the trouble of adopting such elaborate organizational structures: “Given the easy returns available to much early railroad investment, efficiency was not necessary for survival…So why did they do it?” Their answer is that modern management practices and structures provided powerful tools above all for controlling labor, creating “‘calculable’ persons in calculable spaces who internalized their self-awareness of their required performance,” and that these tools were originally created to produce Army officers at the Military Academy at West Point.Footnote 3
As the work of Caitlin Rosenthal, Bill Cooke, David Oldroyd, Richard Fleischman, and Thomas Tyson describes, managers of laborers in agro-industrial commodity production in the antebellum United States also used violence or threat of violence to control workers and suppliers—the service input of production that the military is particularly designed to provide.Footnote 4 Having argued that military leaders developed modern management practices and organizational forms to employ officer-agents in the production of violence, it may also be fruitful to ask if the military’s technologies of relation with nonmanagement suppliers of labor and capital also provided a model for the American business corporation. This article draws on a variety of sources to support the first of these statements but can only begin to address the question raised in the second.
The article proceeds as follows. Section two discusses some of the existing scholarly literature on the development of the corporate form in the United States, reviewing analyses of the modern corporation’s impacts on American society and its historical origins in government, public works, and speculation borne of conquest. The section focuses on the role of organized state violence in the constitution of business associations including the corporation, following historian Mark R. Wilson’s call to “bring the military in” to organizational analysis and seconding his and other scholars’ challenge to the “American exceptionalist” idea that the large corporation of the late nineteenth- and twentieth-century United States was a primarily private creation. In fact, Wilson writes, “the most important single organizational innovation in nineteenth-century America—namely, the emergence of modern bureaucratic administration—originated neither in business nor even in such civilian government bureaucracies as the Post Office Department, but rather in the military,” and more specifically, in a military in which “warfare and the administration of a sprawling continental empire are a central concern.”Footnote 5
Section three describes the evolution of the US military as an increasingly effective producer of imperial violence and shows how the mechanisms of coordination and management of people and capital described by Chandler as the spontaneous creations of railway entrepreneurs were developed decades earlier by long-serving officer-bureaucrats in the Department of War. Section four discusses evidence of the transfer of these mechanisms from the Army to the railroads. The article concludes with some questions for further research.
The Corporation in the United States: Impacts and Origins
Historians have identified multiple influences on the development of the corporate form and its success in organizing industry, for good and for ill. Many scholars describe the chartered incorporation of municipalities and charitable and social associations as the progenesis of the US corporation, pointing to the corporation’s origins in public service provision as a demonstration of historical precedent for the regulation of business corporations for the public good.Footnote 6 Others, including sociologists William Roy and Charles Perrow, provide accounts of the birth of the modern corporation in the US railway industry that emphasize the form’s tendency to concentrate control of industrial assets in the hands of the wealthy and powerful and to externalize costs onto workers and communities. Roy finds that “the corporate system of railroads, despite the rise of managerial systems that rationalized operation, was efficient only in its ability to create large systems, not in its ability to effectively use resources and return reliable profits.”Footnote 7 Perrow argues that coordinated regional networks of smaller firms could be as or more efficient and innovative at lower costs to society than industries dominated by large firms. Presenting accounts of financial elites enticing legislators and judges to create a system of corporate law favorable to growth and concentration, he concludes that corporate “bureaucracy (formalization, standardization, centralization, hierarchy) is the best unobtrusive control device that elites ever had.”Footnote 8
As legal historian William Novak notes, regardless of the balance of social costs and benefits engendered by the rise of the large firm, all forms of incorporation involve in some way access to the coercive powers of the state, particularly where a corporation controls valuable economic assets. “Beneath the language of consent and contract,” Novak writes, “elements of coercion, restriction, and inequality remain irreducible parts of American associationalism” and involve the state as a third-party enforcer. Thus Novak argues that it was not a series of contracts among equals in power but a specific distribution of “legal and political power that underwrote the early twentieth century corporate economy” through the instruments of “subsidization, corporate charters, public land policies, eminent domain, mixed enterprise, and the transformation of private law doctrine.”Footnote 9
One way that legal and political power underwrote the economy was in the state’s discriminatory exercise of force in support or denial of the rights of persons and property. Radical asymmetry of access to the military and police powers of federal and state government, for example between members of Indigenous Nations and land developers or between enslaved workers and their employers, supported developers’ and enslavers’ property claims.Footnote 10 As sociologist Victor Ray points out, even critical analyses of the American corporation like that of Perrow fail to recognize that the corporation’s “organizational formation was partially premised on the expropriation and exclusion of racial others.”Footnote 11 Continental or “domestic” imperialism was essential to the development of the US economy, as world systems scholar Giovanni Arrighi describes: “as soon as the Revolution had freed the settlers’ hands, they set out to conquer as much of the North American continent as was profitable and to reorganize its space in a thoroughly capitalistic manner…The result was a compact domestic territorial ‘empire.’”Footnote 12
The US military was deeply involved in the building of the infrastructure that made territorial administration and development profitable, including the survey and construction of roads and canals. From 1824 to 1838 Congress authorized the Army via passage of the General Survey Act to lend out West Point-trained engineers to assist with the building of public and privately-owned infrastructure projects. The Baltimore and Ohio Railroad (B&O) was the first railroad to receive substantial aid from US Army engineers, and it was the B&O that served as a model for other railroads in the years to follow. As Colleen Dunlavy notes, “The significance of the army engineers’ railroad work has never been fully appreciated—further evidence of the power of invisible paradigms perhaps… In any other country, the army engineers’ impressive contributions to early railroad development would suggest a statist pattern of industrialization.”Footnote 13
Not only a statist but an imperial-statist pattern of industrialization characterized the political economy of the nineteenth-century United States. Writing about the importance of the corporate form to the reproduction of the elite class in Philadelphia after the Revolutionary War, Andrew M. Schocket demonstrates how the duplication by American elites of British use of incorporation in banking and internal navigation also placed Philadelphians in the existing trans-Atlantic economy of sugar and sugar-colony provisioning, an economy dependent on conquest and enslaved labor. Schocket identifies the Bank of North America as the first US business corporation, created according to the model of the existing (and thriving) British bank and canal corporation. The merchants who pushed for the bank and navigation projects from the interior to ports were provisioners of Caribbean sugar plantations. “The borrowing of British corporate practice,” Schocket writes, “further integrated the United States into the Atlantic economy beyond the adoption of similar institutions. Indeed, the Bank of America’s original establishment was possible only because of a sudden influx of specie from Cuba to the bank that ensured it would be able to meet its first obligations…In turn, the bank’s ability to draw investment provided confidence in the banks and gave them adequate assets to lend confidently…Such common efforts showed their ultimate fruition in the development of railroad technologies and corporations on both sides of the Atlantic in the 1820s and 1830s.”Footnote 14
In the mid-1820s, when merchants in Baltimore began to plan the organization of the Baltimore and Ohio Railroad, their purpose was to make Baltimore a leading port (in contest with New York and Philadelphia) in the shipping of grain grown from topsoil on the other side of the Appalachians, on lands that were still being actively appropriated from Indigenous Nations by force or threat of force.Footnote 15 Though little of the B&O was built by enslaved laborers, the funds provided for its construction by supporters like Charles Carroll (the last surviving signer of the Declaration of Independence, who laid the B&O’s cornerstone at a ceremony on July 4, 1828) were accumulated via tobacco production by enslaved agricultural workers and the shipping of flour to West Indian sugar plantations.Footnote 16 When Carroll signed the Declaration, he was one of the largest slaveholders in the colonies as well as one of the richest men in English North America. Farther north, railroads in New England were built with funds and European credit on good terms accumulated and secured through years of trade with similarly wealthy planters in the Caribbean.Footnote 17
In the West, as the influential nineteenth-century journalist Albert Richardson wrote, the locomotive was “the true apostle of the Monroe Doctrine,” facilitating the US military’s control over the Western territories in a regime military historians refer to as the “calvary-railroad complex.”Footnote 18 In 1869 the Senate Committee on Pacific Railroads identified the locomotive as “the sole solution of the Indian question,” arguing that the railroad would induce the settlement of whites in large enough numbers to provide a mid-continent belt of white self-protection, dividing the forces of Indigenous Nations north from south.Footnote 19
Affiliation with the violence-producing arm of the state provided capitalists with the power to command labor resources and to accumulate both land and credit on terms so profitable as to qualify as plunder.Footnote 20 Though railway construction was dangerous work for all laborers, Chinese railway builders in the West and both enslaved and free Black workers in the South routinely received categorically lower compensation for more dangerous work than did their white counterparts.Footnote 21 In what was to become Western Iowa and Eastern Nebraska territory, representatives of Indigenous Nations received in the mid-nineteenth century less than one dollar per acre for land that was almost immediately resold to settlers and speculators for nearer to ten.Footnote 22 State grants of land and credit, the rights to which were backed up by the state’s ability of violent enforcement, allowed railroad system builders to attract even more capital from national and overseas investors.Footnote 23 Conquest provided starting capital.
Conquest via racialized violence was also “an organizing phenomenon from which the state derive[d] its administrative machinery.”Footnote 24 Scholarship on US political development in the nineteenth century has challenged the long-standing consensus that the pre-Civil War American empire-state was weak.Footnote 25 David Ericson argues that the antebellum federal government grew and developed in the context of enforcement of the enslavement of African Americans, including the employment of enslaved workers on government projects, well before the passage of the Fugitive Slave Act in 1850.Footnote 26 Between the War of 1812 and the war with Mexico in the 1840s the longest and most expensive engagement of the US Army was fought in the Lower South, in what is now Georgia, Florida, and Alabama—states that Matthew Karp describes as “largely the creation of US military power.”Footnote 27 These long wars against the Creek and Seminole Nations were especially intense, Ericson explains, because they combined the enforcement of institutionalized enslavement of African Americans with the coerced transfer of Indigenous land. Administrative structures formalized by the Department of War after the War of 1812 were tested during this period, in which the building of fortifications and roads in Florida and Georgia by soldiers and slaves was an important part of the Army’s work.Footnote 28 The invasion of Mexico in the 1840s, which many Americans correctly identified as an imperialistic effort to extend slavery into the Southwest, provided the theater for the greatest imperial-military and logistical triumph of the antebellum US Army. Seasoned quartermasters used tested organizational procedures and skills to efficiently supply US troops in that conflict, securing US claims to sovereignty coast-to-coast.
William Adler demonstrates that the staff departments of the antebellum military achieved a significant degree of professional expertise and autonomy from the disruption of party politics through the leadership and administrative bureaucracy-building of the War Department. Until the advent of the railways, as Samuel J. Watson observes, the army was “by far the largest, farthest flung, most internally articulated, and most expensive full-time organization in the United States,” requiring “greater administrative rationality and managerial capacity than any other organization in the nation.”Footnote 29 Adler concludes that the military provided not only the “assertion of national authority that was a precondition for a national market” but also a model of “central state apparatus in this period which in many ways resembled modern bureaucratic forms.” In the process of devising more efficient ways to deliver violence across a continent, the early nineteenth-century US military “helped to spread new management techniques to the private sector,” techniques that would form the core of the modern corporate form.Footnote 30
Evolution of the Army as a Force for Domestic Empire
Administrative Innovation in the Imperial Military: The Generation of 1815
Leadership within the Department of War reformed the military’s administrative machinery in response to logistical failures of empire-building at the nation’s start. Following the American Revolution, the inadequacy of roads for troop transport to the interior became increasingly apparent when a combination of state militia and US Army regulars suffered a series of early defeats in the lands Northwest of the Ohio River, hampered by defections and the difficulty of moving troops and artillery through swampy ground. Following the close of the War of 1812, those acquainted with the difficulties called for increased financial support for the regular US Army, both as a standing professional force and as a leader, through its Corps of Engineers, in infrastructure building.
Among those at the forefront of this call were four members of what American historians identify as the “Generation of 1815”: South Carolinian Congressman and US Secretary of War from 1817 to 1825, John C. Calhoun; West Point Superintendent from 1817 to 1833, Sylvanius Thayer; Quartermaster General from 1818 to 1860, Thomas S. Jesup; and Commanding General of the US Army, Winfield Scott, whose career stretched from 1808 to the start of the Civil War. Together they built an organizational hierarchy that succeeded in managing huge amounts of capital and labor over a vast territory for the purpose of empire-building, well before the railroads were formed. As head of the Department of War and then Vice-President, Calhoun was at the center of the modernization of the military and of the management innovations that were to influence large enterprises, public and private, throughout the nineteenth century.Footnote 31
Calhoun’s government career was directed toward the building of a nation of white citizens, as he stated clearly late in his life, the United States had “never dreamt of incorporating into our Union any but the Caucasian race—the free white race…Ours, Sir, is the Government of a white race.”Footnote 32 As Secretary of War from 1817 to 1825, Calhoun is remembered by historians of administration as a talented innovator. As J. P. Clark writes, after his appointment in 1817 Calhoun “dedicated his eight-year tenure to building an effective federal military bureaucracy” with all the characteristics of modern management identified by Chandler. Calhoun
rationalized administration by creating a comprehensive structure of staff departments (also called bureaus), such as the Quartermaster, Subsistence, and Medical. Each bureau had a chief located in Washington who was directly responsible to the secretary of war and available to him as a technical advisor. These chiefs presided over a network of subordinate staff officers, who in time became experts with decades of experience in their functional specialty. Improvements came rapidly, as everything from personnel records to artillery pieces were standardized, and the War Department was able to keep pace with the demands of an expanding country. The military was the most complex and far-flung organization in antebellum America.Footnote 33
As historian Todd Shallat describes, Calhoun “did for the army what Hamilton and Gallatin had strived to achieve at the Treasury Department: he virtually abolished a massive debt, and with a handpicked general staff he reorganized the department so a leaner, more efficient army could rapidly expand.”Footnote 34
By the time elite merchants and real estate interests in the Atlantic port cities of the US became interested in building railroads, in the late 1820s and 1830s, the US Army already evidenced the key characteristics of “modern business enterprise” as defined by Chandler: a multiunit organization coordinated by a hierarchy of professional, salaried, career-oriented middle and top managers.Footnote 35 In creating its internal hierarchy, the Army was attempting to address the same principal-agent problems that the railroads would face, but decades earlier. Many of Chandler’s other marks of modern enterprise were apparent in the military as well; for example, regarding the separation of management and ownership characteristic of the corporate form, military managers had no formal ownership claim on the enterprise of violence production (in terms of property claims on returns) superior to any other citizen—in fact, “ownership” of the military was far more diffuse than that of a corporation owned by shareholders. The military had more permanence than a corporation; its managing officers were just as or more likely to be career-oriented as the officers of a corporation, to be promoted according to a formal system of evaluation, to be technically trained, and to be interested in the long-term health and growth of the organization. Aside from the church, the Army was the only institution in the early nineteenth-century United States that offered lifetime employment, a concept that the railroads would later emulate.Footnote 36
Centralization, Professionalism, Hierarchy
The reforms of the Generation of 1815 included all the organizational structures and procedures described by Chandler as essential to modern corporate management, including increased centralization, functional specialization, and delegation of authority; the further professionalization of management; and the establishment of an elaborate hierarchical structure of bureaucratic coordination.Footnote 37 To centralize control, Calhoun required that the newly appointed heads of the Army’s support bureaus, accountable for the performance of all those under their jurisdiction, locate their headquarters in Washington, D.C. As Calhoun explained to Congress in 1818, this provided every department of the army with “a proper head who, under the laws and regulations, is responsible for its administration. The head of the [War] Department is thus freed from detail and has leisure to inspect and control the whole of the disbursements.”Footnote 38 As administrative historian Leonard D. White recounts, Calhoun’s reformed bureau system meant “specialization of function, separately organized as such, with assigned authority to operate under the general oversight of the head of the department…[with] the appointment of officers who had the competence and staffing to take responsibility for making decisions under a broad delegation of authority.”Footnote 39
Post-War of 1812 reforms were also characterized by the increased professionalization of the officer corps of the U. S. Army. As Wilson points out, during this period “the military was one of the few institutions that had established a formal organizational hierarchy with well-defined occupational ranks” that provided a path for advancement via the development of field-specific skills—“a defining feature of a professional career.” Most staff officers were graduates of West Point, and most West Point graduates spent their first post-Academy years on the Western or Southern frontier. Future Quartermasters got their on-the-job training in the “trans-Mississippi West, where they coordinated the logistics of a continental empire.”Footnote 40 Officer service generally tended to be long, with an officer corps retention rate of about 90% per annum between 1821 and 1860, a rate “unparalleled in any other institution, organization, occupation, or profession in the United States at that time.”Footnote 41
Improving officer training was a key component of post-War of 1812 reforms. As Calhoun wrote to Major General Jacob Brown in 1820, “the progress of military science has not added much to the difficulty of performing the duty of the soldier or of training him, but it has greatly [added] to that of the officer. The great and leading objects…of a military establishment in peace ought to be to create and perpetuate military skill and experience, so that, at all times, the country may have at its command a body of officers, sufficiently numerous, and well instructed…”Footnote 42 In this goal Calhoun was greatly assisted by Superintendent of West Point Sylvanius Thayer, who standardized the Academy’s curriculum, increasing the rigor of the program and enforcing hitherto ignored entrance requirements. Hoskin and Macve have described the rigorous system of self-surveillance, reporting, and examination that Thayer set up for the cadets at West Point, including as Watson notes an “organizational hierarchy” within the Academy designed to “give graduates training in the processes of command and administration.”Footnote 43 As Clark writes,
Thayer’s work thus complemented that of his contemporaries who were standardizing other parts of the army. Calhoun recognized this and codified the practice of granting commissions first to West Point graduates before turning to any other source of candidate. His War Department required well-educated, numerate staff officers, just as Scott’s regulations [see below] required disciplinarians to enforce them. By the last years of Thayer’s superintendence, West Point was already so central to the American military profession that Alexander Macomb, the commanding general, called it ‘the very foundation of the whole Army.’Footnote 44
The Generation of 1815 reformed the Military Academy at West Point to provide the US Army with officers schooled in instrumental rationality: as Watson notes, “Accountability demands the ability to count, and few Americans possessed this ability to so great a degree as West Point graduates” of the 1820s and 1830s. Thus, prior to the Civil War, “army logistics and administration must be recognized as among the most advanced, and most effective, in pre- and early industrial America…Buttressed by the disciplines of drill and inspections, the mathematical rationality instilled at West Point encouraged timeliness and a habituation to and integrity in reporting—the regularity, or more broadly the accountability by which officers often judged one another and were judged by Congress.” Training at West Point provided an “instrumental rationality particularly essential for what [Army engineer William H.] Swift labeled ‘a corps of instructed administrative officers to serve as a nucleus upon which may be predicated any necessary force.’”Footnote 45 General Winfield Scott claimed that the overwhelming success of the Army in the 1840s war with Mexico—the war that brought most of the West under the jurisdiction of the US Government—would have been impossible without the improvements in efficiency brought about in the post-1817 years as a result of improved officers’ training at West Point.Footnote 46
In addition to centralizing the Army’s top staff in Washington and promoting the professionalization of the officers, Calhoun and the bureau chiefs established an elaborate hierarchical structure of bureaucratic coordination. The Army structure that Calhoun inherited already included organizational characteristics later seen in the railroads, including the use of geographical divisions, functional staff departments, and the delegation of authority from headquarters staff to field superintendents on the line. From the beginning of his tenure as Secretary of War, Calhoun confronted the benefits and challenges that hierarchical organization produced. Calhoun was positioned at the top of the hierarchy, reporting to the President and Congress much as the General Superintendent of a railway corporation would report to the President and Board of Directors. Under this civilian leadership, the Army itself was organized into two geographical divisions, North and South, with a commanding general at the head of each division. Within these two divisions were several geographical subdivisions, the leadership of which reported to the commanding general. Parallel to this hierarchy were the functional staff departments: Engineer, Ordnance, Quartermaster, Commissary, Adjutant and Inspector General, Surgeon General, and Paymaster General, whose personnel in the field reported through a parallel upward ladder of superiors to the heads of their departments in Washington.
Problems of coordination and conflict of authority between functional and regional hierarchies later experienced by the railroads arose early in Calhoun’s tenure at the War Department, most famously in a disagreement between the War Department and Southern Division Commander Andrew Jackson in 1817. As commander of a regional division, Jackson became incensed when an Army engineer Jackson had assigned to survey the Upper Missouri River was, unbeknownst to him, recalled to New York by Calhoun’s predecessor, acting Secretary of War George Graham. Jackson threatened to resign over this abrogation of his regional command. In response, Calhoun drafted new rules that maintained the authority of functional bureau or department leadership over officers assigned to the line while at the same time setting up a procedure for the issuance of orders that ran regular channels of communication from headquarters through regional division commanders and subcommanders—a compromise much like that forged by the railroads decades later.Footnote 47
The development of a modern bureaucratic structure for the military also required the establishment of formal written rules for coordinating multiple hierarchies, units, and agents of violence production. Under Calhoun “all areas of the military establishment…witnessed quiet trends toward uniform, depersonalized procedures,” including the drafting of rules for all staff departments headquartered in Washington.Footnote 48 In 1821 the US Army published a manual of rules and regulations for both staff and line—another feature of bureaucratic organization that railroads were soon to utilize. The General Regulations for the Army was assembled at Calhoun’s direction by Brigadier General Winfield Scott, a veteran of the War of 1812 who “would go on to become one of the most distinguished soldiers in American military history.”Footnote 49 In creating the manual Scott drew on his war experience and his study of European and especially French military schools, where training in mathematics and engineering was emphasized and administrative procedure was well-developed. The Regulations included not only detailed specifications of hierarchies of command and communication but also accounting procedures for the receipt and use of money and supplies, via elaborately detailed, preprinted forms for officers to use in the monthly, quarterly, and yearly reports that the manual mandated in detail. These forms were an important part of Army officer service, as Watson observes, “most officers spent substantially more time filling out forms than drilling troops.”Footnote 50 They were also used in the construction of the earliest railroads, as described below.
Military Precursors of the Railroads: Engineer and Quartermaster Departments
The Army officers Congress sent to the railroads after the passage of the General Survey Act were a part of the US Army’s Engineer Department, which like the other functional departments or bureaus of the Army benefitted from long-tenured reformist leadership, professional training, and standardized rules and procedures. From 1829 to 1861, the Corps of Topographical Engineers, from which several chief engineers of railroads were recruited, was headed by Lieut. Col. John J. Abert, another member of the Generation of 1815. “Topogs” trained at West Point were uniquely skilled, since up to 1824 no school other than West Point provided formal training for engineers, and Rensselaer (one of the earliest civilian engineering schools) graduated only seven in its first fourteen years, 1824–1838.Footnote 51 While West Point graduates were by no means the only men working as skilled engineers in the early nineteenth-century United States, the Army was a leading source of formally trained engineering talent. As Adler notes, “Men such as [Quartermaster General] Jesup and Abert developed for their bureaus standing as neutral, professional experts who were providing the best technical advice available to policymakers” like Calhoun and Congress—and to the organizers of the earliest railroads, several of which, like the Baltimore and Ohio, were to become models for the rest.Footnote 52
Aside from the Engineer Department, among the most important of the functional departments to benefit from the innovations of the Generation of 1815 was the Army department most overlapping in function with the railroad corporations, which achieved a scope and sophistication of administration that rivaled or surpassed them for decades. The Quartermaster’s Department, headed for over forty years by General Thomas Jesup, was responsible for the procurement, transportation, inspection, and distribution of Army supplies (in cooperation with the Commissary General) and held overlapping responsibilities with the Engineer Department in the provision of troop transport infrastructure. As Wilson argues, this bureau would “emerge, by the 1850s, as one of the largest organizations in the United States. Few organizations of any kind could match the size of its budget, the complexity of its administration, or the geographical range of its operations.” In the mid-1850s, the decade that Chandler and others describe as the heyday of US railway expansion, the Pennsylvania Railroad (PRR) reported operating expenditures of about $2.5 million, when the annual budget of the Quartermaster’s Department alone was over $5 million. In 1864, the Quartermaster’s Department employed more than one hundred thousand civilians, “making it far and away the largest single employer of civilian labor in the United States.”Footnote 53
Even prior to the War of 1812 and the administrative reforms that followed, the Quartermaster’s Department had grappled with the boundary-setting questions that organizational scholars would discuss in relation to the firm: when to pay outside contractors for Army supplies, for example, versus hiring civilians to produce supplies as employees; how to prevent workers from learning skills on the job and then resigning their positions to seek better pay elsewhere; how to create uniform reporting procedures to keep track of agents’ use of organizational assets and discourage opportunism.Footnote 54
As a member of the reformist generation, the Kentuckian Jesup ran the Quartermaster’s Department according to the rules and procedures laid out in the 1821 Army manual and its revision in 1825, both of which included his input. A look at the rules for officers of the Department indicates the continuity between the work of its officers in providing transport of Army supplies and troops and that of employees of railroad corporations, for example, station agents and conductors. Paragraph 984 of the General Regulations stipulated that “Quartermasters at the intermediate stations between the places of receipt and delivery [of Army supplies] will be held responsible for the safe and prompt transmission of all articles from their respective stations.” Paragraph 985 provided that “with each quantity of stores conveyed, the quartermaster of the post from which it is sent, shall, if he deem it necessary, furnish a conductor, who shall have charge of it, and for whose conduct, in the safe keeping and delivery thereof, the quartermaster shall be responsible.” Paragraph 985 required that an invoice accompany any articles shipped and that a bill of lading be forwarded both to the quartermaster and to the receiving officer for whose command the shipment was intended. Other rules stipulated that no officer have a personal financial interest in business with the Army, maintaining the separation of management and ownership, and laid out detailed procedures and forms by which quartermasters in the field must render their accounts, on a regular quarterly schedule, with examination by the quartermaster general and transmission to the property accounting officer of the treasury department.Footnote 55
Efficient management of the means of war proved essential during the decades of US expansion in the South and West. As historian Erna Risch describes, in the mid-1830s extensive armed conflict with the Seminole and other Indigenous Nations “afforded an opportunity for testing the effectiveness of the [Quartermaster’s] Department’s regulations and the efficiency of its personnel…Florida was the training ground that provided an experienced cadre of quartermasters to man key supply posts during the Mexican War.”Footnote 56 By 1847, at the height of that war, the Quartermaster’s Department was managing a wartime budget of around $22 million and employing thousands of civilians in clothing-making alone while the Pennsylvania Railroad was in its first year of construction.Footnote 57 That Jesup saw these triumphs of modern management as part of an imperial project is illustrated by his “proud assertion” in his 1847 report to Congress that “‘with our depots farther from the sources of supply than Algiers is from Toulon or Marseilles, we accomplished more in the first six months of our operations in Mexico, than France, the first military power in Europe, has accomplished in Africa in seventeen years.’”Footnote 58
In sum, for at least the first two decades of railway development in the United States, from the late 1820s through the late 1840s, it was the Army and not the railroads that developed and employed the largest, most sophisticated bureaucratic organization to produce a vital economic service: violence in pursuit of continental imperial expansion. As Wayne Wei-siang Hsieh argues, “only a regular army [and not the unprofessional militias on which early republicans hoped to rely] could defend the American nation-state.”Footnote 59 Numerate, trained career professionals coordinated distant independent units of production, using standardized procedures and an articulated chain of communication and command. If hierarchy, careerism, and coordination by nonowner managers are the defining marks of modern management, it was administrative innovators from the extremely hierarchical world of the national military that produced the structure that the first national industry of vertically integrated corporations—the railroads—adopted.
Military Influence on Management and Organization in the Early US Railroad Corporation
Alfred Chandler argued that railway management’s military origins, though undeniable in the cases of early roads like the Baltimore and Ohio, ceased to matter by the 1850s when railway building boomed and many existing lines underwent changes in management—changes that Chandler claimed were created de novo by the railway managers of that decade. Chandler argued that the divisional form of organization was an innovation of uniquely American origin that allowed for a “flexibility of control and a decentralization of decision-making that made possible more effective handling of traffic over tracks hundreds of miles long and as many miles away from the central administrative office.” The railway officers who created these innovations Chandler described as “the first technologically trained administrators to American business, men who completed engineering training and then rose up the managerial ladder, making a lifetime career of railroading.”Footnote 60
As I have been endeavoring to show, however, divisional structure and delegation of authority were present in the military well before they were used in the railroads, and the “rational and analytical” mindset that traveled from the building of structures to the building of organizations was first cultivated in the US military in the building of a domestic empire. In some of the earliest and most influential US railroad corporations, it was Army engineers who brought this mindset to the railroads. In this final section, I will briefly discuss four railroads whose 1840s and 1850s management Chandler identifies as having created the corporate form, and then show how each of these managements was in fact importantly influenced by the military.Footnote 61
Origins of the Railroad Corporation: Army Influence on the B & O Railroad
The first of the railroads to benefit from the 1824 passage of the General Survey Act that lent Army engineers to privately-owned corporations was the great early trunkline and model to other railway builders, the Baltimore and Ohio Railroad (B&O). By 1835, the editor of the American Railway Journal referred to the B&O as the “Railroad University of the United States,” as many later railroad builders used its organization as a template for their own.Footnote 62 Chandler credited the B&O with being the first to separate the financial concerns of the railway from its production of transportation services through the creation of separate functional departments—something that the military had done decades earlier in its separation of the Departments of War and Treasury.
After the passage of the General Survey Act, three brigades from the US Army’s Engineering Department were sent free of charge to the newly organized Baltimore & Ohio Railroad corporation in 1827 to survey potential routes. In the course of their work, the Army engineers provided regular reports to the company’s board of directors using the forms prescribed in the 1825 update of the General Regulations. The reports sent to the board by the surveying parties contained “essentially the same information, submitted in the same format, as the data used by the Corps of Engineers to conduct its operations.”Footnote 63 Two of the three Army brigade captains, Lieutenant Col. Stephen H. Long and Captain William G. McNeill, became members of the railroad’s new Engineer Department tasked with planning construction.
The structure and principles that Army engineers designed for the administration of the “big business” of railroading, including importantly the line and staff distinction and the transmission of regular data on operations and expenditure from the field to the central officers, were a part of the 1825 Army manual rules that the Corp of Engineers took with them and applied to their work for the railroads. As O’Connell argues, “The system of accountability Calhoun installed, and the bureaucratic means by which this accountability was enforced, would be among the most important parts of the military management system later borrowed by the business community.” When, for example, the B&O’s board of directors needed to devise a plan for moving from planning to construction of the railroad, the corporation’s president and Baltimore banker, Philip E. Thomas, turned to Captain McNeill to draft regulations which McNeill later said were modeled upon (and sometimes directly copied from) the printed regulations of the US Army Engineering Department, even stipulating that company engineers use the forms provided in the Army manual “until other forms shall be prescribed.” O’Connell’s research shows that these regulations were officially adopted by the board for the Engineering Department of the B&O in 1828.Footnote 64
The same research shows that President Thomas was so impressed with the business management possibilities of McNeill’s draft that he wrote to Army Chief Engineer Alexander Macomb, asking him to forward suggestions for accounting procedures for the company. Macomb forwarded a copy of the Army Engineering Department regulations. As O’Connell reports, Macomb argued that if the B&O were to follow army reporting practices, the directors would “at all times have the means of judging accurately of the state of their affairs and the progress of their work.” The rules approved particularly emphasized financial accountability and economy in the disbursement of funds for operational expenses; as O’Connell writes, “the system of personal and financial accountability was in all major respects identical to the system used by the Corps of Engineers.”Footnote 65
In 1847 the B&O adopted a new organizational manual authored by Benjamin H. Latrobe, Jr., whom Chandler credits for “set[ting] up one of the very first functionally departmentalized, administrative structures for an American business enterprise.”Footnote 66 Son of the famous architect, Latrobe, Jr. was a lawyer by training who received his engineering education after his father’s death, working in the engineering department at the B&O.Footnote 67 When Latrobe started at the “University of Railroads” in 1830, the B&O was operating under the influence and procedures of military men. A comparison of the 1847 structure he created and the 1825 General Regulations for the Army shows that the same basic strategies of divisionalization, departmental specialization, and hierarchical delegation of authority supported by a regimen of reporting and accountability were all present in both documents and that Latrobe’s revision was less of an innovation and more of an augmentation of the system already created by his Army veteran predecessors.Footnote 68
Army Influence on the Western, Pennsylvania, and New York & Erie Railroads
The Army’s influence soon spread beyond the work of its engineers on the “Railroad University of the U. S.,” as Captains William G. McNeil and William H. Swift (another Army officer assigned to the B&O) went to work at the influential Western Railroad in Massachusetts in 1836. Lieutenant George W. Whistler, an 1819 West Point graduate and experienced Army engineer, spent 14 years on Army topographical duty (the last five on railroads including the B&O) before joining the Western as a consulting engineer in 1836. These three Army engineers collaborated on the first known book of rules specifically for American railroads, Regulations for the Government of the Transportation Department of the Western Railroad, published in 1840.Footnote 69 The Regulations of the Western, like those of the B&O, were patterned after those of the Army’s Engineering Department.
Following a series of dramatic accidents in the 1840s, Whistler (who by that time had resigned his commission and been promoted to chief engineer) created at the Western a divisional structure and reporting regime that accounting historians Hoskin and Macve argue were modeled after Thayer’s reforms at West Point.Footnote 70 Angevine thinks that Whistler was inspired by his experience with the Army Corps of Engineers, but concludes that “in any case, the military influence is clear.”Footnote 71 The reforms that Whistler laid out in the 1841 “Report on Avoiding Collisions and Governing the Employees” of the Western Railroad represented what Chandler identified as “the first modern, carefully defined, internal organizational structure used by an American business enterprise.”Footnote 72 In 1846, President Gadsden of the South Carolina Rail Road referred to the Western as “among the best managed Roads in the United States,” using its operating ratio as a benchmark of efficiency by which to compare that of the SCRR.Footnote 73
A similar military influence operated on the Pennsylvania Railroad under the leadership of J. Edgar Thomson. On the Pennsylvania, Chief Engineer and later President Thomson worked closely with West Point graduate Herman Haupt to create a complex line and staff management and detailed reporting and accounting system that Hoskin and Macve argue was inspired by Thayer’s system at West Point and primarily the work of Haupt, who became the railroad’s first superintendent of transportation in 1849.Footnote 74 Though Thomson did not go to West Point (his biographer writes that he wished to go but did not have the means), he received his first exposure to railroad work under the close direction of a career Army officer, Major John Wilson, another member of the Generation of 1815.
A South Carolinian, Wilson served in the War of 1812 and was commissioned as a US topographical engineer. Recommended first by John C. Calhoun for employment on fortifications in Charleston, in the late 1820s Wilson was contracted by the canal commission of the state of Pennsylvania (of which Major D. B. Douglass, professor of engineering at West Point, was a member) to survey a route for what would become the Philadelphia and Columbia Railroad, a part of the state’s Main Line system.Footnote 75 Thomson got his first railroad job as a rodman for the survey party led by Wilson and, and when Wilson became chief engineer of construction, worked under him as assistant engineer. The two also surveyed for another important early railroad, the Camden and Amboy Railroad of New Jersey. Both railroads later became part of the PRR system.Footnote 76 Though Wilson died in 1833, his southern connections likely helped Thomson secure a position as chief engineer of the Georgia Railroad in 1834, where, by insider investments in land and railway development in that state, Thomson made enough of a fortune to no longer need to work for a living. As both engineer and agent of the Georgia Railroad, Thomson advocated for the employment and purchase of enslaved laborers, where according to his biographer he “attended to the details of working the bondsmen” and “recognized the immense value of the system in stabilizing the supply of well-trained workers.”Footnote 77 Thomson left the Georgia Railroad to become the chief engineer of the Pennsylvania Railroad in 1847.
From the start of his time at the PRR, Thomson worked closely with Haupt to create an organizational system that showed heavy influence from existing Army practices. Operating like the Army engineers under whom he first worked, upon arriving at the PRR Thomson divided the road into eastern and western divisions, each “led by an associate engineer with principal assistants for each 30-mile segment, and sub-assistants for each 10-mile sub-segment.”Footnote 78 When the newly organized railroad needed a formal organizational system for operation, Thomson sent Haupt on the common tour of existing New England railroads, including the Western, to “collect information on their equipment and management practices.” On his return, “the two men roughed out a highly centralized plan of organization which drew heavily on Haupt’s information and Thomson’s prior experience on the Georgia Railroad.”Footnote 79 It was Haupt who drew up a final document and submitted it to the Board of Directors, who approved it in 1849 and again in 1852 with additions provided by Haupt.
Chandler argues that it was not until the 1859 edition of the Organization for Conducting the Business of the Road, submitted to the Pennsylvania’s board after Haupt had left the railroad, that the management demonstrated the advanced implementation of divisionalization, delegation, and hierarchy that Chandler credited to Thomson alone. But as Hoskin, Macve, and O’Connell agree, Haupt’s 1849 version already included these innovations, along with a detailed accounting system probably influenced by Thomson’s work at the Georgia Railroad but still reflective of the systems already in place within the Department of War and particularly within the Quartermaster and Engineering Departments.
Even at the New York and Erie Railroad, where in the 1850s General Engineer and Superintendent Daniel C. McCallum created what Chandler identifies as one of the earliest corporate organizational charts,Footnote 80 the management structure and principles employed by McCallum reflected a philosophy and practice that had existed in the US military for decades. As McCallum noted in a long passage of his 1856 Report cited by Chandler, the growth of the railroads during this period to cover hundreds of miles of territory created management problems not yet faced by the owners of private enterprises, but with which (though McCallum did not note this himself) the US Army had long been engaged. To address these problems, McCallum took the steps—new to business but familiar to the military—of dividing the New York and Erie into six geographical “divisions” and creating a management hierarchy reflective of six principles: “proper division of responsibilities,” “sufficient power conferred to enable the same to be fully carried out,” “the means of knowing whether such responsibilities are faithfully executed,” and “great promptness in the report of all derelictions of duty…such information to be obtained through a system of daily reports and checks”Footnote 81: all principles at the heart of Calhoun’s earlier reforms.
The similarity of the principles and even the language of McCallum’s report to that of Calhoun and the 1825 General Regulations for the Army is striking. Sounding like Long and McNeill—the two Army engineers who in the late 1820s experienced pushback from the merchant and banker board members of the B&O for the engineers’ insistence on regularity in reporting and procedure—McCallum argued that “In my opinion a system of operation, to be efficient and successful, should be such as to give to the principal and responsible head of the running department a complete daily history of details in all their minutiae. Without such supervision, the procurement of a satisfactory annual statement must be regarded as extremely problematical”—the same argument made by Long nearly two decades before.Footnote 82
Conclusion
The decade of the 1850s saw a boom in railroad track construction, as major east-west trunk lines like the B&O and Pennsylvania completed their planned penetration into the grain-growing regions of the trans-Appalachian West. Chandler argues that the administrative structures and principles laid out in the annual reports of these roads in the mid-1850s were created substantially from scratch by the engineering-trained General Superintendents of the roads; as he writes, “These men did not borrow: they approached their brand-new problems of building an administrative structure in much the same rational and analytical way as they approached that of building a railroad or a bridge.”Footnote 83 Theirs, Chandler argues, was a “rational” approach to the administrative challenges of a business much larger in capitalization and employment than any canal, plantation, or manufacturing enterprise.
In fact, the administrative problems that railroad managers faced were not new, nor was the “rational and analytical” mindset that they applied to solving those problems. Engineers who designed the structures and wrote up the principles that were to become the defining features of American corporate enterprise were many of them West Point trained or had served with one of the Army Corps of Engineers’ survey and construction brigades in the earliest era of railway construction. Even for those like McCallum, who had no obvious experience with the military, the existence of Army practice and organization provided an obvious precedent on which to draw. As late as 1850, the Army’s contribution to railroad building prompted Francis Wayland, president of Brown University, to declare, “The single academy at West Point has done more toward the construction of railroads than all our…colleges united.”Footnote 84 In 1890, the General Manager of the Charleston and Savannah Railway and president of the General Time Commission (the trade organization of railway management, later to become the American Railway Association) made the commonality of problems and solutions in railway and military enterprise explicit. “A railroad system properly organized,” President H. S. Haines argued, “has its staff, field and line officers, its supply departments, its inspectors, its divisions and districts of operation; in a word, it is an army…” Railways were organized like armies, Haines explained, because they faced a common challenge: maintaining control over people and resources across wide expanses of contested territory.Footnote 85 Certainly, the construction and early operation of what were to be major railway lines were overseen by men schooled in or exposed to Army procedures.
My argument here has been that the organizational forms and management procedures adopted by the business community of the early nineteenth century in the construction and operation of the first national corporate industry were of not only military but imperial-military origin, and that this distinction is important for understanding the history and impacts of corporate business enterprise in the United States. Modern corporate management had effects both laudatory (supportive of professionalism and long-term employment for upper-level and later union-represented workers) and destructive (de-skilling and exploitation for excluded workers and the externalization of costs onto communities within and outside the United States). The intensive use of natural and human capital to control costs via their externalization is a feature both of private industry and the military.Footnote 86 Andrew Carnegie pursued this strategy in the serial scrapping of steel production sites, something he could not have done had land and mineral rights not been made “cheap” to developers by the forced removal of Indigenous management.Footnote 87 Regarding the using up of human capital, political scientist Karen Orren notes that the characteristic of modern management Chandler identified as most responsible for the superior “efficiency” of the corporate form: its “more intensive use of facilities and personnel employed in the processes of production and distribution,” could be maximized wherever the master-servant employment relation that marked American labor relations before the unionization of the railroads remained unchallenged by law and custom—as it was for nonwhite, nonmale railway workers who were long barred from many railway unions. As Orren writes, “Though it was a much older institution, labor relations under the old regime, by which the worker was tied by law and exigency to his job, may in this light be seen as the original ‘economy of speed.’”Footnote 88
This article raises several questions for future research. First, what is the relationship between “corporatization” as Chandler and Perrow describe it: a multiunit enterprise coordinated by career managers (Chandler) that concentrates wealth and power through the exploitation of workers and communities (Perrow) and imperialism as Go defines it: “a transnational formation by which political power is unequally exercised over weaker populations deemed and treated as inferior”?Footnote 89 What part did the radically asymmetrical distribution of exposure to and protection from violence, exercised within a vast geographical market space under a single federal jurisdiction, have on the development of the American corporation as a new and unique coordination mechanism of production? When the military and the railroads employed enslaved laborers (as Thomson did on the Georgia Railroad), how did the management of those laborers differ from that used with free? Was it more “corporate,” and in what ways? Further investigation of the operations of the Quartermaster’s Department and early railroads in the South may help to answer some of these questions.
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