The Traditional Enterprise in Production: The Expansion of Prefactory Production

In 1790 nearly all the families who raised or processed crops or goods lived on the same premises on which they worked. The largest group of producers who lived and worked in the same place were, of course, the farmers, who accounted for close to 90 percent of the labor force in 1790. In the early nineteenth century the family farm which produced crops for the market also raised much of its own food and manufactured its own furniture, soap, lye, candles, leather, cloth, and clothing.2 In fact, goods manufactured in the home were often sold to neighbors and nearby towns. In 1810 the secretary of the treasury, Albert Gallatin, estimated that “about two-thirds of the clothing, including hosiery, and of the house and table linen, worn and used by the inhabitants of the United States, who do not reside in cities, is the product of family manufactures.”3

In the seaboard cities and the small towns of the interior, manufacturers were largely artisans who lived above or near their shops.4 They worked at a specialized trade such as the making or processing of cloth (spinners, weavers, tailors, and makers of stockings, gloves, hats, and sails), leather (tanners, shoemakers, and harnessmakers), wood (makers of furniture, carts, wagons, carriages, paneling, and clocks), metals (smiths of gold, silver, copper, tin, blacksmiths and whitesmiths, gunmakers and iron- mongers), or clay and glass. Some artisans, especially journeymen who had not yet set up their own establishment, became itinerants during the warmer months, traveling from village to village and farm to farm in the practice of their trade.

Those few producers who worked outside the home lived in the towns and were concentrated in the building trades, constructing homes, ware-houses, commercial edifices, ships, and wharves. They too were artisans— painters, carpenters, masons, shipfitters, riggers, caulkers, and the like. Normally their work was supervised by a master carpenter or shipbuilder. In the ports, ropewalks and copper-sheeting works supplemented ship construction. Like the small city breweries, rum and sugar refineries, and tanneries, they were usually operated by a master artisan and a small number of assistants.

Other industries were rural in nature and often tied closely to farming. Lumbering and potash making remained primarily part of the process of land clearing. Farmers became lumbermen in the winter, providing wood for fuel and lumber for the growing seaports and for the West Indian trade. Trapping, too, provided additional “cash crop” for the frontier farmers. However, until the expansion of John Jacob Astor’s American Fur Company, after 1815, large-scale fur trading in the United States was dominated by the British in Canada. After 1815, Astor’s fur company carried out trapping on a continental scale, but its trappers were working in areas that were not yet settled by American farmers.

Until the 1840s mining continued to be carried out on a small scale. Before the opening of the anthracite fields in Pennsylvania, the only place coal was mined extensively in the United States was along the James River in Virginia.5 There much of the mining was done by farmers and planters who leased pits. As early as the 1790s, however, a few large enterprises employed as many as forty miners, usually slaves, supervised by an overseer or two. The total output of the James River coal mines remained small and was for many years measured in bushels rather than tons. In the years after 1790, iron mining continued to be carried on as part of iron processing in the rural iron plantations. These iron plantations worked largely by slaves and indentured servants were, before the coming of the integrated textile mills, the largest industrial enterprises in the United States. Lead mines in the frontier districts of Missouri, Wisconsin, and Illinois were leased out under government supervision to individuals or partnerships who rarely employed more than a score of men. No copper was mined in any quantity until after 1840, and what little gold and silver was extracted was done so largely by individuals rather than partnerships.

Of the three ways to expand output in manufacturing or processing— the enlargement of existing shops with the traditional work force, the “putting-out” system, or the use of machinery and other capital equipment—the first was used primarily to meet local demand. After 1790, the artisans enjoyed growing local markets and had access to local supplies of yarn, leather, and wood and easily obtained cloth and metal from importers of British products. Although they became somewhat more specialized, they expanded their output to make their suits, dresses, hats, furniture, tableware, copper, brass, and pewterware by employing more apprentices and journeymen who continued to work in the traditional manner with traditional tools. The same could be said for the makers of sails, ropes, and glassware, and rum, whiskey, and beer. In all these trades new machinery was not extensively developed or used before the 1840s. The enlarged shop was still a small personal enterprise. Work continued to be done in or near the home of the master who remained responsible for feeding and housing his apprentices and journeymen.

In the same way, the building and construction enterprises expanded to meet the growing demand by employing and training younger craftsmen.6 As the cities grew, master carpenters and builders often contracted to construct a series of houses at one time, and so kept a number of journeymen and apprentices at work under their direction.7 This was the case, too, in shipbuilding, where master shipwrights took charge of bringing together and supervising a group of skilled shipwrights, riggers, caulkers, and the like. Contractors, who took over the task of laying down and paving city streets, worked in much the same manner as those who were building turnpikes and canals. They were small local contractors using local labor. Normally an engineer or a city official supervised the work of these contractors. Their workers continued to use traditional tools and skills.

Where artisans, shipbuilders, and building contractors expanded their output to meet growing local demand by adding apprentices and journey- men to their work force, those producing for distant markets turned to putting-out work to be processed by workers in their homes, a method of production widely used in Europe. To produce the needed volume, an artisan or a merchant would purchase materials—yarn, leather, cloth, wood, or metal—deliver them to workers in their homes, pick up the completed article, and then arrange for its sale, either outright or, more often, on commission to merchants in the nearest major port or commercial center. In the 1790s, shoes, straw hats, lace, stockings, other clothing, woven cloth, chairs, clock cabinets, other furniture, cards for cleaning wool, and nails were produced through putting-out to households. Of these, shoes and chairs were the items made on the largest scale for distant markets.

The history of the shoe industry best illustrates how the putting-out system in the United States evolved to meet a growing demand.8 From the late eighteenth century until the 1840s, shoes for markets in the West Indies and then in the south and west were produced in homes or on farms. After the turn of the century, an increasing number of specialized workers received leather, thread, and other supplies from a merchant or a master “cordwainer.” The makers of shoes carried out their tasks in tiny shops attached to their homes (mostly farmsteads), known as “ten footers.” As the demand expanded in the 1820s, the entrepreneurs tried to supervise and coordinate production more effectively by setting up a “central shop.”9 There, the leather was cut into soles and the upper part of the shoes. The latter was sent out to out-workers. After the completed uppers came back to the shop, they and the soles were sent out to other workers, the “fitters,” who completed the shoe.

Under this system, shoemaking was all done by hand, at the individual’s own time and pace. “Up to the forties,” Blanche Hazard, the industry’s leading historian has written, “the shoemaker had used mainly [hand] tools, and just such as had been used for centuries . . . The domestic worker had enjoyed all the latitude that he needed or wished. He sowed his fields and cut his hay when he was ready. He locked up his ten footer and went fishing when he pleased, or sat in his kitchen reading when it was too cold to work in his little shop.”30 In the forties, improved metal machinery began to replace the older, traditional tools, and, in the fifties, the invention of steam-powered, relatively expensive shoe-making machines brought the factory form of production to the shoe industry and quickly brought to an end the putting-out system.

In other industries the putting-out of goods in homes was not as wide- spread as in the shoe trade. Leather manufacturing, such as saddlery and belting, continued to be done in the artisans’ shops. In clothmaking, putting-out was used only between the Embargo in 1807 and the adoption of the power loom. How long this system continued in the making of chairs, cabinet work, and other wood products is not clear. It was used in its most simplified form (that is, having the workers make the complete product at home) in the production of straw and palm leaf hats, cloth bonnets, and gloves until well after 1840.11 Indeed, the invention of the sewing machine, though ending its use in the making of shoes, expanded it in the apparel industry. In all these trades, the entrepreneurs sold the finished wares through the wholesaling networks that had developed after 1815 on the east coast to market British goods.12

In the United States, more than in Britain or on the Continent, machin- ery was used oftener than the putting-out system to produce goods for distant markets. Some machines came from Britain; many were developed by Americans, especially New Englanders. Until the 1840s, however, the machines were simple, made largely of wood. Metal was used only in the critical cutting parts or where friction occurred. These machines were, therefore, easily built and repaired by local carpenters, blacksmiths, and tinsmiths, or by the manufacturers themselves. Their initial cost and main- tenance were low. They were nearly all powered by water from small streams. As these streams froze in the winter, flooded in the spring, and often ran dry in the summer and early fall, the volume of the output of the machines they powered was small and varied with the seasons.

The use of machinery came early in the processing of products of the field and forest.13 As early as 1795, Oliver Evans constructed a continuous process flour mill on the Brandywine Creek in Delaware. This mill annually milled 100,000 bushels of wheat into flour. It employed six workers who spent most of their time closing barrels. Similar mills soon appeared along the towns on the fall line, where streams and rivers reached tide water, particularly Baltimore and Richmond. With the opening of the New York and Ohio canals, Rochester and Buffalo in the 1830s and 1840s surpassed the more southern cities as the nation’s leading mill centers. Although output increased, the mills remained small and operated only during and immediately after the harvest season.

Machinery also was used increasingly in the wood and lumber trades. Sawmills employing either imported or locally made saws began to sell to specialized dealers, who in turn marketed lumber for fuel and supplied finished woods to local builders and manufacturers. Such manufacturers used water-powered planes, presses, and simple cutting machinery to make clapboards, flooring, and mill work (paneling, mantels, doors, window frames, and so forth), furniture, clocks, buttons, and other notions, as well as axe and hoe handles, gun stocks, hat blocks, and shoe lathes. Although most such production was winter’s work for local consumption, an increasing amount went for distant markets.

Clockmaking provides a revealing example of the expansion of pro- duction by the application of machinery in the woodworking industries. Here Eli Terry of Plymouth, Connecticut, was a pioneer. After inventing a machine for cutting the teeth of wood clockworks, and another for cutting the leaves of pinions, Terry, in 1806, built a shop twenty feet square, using water conveyed “through a hole six inches square.” After enlarging his shop and developing more machines, ten men and two women were able to produce 1,100 clocks annually; these sold for $25 and $30 apiece. The materials for these clocks could be obtained from nearby forests and fields. Only small amounts of special woods—cherry and mahogany—and brass and glass came from nonlocal sources. Only the weights, pendulum bob, and crown wheel were made of brass.14 Other Connecticut clockmakers soon followed Terry’s lead. By 1820, similar small manufacturing establishments in the Bristol-Litchfield-Waterbury area of the state were producing 15,000 clocks a year. Comparable production by machinery in small shops became quite widely used in the making of chairs and other furniture, buttons, combs, and notions. In southern New England machine-made products often replaced hand- manufactured items.

The example of Eli Terry and of others manufacturing by means of fabricating and assembling wooden interchangeable parts suggest the scale of operations in the woodworking industry before the 1840s. The work force was tiny—a dozen or so people—power came from small streams, materials were close at hand, and those few items that came from a distance were required in only small amounts. While the output of a mill greatly exceeded that of a single artisan, or that of a number of home workers, it still could be easily marketed by a few peddlers, who drove their carts as far west as Buffalo and as far south as Richmond, selling to farmers and to general stores along the way. As the number of producers increased in the 1820s, the clockmakers and woodmakers continued to use peddlers, but relied increasingly on local merchants and distant storekeepers to sell their goods and to provide credit. By 1840, clocks came to be sold almost entirely through commission agents and then jobbers in New York and other eastern cities.

Metal products were manufactured and sold in much the same way as wood products. Buttons, razors, cutlery, locks, pots and pans, and other consumer goods were produced for consumer markets in small shops using simple but specialized cutting, stamping, and polishing machinery.15 The metalmakers also sold through peddlers and then through commission agents and jobbers in New York and other eastern ports.

They differed from the wood processors in other ways, however: their materials came from a greater distance and cost much more. Nearly all their copper, tin, and much of their iron came from abroad. In New England even the blacksmiths, the largest consumers of wrought iron in an agrarian economy, imported their materials.16 In 1832, 161 out of 167 blacksmiths in Maine used European iron. The largest ironworks in New England—makers of nails, hoops, wire bars, axes, and shovels—were in that year receiving 70 percent of their requirements from abroad, even after the high tariff of 1828 (the notorious Tariff of Abominations). So too were manufacturers on the Delaware River. Until the 1830s these works continued to use charcoal for the heat needed to work their iron, despite rising costs as local wood supplies were depleted.

The production of American pig and wrought iron remained concen- trated in eastern Pennsylvania. Its price stayed high, not only because of transportation costs (iron was rarely mined near tidewater), but because its producers relied wholly on an ancient form of production.17 As Peter Temin has pointed out, “the American iron industry in 1830 operated almost exclusively on the basis of traditional technology, despite the very successful new technology in Britain.”18 Pig iron was still produced by charcoal-fired blast furnaces, and wrought iron was still made by water- driven hammers. Even as late as 1832, much of the American iron was produced on iron plantations similar to those of the colonial period, located in isolated rural areas where ore, wood for charcoal, and water power for the forges were to be found on a single large tract of land. The output of these plantations remained small, with the furnaces producing at best twenty-five to thirty tons a week.10 Both the furnaces and forges were normally shut down during the cold (and freezes) of winter and the heat (and droughts) of summer.

As their ore supply was depleted, iron plantations were often abandoned. Their owners, if they stayed in the business, located ore in more distant areas. The blast furnaces usually followed mining into the hills, but forges remained closer to the markets.20 Although ironworks became more specialized in function, they continued to make a variety of products. The pig-iron processors made stoves and other cast-iron products; while the makers of wrought iron produced nails, wire, and fittings, as well as bar and sheet iron.21 In the making and processing of iron, as in nearly all other manufacturing, the enterprise remained small and personally managed. In the blast furnaces, forges, and finishing mills, a work force of as many as fifty men was uncommon.

It was only in the making of cloth that the factory employing a permanent force of more than fifty workers had become common before 1840. And even in clothmaking the new type of manufacturing estab- lishment did not appear until 1815, when the machinery for both spinning and weaving was placed within a single mill. Before that date, machinery had been used only in spinning; weaving continued to be done entirely by hand. Although in 1790 the design of Richard Awkwright’S water- powered spinning mules had been brought by Samuel Slater from England to Rhode Island, the adoption of spinning machinery came slowly. Only fifteen cotton spinning mills were in operation before the passage of the Embargo Act of 1807.22 All were located in southeastern New England, all were powered by the flow of small streams, and nearly all used crude Awkwright frames.23 Their owners depended on local families for the labor force, with the children tending the machines and the adults doing the heavy work. The heads of the family were paid in goods—yarn, food, and supplies— supplemented by some cash. The manufacturers sold their yarn at first to local householders and weavers and then to commission merchants in Boston, New York, Philadelphia, and Baltimore. These spinning mills were managed by partners, or often by a single owner.

In the years between 1807 and 1815, when embargoes, trade restrictions, and wars cut off the normal British imports of thread and cloth, the domestic textile trade boomed. By 1809 Albert Gallatin noted that sixty- two spinning mills were already in operation and twenty-five more were being constructed, with the greatest concentration still being in southeastern New England.24 The demand for yarn and for cloth woven from that yarn not only remained high but also moved westward as the population migrated into the Mississippi Valley. In 1806 the Providence firm of Brown and Almy (the mercantile enterprise that marketed the products of Slater’s mill) sold 16 percent of its total products through Philadelphia and 8 percent through Baltimore. By 1808 the proportions had jumped to 30 percent and 14 percent. At the same time, Brown and Almy shipped an increasing amount of woven cloth with its yarn. By 1814,67 percent of the firm’s total output was sold through Philadelphia.25 To meet the demand for cloth, Slater and other spinning mill operators began to have yarn put out to be woven by hand looms in homes. Then, in 1809, these manufacturers moved the workers into central shops in order to supervise more effectively the processes of production.26

The growing demand for cloth encouraged the mechanization of weaving. The resulting integration of weaving and spinning within a single mill led to the construction of the first large factories in the United States.27 In 1814 a Bostonian, Francis Cabot Lowell, who had smuggled the plans of a power loom out of Britain, built a factory on the Charles River at Waltham, Massachusetts. There he placed spinning machinery to feed his new weaving machines. By integrating all the activities involved in these two basic processes, Lowell’s Boston Manufacturing Company was able to turn out a far greater volume of cloth at a much lower unit cost than any other American textile producer. The integrated factory, with its initial capitalization of $100,000 (raised quickly to $300,000 and then to $600,000) and its work force of three hundred workers, was far larger than any existing mill in the nation. Because of its size, the work force could no longer be paid irregularly and in kind. Monthly cash wages provided the mill hands with their only source of support. Unlike the workers in the spinning and other small mills, they no longer looked to agriculture for part-time work and subsistence.

Because of the volume of its operations, the success of the Boston Manufacturing Company demanded more than technological innovation. To build and to repair the large number of machines needed, Lowell and his associates constructed their own machine shops. To obtain a permanent work force of the size they needed, Lowell reached out to that yet-unused supply of labor, New England farm girls who had finished their schooling but who were not yet married. To provide the unprecedented amount of working capital needed to pay regular wages and to buy cotton in volume, Lowell and his associates incorporated their enterprise. They did so in order to tap the funds of Boston mercantile families who, because of trade restrictions and wars, had not been able to continue their investment in commerce. Finally the Boston Manufacturing Company placed the mar- keting of its output in the hands of a single agent. Because of the high volume involved, the agent readily accepted a commission of only 1 percent. The marketing firm, B. C. Ward & Company, with which Lowell’s associates were closely connected, sold most of the factory’s output through the growing dry goods jobber network in New York City. Aided by the mildly protective Tariff of 1816, Lowell’s enterprise was able to compete easily with the output of British factories whose low prices were at that time driving many American textile enterprises out of business.

In fact, the integrated mill proved highly profitable. The profits of the Boston Manufacturing Company, reflecting the productivity of its factory, ranged from 16 percent to 26 percent annually, even during the period of price-cutting caused by the depression following the panic of 1819.28 After seven years of operation, the stockholders received more than 100 percent return on their original investment.

Eager to expand, the entrepreneurs associated with Lowell were keenly aware of the need for a more powerful and steady source of power than was available from the Charles, Blackstone, Brandywine, and Schuylkill, the small streams that powered existing mills in the United States. To keep more than a single integrated mill going, they needed not only to harness a major river but to do so where a large drop in the riverbed promised a powerful force of water. They selected a site on the Merrimack River where a canal had been built around a thirty-foot fall. By enlarging the canal to a width of sixty feet and a depth of eight feet, and by building the largest waterwheels in the country, they obtained the power to run, winter and summer, a dozen mills the size of the one at Waltham. There they set up an industrial town named for Lowell.20

By the end of the decade, ten of the largest corporations in the United States, capitalized at between $600,000 and $1,000,000 were using the water power that flowed through the hydraulic system at Lowell. Other manufacturers began to build similar integrated mills powered by the same technologies on the Merrimack, Connecticut, Passaic, and other large rivers where they took major drops as they flowed to the sea.30

These men used much the same types of labor force, and they organized their enterprises as corporations. The shares of these firms were closely held. In nearly all cases, the controlling shares remain in the hands of three or four close associates and their families.31

Yet such industrial sites were limited. Lowell, Manchester, Lawrence, Holyoke, Springfield, and Patterson were among the few industrial cities in the United States whose growth was based on water power. It was not until the steam generated from anthracite coal became available that similar large integrated mills were built in southern New England and the middle states.32 Appropriately enough, Samuel Slater, the founder of the spinning industry in America, built the first integrated steam mill in 1828, in Providence. Until that time he and most of the other textile producers in southern New England continued to rely on hand weavers to process their yarn. Only after coal became available to generate inexpensive steam power were the southern New England enterprises able to compete efficiently with the river-powered mills to the north or the steam-powered factories of Great Britain.

The cotton industry set the example for the wool manufacturers, but for no others. By the 1830s both the spinning and weaving of wool were being handled first by water-powered and then by steam-powered machinery.33 The very first woolen mill to adopt the full panoply of the techniques developed at Waltham began operation in Lowell in 1830.

A survey of American manufacturing authorized in 1832 by the secretary of the treasury, Louis McLane, documents the concentration of the factory form of production within textiles.34 Of the 106 manufacturing firms listed in the McLane Report that had assets of $100,000 or over, 88 were textile companies (of these, 10 were producers of wool fabrics, and 2 made both cotton and wool cloth). Twelve were iron- makers, the majority of which were still the ancient type of “iron plantation.” (The assets of these firms were as much in land and mines as in buildings and machinery.) The remaining 6 enterprises in the largest 106 included manufacturers of nails and hoops, of axes, of glass, of paper, of flour, and of hydraulic equipment. Of the 36 enterprises reporting 250 or more workers, 31 were textile factories, the remaining were 3 ironworks, the nail and hoops works, and the axe factory.

If smaller amounts of capital and smaller numbers of workers are used to define the large manufacturing establishments of the 1830s, the pattern remains the same. Of the 143 firms having capital assets of between $50,000 and $100,000, the greatest number were textile firms with iron enterprises following in about the same proportion as they did on the list of 106 firms with assets of $100,000 or more. The enterprises in the $50,000 to $100,000 range in other industries included nailmaking firms, a producer of steam engines in Pittsburgh, a firearms maker in Connecticut, a gunpowder company and a flour mill in Delaware, and a saddlery establishment in Pennsylvania. If one looks at the enterprises with fifty or more workers (which were not included in the other categories), the concentration remains in textiles, with ironworks second in number, but a good way behind. There are a number of industries in which one or two enterprises reported hiring more than fifty workers. But in only six industries were there as many as three to seven firms with a work force of over fifty: books and printing with seven, cordage with five, shipyards with five, buttons with three, combs with three, and glass with three. (The button and comb firms listed workers working at home.) The overwhelming majority of the enterprises listed in the McLatie Report had assets of only a few thousand dollars and employed at the most ten or a dozen people.

The McLane Report is incomplete. It covers only ten states, all in the northeast (with a short and very incomplete statement on Ohio). Although the returns for some states, especially Maine, Massachusetts, Rhode Island, Pennsylvania, and Delaware are most detailed, those for others have gaps in capitalization, employment, and other data. Nevertheless, the information covers those states in which, as late as 1850, 75 percent of all American manufacturing was concentrated. Much of the data provided on individual enterprises is very detailed, giving a wealth of information on wages, sources of raw materials, locations of markets, and types of power used, as well as on assets, working capital, and employees. Moreover, scattered data in the censuses of 1830 and 1840 and studies of individual firms and industries support the generalizations indicated by the 1832 survey. Although other enterprises with assets of more than $50,000 and with employees of more than fifty workers not listed in these reports or studies certainly existed, it seems hardly likely that new information would alter the profile of American industry given in the McLane Report?5

The McLane Report also emphasizes that as late as 1832 American manufacturing was still powered almost exclusively by water. If enterprises in the Pittsburgh area where coal was plentiful are excluded, only 4 of the 249 firms capitalized at $50,000 or more relied on steam for power. Three more supplemented water power with steam. A check of the firms with assets of less than $50,000 but with fifty or more workers shows only one using steam and that was a machine and iron works in New Britain, Connecticut. Peter Temin, in his study of steam and water power, located as many as 100 steam engines in the McLane Report, but the majority of those were often low-horsepower auxiliary engines.36 With the exception of Pittsburgh, more firms reported the use of wind and mule power than steam.37 In the great majority of cases, water power was generated by small streams rather than large rivers. This meant not only that the volume of power generated was relatively low but also that most machinery in the United States was subject to seasonal periods of shutdown because of ice, drought, and freshets.

The profile of American industry delineated in the McLane Report and other sources is, then, one of production being carried out by a large number of small units employing less than fifty workers and still relying on traditional sources of energy—water, wind, animal, and human. The resulting products, when sold beyond local markets, were marketed through the growing specialized distribution network, initially created to market the goods produced by British factories in the United States. Investment decisions for future output, as well as those for current pro- duction, were made by many hundreds of small producers in response to market signals, in much the way Adam Smith described. Before 1840 the traditional form of enterprise remained quite satisfactory for the management of production in the American environment.

Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.

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