The statement of a railroad man in the New York Herald is valuable: "Mills for the weaving of the coarser cotton fabrics are now in successful operation in Tennessee, Georgia, Kentucky and several of the Atlantic Coast States, all of which have beenbuilt by native labor, mostly with local capital and are managed by Southern men."[205]
The Clifton Mill near Spartanburg, furnishes a fair example of the distribution of holdings of the capital stock of a larger enterprise. The joint stock company owning the mill operated under a special act of incorporation of the Legislature, exempting the property from taxation for a period of years, and relieving the stockholders of personal liability. The shares were of a par value of $100. and aggregated $500,000 of which $250,000 was paid in. The stock was held mostly in Spartanburg, Charleston, Boston and Baltimore. Spartanburg capitalists owned $200,000 worth of the stock, Charlestonians $150,000, and $50,000 was held in Boston.[206]To make the capital stock $500,000 most of the original stockholders had doubled their subscriptions.[207]
For a factory near Gaffneys, South Carolina, which would need $500,000 capital stock to the amount of $200,000 would be subscribed for in Chester County, it was thought, and for the remaining $300,000 the North would be looked to.[208]
Together with large subscription to the stock of the Atlanta Exposition from the North and East, went an early subscription of $20,000 in Atlanta.[209]
While it might be considered under the heading of the cotton mill campaign, or denominated "Southern enterprise", I believe it will be most interesting to relate at this point briefly the facts in the Columbia canal scheme, as illustrating how domestic capital threw itself into the situation in which the South found herself in 1880, and the years immediately following. It is especially instructive to notice how Northern enterprise, while, so far superior to Southern initiative at all times before, after 1880 failed where in the South sometimes native energy succeeded.
Columbia, the capital of South Carolina, is located at the falls of the Congaree River. Today there is a canal of about three miles in length, 60 or 75 feet in breadth, terminating at the lower part of the city. At the end of the canal is a duck mill. In 1868 the Messrs. Sprague, manufacturers of Rhode Island, took up a plan of developing this water power at Columbia, but "in consequence of their misfortunes, failed", and the whole matter of the canal passed to the hands of the State Canal Commission. Some prominent Columbians, hoping to revive the project,contributed money to the employment of one Mr. Holly, a first-rate hydraulic engineer of Rochester, New York. Mr. Holly was making surveys and progressing satisfactorily when, after three months, his engagement was discontinued. The reason for this was that Thompson and Nagle, engineers of Providence, on a tour of inspection through the South, were attracted to the water power at Columbia, and Mr. Thompson appealed to the State for franchises, in which appeal he was supported by the citizens of Columbia who had helped promote the modest work under Mr. Holly. On February 10, 1880, the final contract between Thompson and Nagle and the State Canal Commission was entered into; by its terms the engineers were to have the use of 200 convicts for three years, and at the expiration of this time they were to have developed at Gervais Street 15,000 horse power of water power, and have in operation a cotton mill of at least 16,000 spindles.
Thompson and Nagle thought the necessary capital could be had at the North. They failed to secure it, and attributed their failure to the turmoil of the presidential campaign which was raging. Though this was probably a valid basis for the appeal to the Legislature for an extension of the rights granted them, the application for extension was denied. At this juncture, modifying the scope of the plans somewhat, the foremost citizens of Columbia took up the matter themselves, and organized theColumbia and Lexington Water Power Company to bring about the development.[210]
Nightly meetings were held of those interested in the purchase of Mr. Thompson's charter. In one hour eleven subscribers gave $5,000 each—$55,000—toward the amount.[211]A few days later the subscriptions in Columbia had reached $117,600, and the expectation was that the sum set to be raised in Columbia—$125,000—would be exceeded.[212]
Mention has been made several times of the Charleston Manufacturing Company. At the end of the first day $120,000 of its capital stock had been taken.[213]A little later the subscriptions to the stock had become $200,000 and more, mostly "for small amounts, which is what is desired. At the present rate the whole capital required will soon be subscribed." On July 6, the News and Courier had these two editorial paragraphs, the justifiable satisfaction pervading which is not to be mistaken: "We are authorized and requested to say that the whole of the stockof the Charleston Manufacturing Company, being half a million dollars, has been subscribed, and that the books are closed. It is useless, therefore, to continue to send in subscriptions.
"We believe that more than three-fifths of the whole capital stock are held in Charleston, so that right here will come the bulk of the direct profit by the working of the company...."
But before the Charleston Manufacturing Company had completed its organization another corporation had come into existence. This was a mill company promoted and most largely subscribed to by the Germans of Charleston, headed by Captain Tecklenburg. Not much was said about the concern in the papers, but of its $100,000 of capital stock, $75,000 were subscribed between January and May of 1881. This Palmetto Manufacturing Company, as it was called, was apparently, the most restricted in its stockholders of any mill that had been projected in the South to this time.
Little towns, villages almost, did not fail of local enthusiasm and capital in small amounts.[214]In January of 1882 Fort Mill, in York County, was agitating the building of a cotton mill there, and $50,000 was set as the amount of stock to be secured.[215]Chester, a little earlier concluded her size would compelher to produce $300,000 for a mill within her borders.[216]A gentleman of Griffin, Georgia, offered to subscribe one fourth of the capital necessary to start a mill there.[217]
Having seen the character of the arguments used in attracting native capital to the Southern cotton mill projects, and the extent of the response to these appeals, it is next necessary to turn to the other source of assistance—outside capital. Practically this may be termed Northern capital, although Englishmen interested themselves in the Southern ventures, and much money came from what were strictly termed, the Eastern States. In the minds of the people of South Carolina, North Carolina, Georgia, Alabama and those States, capital stock of a Southern mill held in Baltimore would be classed as appertaining to the North.
It is proper first to consider the attitude of the South toward Northern capital; second, the appeals made to Northern capital; and third, the effect of these appeals or the response of them.
In many aspects the rise of cotton mills in the South was less an industrial development than a subtle drama, powerful in its great motives. As William Garratt Brown has said of thehistory of the Southern States in their struggle upward after the war, it is not only to be studied with diligence of research, but is to be viewed with passion. The story of the cotton mills is filled with elemental emotions; the moving characters are splendid, clear-cut dramatic types; there are the villain, the hero, the schemer, the lover of his fellow men. The vices and virtues take their part—self-sacrifice, jealousy, hate, charity, revenge, bravery, honor, patriotism.
The first act of the drama is constituted in the defeat of Hancock and the magnificent refusal of the South to be baffled—the oath to rebuild her shattered fortunes. The actors leave the stage with hope filling the future. The curtain rises on the second act to discover the chief spirits of the South setting systematically about "the cotton mill campaign"; their brethren converted to a belief that manufacturing the staple would transform the South, they turn in entreaty to their fellows for support, and the answer is loyal and gallant.
The third act opens with a situation which tests the greatness of the players' faith in what they profess. Domestic resources exhausted or exhausting, or slow in response to the need, should the object for which they were striving be lessened in its meaning, importance and desirability? Should the cotton mills which were to mean so much be restricted to the means of the South, urged to the front by a splendid pride and devotion?Should theesprit de corpswhich animated the Southerners, and the cheerfulness of their co-operation, with all that inspired these, when they failed of further effect, be considered to set the natural and proper limits to expansion?
Was this to close the action? Or was the South, remembering her vows, to cling to her ambition undiminished? In spite of wounds yet fresh and burning, which in the name of pity and honor and self-esteem cried out to be nursed and comforted at home, could the South face again her enemies, and this time not just to challenge, which was hard, but to entreat, which was hardest? Would the South rise superior to pride, and be content with nothing short of the fullest heroism? Would she go to the North for capital for her young cotton mills?
It was a silent struggle with herself. Little was uttered, but fundamental emotions were at play. When she decided to appeal for assistance in a work which she knew to be right, the climax of the drama had been reached. The crucial test had been endured, and the South had emerged triumphant.
As has been said, few lines are there to indicate the feeling. It is largely dumb show. But we may look at the expressions that did occur to show the attitude of the South toward the question of Northern capital.
The following manifesto is significant, involving as it does recognition of the necessity for a modification of political views if capital to be invested in the South, in the eyes of theNorth, was to be made safe: "In this state (South Carolina) we need capital and less party and politics.... Such men as Gould, Vanderbilt and Plant have invested millions of dollars in our railroads, manufactories and other enterprises, and have been remunerated in the face of a 'Solid South and a Solid North'. It is useless to say that millions have been driven off from like investments on account of personal whims and jealousies among prominent politicians in both parties.Can the South afford to remain solid?This is the great question of the day, and it can be answered in the negative.... We want all the capital possible to develop our hidden and inexhaustible resources...."[218]And again: "So long as we have section unity in politics in the South its material prosperity will be checked and an absolute injury will be sustained through its entire commercial and agricultural dealings by exciting distrust of capital.... So taking the past and the present as indices for the future, it is plain to see that a dissolution of the solid South will cut at the very roots of all these wrangles between the North and the South in which sectionalism is involved."[219]
The News and Courier wished to accord to every dollar of Northern capital invested in the South the same credit as wasfelt to be due home capital likewise contributed to the building up of the section. "Outside capital ... is beginning to seek this Southern field to aid in a more rapid and thorough work of restoration of dead or dormant enterprises. This movement needs a wise encouragement by public and private approval. Some of that credit which was accorded to the man who caused an additional blade of grass to grow should be given to everyone who affords facilities to manufacture an additional boll of cotton, or to carry it and other produce to market."[220]
A gentleman connected with the International Cotton Exposition said: "We people of the South should embrace every opportunity which, like the opportunity afforded by this Exposition, will bring among us intelligent and interested observers of our industrial condition, resources and aptitudes. We have in the midst of us the raw material, so to speak, of a magnificent prosperity. We lack knowledge, population and capital. These may be slowly accumulated in the course of years, or they may be rapidly by well directed efforts to obtain them from beyond our own borders. We advocate the latter plan."[221]This is as business-like as anyone could desire.
In an interview with the Atlanta Constitution, Francis Cogin reviewed the cotton manufacturing situation in Augusta, reciting the profits and asserting that the Southern mills had an advantage over those of the North such as would allow the former to earn dividends at a time when the latter would not be making a dollar. He concluded: "The future of cotton manufacture in the South will be limited simply by the good sense and courtesy of our own people. If we invite capital, make it safe here, and welcome those who bring it, we will get all we want."[222]The element of safety, here remarked, meant frequently safety to be brought about by political arrangements which would violate the established creed of the South; but sometimes ordinary business balance was pleaded for, as when a North Carolina paper quoted with approval from the Financial Chronicle: "Why cannot the South understand ... that the worst hindrance to her needed influx of industry and capital is uncertainty?"[223]
In another chapter the degrees of intensity with which the cotton mill campaign was urged were seen to vary, roughly, with the distance from Columbia, South Carolina, say, as a center. There is a casual note in the little that found its wayinto the Richmond papers. This is to be remarked in Richmond's attitude toward Northern capital. It was not a stirring, vital thing in Virginia. For instance: "When we consider that the takings of the Continent from Lancashire are not piece goods, but yarns, why cannot we in the South make these yarns for the Continent ourselves and save to ourselves the profit of conversion now enjoyed by the English buyer of the raw material? Why not have a large and successful cotton manufacturing industry?
"We are persuaded that once the folks in New England, who have surplus money awaiting employment, thoroughly investigate the points Richmond presents for a safe lodgment of that capital in manufacturing, the flow will start this way."[224]
The attitude of W. H. Gannon was peculiar, but serves as an introduction to the mention of a phase of the subject which is important. Mr. Gannon, referred to in other connections, believed that Northern capital ought to be welcomed at the South as helping to develop an industry in which the South could stand without a rival. He favored inducing Northern manufacturers to set up plants bodily in the South. But, being the agent of asociety which sought to colonize New England consumptive operatives in co-operative mill villages in the South, the settlement to be financially backed by a Northern capitalist or manufacturer, Mr. Gannon wished to place a modification upon the influx of capital to the Southern States. He asked whether the South should encourage an economic system with "large stock companies with hundreds of thousands of dollars, in which the operatives have no pecuniary interest in the plant, and from the active management of which we ourselves would be virtually excluded? (It is to be borne in mind that, as at present organized, the treasurer and selling agents in those great concerns necessarily control their direction); or is it better that we aid small co-operative concerns wherein the plant is owned in great part by the operatives, and in which we might familiarize ourselves with manufacturing in all its details?"[225]
To contend for small mills, whether as above for the co-operative features suitable to them, or as a means of insuring proper caution in the development of the industry, frequently with entire sincerity, was nonetheless, I think, one evidence of dislike and distrust of Northern capital. H. P. Hammett, an old cotton mill man in South Carolina, said: "I do not share in theopinion commonly expressed that we must procure capital from the North to manufacture the cotton at the South. I would by no means exclude it, but gladly welcome it." But he worked around gradually to this concluding statement, relative to the report that English and Northern capitalists were seeking to locate mills on the water powers of the South: "—it would be unfortunate if most of the best powers should pass from the control of our own people before they knew it."[226]
One more characteristic quotation, and the point is clear: Objection had been raised to the legislation forbidding the pooling of railroads, producing corners in freights with rising rates—the Sherman Act was probably meant. This was too much for the Winnsboro, South Carolina, News, the reaction of which resulted in these words: "Well enough is it to talk about repelling Northern capital by discriminating legislation, but far better have no Northern capital than have it holding native noses down to the grindstone. The half-starved wolf refused to change places with the sleek mastiff that wore a master's collar. Northern capital that brings Northern collars is not what we wish, and we will not have it as long as the people send incorruptiblelegislators to Columbia. We welcome foreign capital down here, provided it recognizes that the State is supreme...."[227]
While it is easily understood how this attitude obtained—the wonder is, in fact, as already seen, that it was not more nearly universal than sporadic—the shortsightedness of such a policy for the South is apparent. For whatever outside capital reaped in dividends, the South reaped a larger advantage in collateral benefits socially. The gain to the communities where mills were located, supposing even that Northern capital was greatly in preponderance, were more than any money earnings, in sums however large, for it meant building for the future in material institutions that would prove dynamic. The cotton mills, and all they brought in their train, presaged a change in social ideals and economic outlook on which no price was to be set.
If Mr. Baldwin, the railroad president, was a little early in making the statement in the middle months of 1881, surely his purpose was good, and his hopefulness was justified, whenhe said: "I say on the strength of recent and extended observation that whatever of antagonism to Northern capital may have existed in the South has disappeared. I never met it, at any time, but (I) am willing to grant that it may have existed sometime and somewhere."[228]
As a corollary of the fact, recognized at the South, that whatever were the social gains resultant upon the establishment of cotton factories, capitalists put their money into these ventures because they believed the conditions of manufacture assured to them dividend, the South grounded its appeals to Northern investors in the hard physical advantages possessed by the South as a field for cotton manufacture, usually stressing superiorities over the Northern States. Northern capitalists were as eager to reap profits as were Southern projectors of mills to enlist their aid and interest, and so the claims of the South were easily investigated without the medium of propaganda. The widespread publicity given to the whole matter of Southern manufacturing in the cotton mill campaign, while no doubt it was registered in all partsof the North and East, was commenced and carried on as of concern to the South.
Correspondence of the New York Times from Atlanta well illustrates this. It is to be noticed how quickly the preliminaries are got over—considerations and speculations in which Southern papers indulged to any length: "Manufacturing in the South is the one subject on which thinking men here speak with entire confidence. They have, most of them, some qualifying doubts as to agricultural progress, the cheapening of cotton production, the raising of home supplies, immigration, mining, and the many other now ambitions and enterprises which have engaged so much attention since the opening of the new era of industrial development. But concerning the future of manufactures, particularly of cotton, all men of intelligence and business experience speak with the assurance of inspired prophecy. It is, in fact, not easy to see why the mill should not seek the cotton instead of the cotton seeking the mill." With this introduction, the plunge is made into the supporting facts, which ought to turn the flow of capital toward the South.
The first statement is that it is a dead waste to ship raw cotton to a mill 1,500 miles away, when it can be made into yarns or fabrics in factories distant from the field only short half-day's journey for a mule. The cost of sending the cotton to New England is reckoned, in expenses of bagging, ties, ginning,baling, storage, insurance, drayage, sampling, compressing, commissions of brokerage, waste in handling, and freight to amount to $14.90 per bale, or almost exactly 1½ cents per pound which the New England manufacturer pays for the cotton above the price received by the planter. The estimate of $100,000,000 is given as the charge on the cotton crop of the South of 1879, on Edward Atkinson's figures, for the items mentioned.
"... to the anxious capitalist tired of a petty 4 per cent. and seeking new and more profitable investments such facts are not without interest. They go to support the claim that the Southern mill has an advantage of from 10 to 20 per cent. over its New England competitor. But these advantages are by no means confined to the elimination of unnecessary charges for baling and transportation." Water power in the South, six dollars per horse power per annum, or in some instances given away for the location of a mill, as against a cost of twelve dollars in New England, is dwelt upon, with the greater utility of the Southern water powers due to the absence of freezes. The cheapness of labor is given prominent place, and the suitability of the climate of the South for cotton manufacture.[229]
Exemption from taxation was a regular method of invitingoutside as well as encouraging domestic investment. South Carolina exempted from taxation for a period of ten years all new machinery put in a factory. The Observer, of Raleigh, said editorially: "... North Carolina might well learn a lesson from the liberal course pursued in South Carolina and exempt from taxation for ten years all cotton factories within our borders. The tax does not net the State more than a thousand dollars or so, and the counties only double as much. But then there may be a great deal in it tending to induce Northern capitalists to make investments with us. Once here, they will be so pleased with our advantages that they will never think of leaving us."[230]
As early as 1872 Georgia had passed a statute remitting taxes on cotton and woolen mills for a decade.[231]
An indication of the comparative coolness of the States near Northern influence, already remarked, in a little controversy which took place in the Richmond papers over exemption of mills from taxation. Said "Hanover": "It is true that a law exempting capital invested in manufacturing, even for a limited period, is unconstitutional. But if it is necessary to that end, the constitution can be amended." The farmers would not object,he thought, since increased size and prosperity of the cities would mean increased gains to them in sale of produce. Richmond, he said, in addition to her natural advantages, needed to offer exemption from taxation to secure the desired capital. But "King William", in rejoinder, asserted that the city was more dependent upon the country than was the latter on the former; that exempting manufactures from taxation would mean increasing the tax for farmers; and that Richmond was doing well enough as it was.
An indirect appeal to outside capital was felt to lie in a direct appeal to domestic capital, and the fact that foreign interest would be attracted by evidence of native faith in the mills was used as an argument in securing capital at home. Thus the Columbia Register, speaking of the plan of the Columbia and Lexington Water Power Company said editorially: "Columbia is now resolved to find money for herself, in the City and the State, for the development of the Canal and the establishment of factories. This will bring in outside capital later on. Nothing so attracts investors in other States as the knowledge that people on the ground have proved their faith in an undertaking by putting money in it."[232]
Again it was said: "More than three-fourths of the capital invested in the cotton mills since the war has been subscribed by our own people, and new enterprises are opening up the way to a proud and successful future. The Southern investment encourages Northern capital to come into the same field, and the rate of progress is far more rapid than if it depended on either Southern savings or Northern capital alone."[233]
A county paper told its readers: "We believe there is money enough in the county, here and there, to make at least a modest beginning so as to attract outside capital."[234]
Having sought to define the attitude of the South toward Northern capital, and to indicate the nature of the appeals made to the outside capitalist, the last topic of this discussion is reached in an examination of the response of investors outside of the South to invitations, and the influx of capital when the opportunities for profit had become apparent.
It must be plain that as the sections drew together with each year that removed the "reminders of the Civil War, the South was more welcoming in her attitude toward Northern capital, and the North more ready to invest in the South. This is recognizedin an editorial of The News and Courier, headed The North and Europe Building Up the South": "It has been evident during the past two years that the distrust which had prevented capital from coming to the Southern States for investment has, in a large measure, been dissipated, and that the disposition to place money in the South in undertakings which promise a fair return is rapidly growing strong. Indeed, the process has gone on much more swiftly than is supposed by those who have not watched the course of events...." Continuing, the editorial quotes an estimate appearing in the New York Herald, that in the eighteen months preceding Northern and European capitalists subscribed to Southern enterprises located in the section east of the Mississippi and South of the James, $100,000,000. Of this amount, more than $90,000,000 was invested in railroads, without the $20,000,000 in the Cincinnati Southern. "Besides the investments in railroads there are the investments in cotton manufactures. There is hardly a city in the South in which there is not a new factory building organizing, and in nearly every case a considerable part of the capital is raised at the North."[235]
The Baltimore American said the same thing: "The South is now the focal point of trade aspirations for the whole country.Capital and industrial activity are crowding upon it from every point of the compass. Every railroad system in the land is struggling to reach it...."[236]
Outside capital invested in Southern cotton mills took two forms—subscriptions to the stock of mills managed in whole or in part by Southern men, and the actual setting up of plants in the South owned throughout by Northern promoters. Of these two, the second was of much the rarer occurrence. Capital not domestic came from two main sources, the North and East, and from England. There is no reason to believe that the English subscriptions, in spite of frequent allusions to England as a possible investor, were large or many.
Pawtucket being the pioneer cotton manufacturing place in the North, Providence, which had come to virtually absorb the smaller city, took a great interest in the new mills of the South after the Civil War. A Providence mechanical engineer designed the mills and machinery for some of the most successful plants, and that its men were thinking of setting up mills of their own in the South is evidenced by the visit of Mr. Boyd to Georgia in 1881, when on behalf of New England capitalists he prospected the State for the best location for a large cotton factory.[237]
A little later it was given as common knowledge that several of the largest manufacturing firms of Manchester, England, had secured sites for mills in the Southern States.[238]A London correspondent of the New York World remarked a clear disposition of English capital to seek investment in Southern manufactures.[239]
The railroads, both the minor lines connecting individual points, and the great systems penetrating the South in this period, were influential in fostering and inaugurating manufactures. The little railroads helped the mills by affording transportation facilities and by making the inland water powers accessible, but the big ones could lend money and did of course make it their business to encourage manufacturing along their lines. President Baldwin, of the Louisville and Nashville, distinguished three ways in which the railroads assisted the sections by aiding mills in reach of their tracks, by uniting the parts of the country, and by affording a strong commercialbackbone.[240]Hon. Gabriel Gannon urged the claims of railroads upon South Carolina as bringing capital to the Southern field; he attributed the erection of a mill with $500,000 capital largely to the railroad connections of Spartanburg.[241]
An article already referred to said of the railroads in their bearing upon manufactures: "The railroad syndicates are of necessity interested in the general growth of the country through which the lines run, and will spare no pains to bring in immigrants and to encourage the opening of mines and the establishment of factories."
In the majority of instances, Northern capitalists subscribed to the stock of Southern mills after a considerable proportion of the shares had been taken at the South. Similarly, a very usual juncture for the investment of Northern capital was a projected enlargement of a plant, machinery manufacturers taking stock in payment for equipment. Thus the Rock Hill Cotton Factory, the $100,000 capital stock of which was owned in Rock Hill and Charleston, South Carolina, in doubling the capital secureda large part of the additional $100,000 at the North.[242]
A vigorous solicitor of Northern funds for Southern mills was D. L. Love, the pioneer cotton manufacturer of Huntsville, Alabama. Before going on one of his trips to New England "for continuous exertion for the establishment of factories in the South," he made a statement of his successes and plans. His project of a cotton mill at Vicksburg, Mississippi, was "on the high-road to success;" he had secured the organization of a company with $40,000 then subscribed to manufacture the staple at Jackson, Tennessee; he had about consummated a contract with New England capitalists to revive manufacture in a building at Corinth, Mississippi; a Connecticut manufacturer was looking for an opening at the South, and would be induced to settle at Huntsville; in all, he expected to bring about the investment of $1,000,000 in factories in Huntsville in the three years to come.
Mr. Verdery, of Augusta, telegraphed from New York news of his success in seeking capital at the North. He "placed $85,000 of the new stock of the Enterprise Factory, and expects to book from $25,000 to $50,000 more in that city. He has had urgentrequests from Boston, Philadelphia and other cities to go to those places, and has no doubt he will be able to obtain large subscriptions...."[243]
Much is to be learned from a close study of the founding of the Charleston Manufacturing Company, which was a representative Southern mill, a child of the cotton mill campaign and an expression of the patriotism, statesmanship and farsightedness of the South of the day. It embodied in its history nearly every element and feature to be noticed in this study. In an advertisement calling for additional local subscriptions, the company made the statement: "Arrangements have been made with capitalists at the North to take such an amount of stock as may be necessary to ensure the success of this enterprise."[244]This statement is to be interpreted in connection with the announcement a fortnight later[245]of the complete organization of the company, with the exception of the election of a secretary and treasurer, two of the nine directors being W. H. Baldwin, Jr., and O. H. Sampson. "Maj.Smythe stated that a considerable amount of the stock was held in Baltimore and Boston, and for that reason Mr. W. H. Baldwin, Jr., of Baltimore, and Mr. C. H. Sampson, of Boston, had been nominated." Woodward, Baldwin and Norris were dry goods commission merchants of Baltimore, and "agents for the goods of several Southern cotton mills," and C. H. Sampson was the senior partner in the firm of Sampson & Co., of Boston, "dealers in yarns and also agents for several Southern cotton mills." Two days earlier Messrs. Sampson and Baldwin visited the site for the company's mill and expressed themselves as pleased with it. On the same day a meeting was held at which it was decided that the mill should manufacture standard sheetings and 3-ply yarns.
In this instance the commission merchants in all probability were those who agreed "to take such an amount of stock as may be necessary to ensure the success of this enterprise," it being either agreed that in return for this they should get the brokerage of the mill, or even, perhaps, receiving their pay as agents in shares of stock, which meant taking dividends instead of commissions. The practise was a common one, and machinery manufacturers followed the same plan. It is not at all clear that it could have been avoided, and the net profits which were earned by the mills of the South in this period would seem to dispute the statement, that the commissions charged by firms which had thus gained control over the product were exorbitant, and leftthe mills barely enough earnings to continue to turn out the goods which was the instrument of their own exploitation.
A final instance of Northern pecuniary interest in the development of cotton manufactures at the South may be noticed in the fact that New York bankers were expected to exceed the subscription of $25,000 to the International Cotton Exposition at Atlanta, alloted to the city. Among the large subscribers were Inman, Swan & Co., $2,000; Drexel, Morgan & Co., $1,000; Brown Bros. & Co., $1,000.[246]
FINANCING THE MILLS
The preceding chapter dealt with the capital of the Southern cotton mills in the period of their establishment. It was first noticed that local capital was naturally drawn upon before any other, and the character of the appeals to local resources and the response to these appeals were brought out. The second division of the report dealt with the attitude of the Southern mill promoters toward outside, usually Northern capital, the nature of the appeals made to Northern capital, and the extent of the response to these solicitations.
Altogether, the surface aspects of the securing of capital were dealt with in a large way; in denominating the present chapter and that following: "The Financing of the Mills", it is intended to bring out the minutiae of the process, and to set forth the mechanism of the problem in its detail.
In seeking to make clear the methods of securing capital in the South, it is convenient to consider first the soliciting of subscriptions to stock, and at the outset it will be well to give a notice that appeared in the financial advertising columns of the Charleston News and Courier at the beginning of the period of cotton mill growth. This notice is directed by "The Charleston Manufacturing Company to The Citizens of Charleston",and carries a contemporary flavor that is of service in an understanding of the problem. Given almost entire, it reads:
"The necessity of establishing manufactures in our city, not only as a profitable means of utilizing capital, but more especially for furnishing employment to many in our midst, has been long felt. To put this matter into practical operation, a few gentlemen applied to the last Legislature and obtained a most favorable charter for 'The Charleston Manufacturing Company'.
"The intention is to raise the capital necessary and to proceed forthwith with energy and activity to erect and put into operation a cotton factory and yarn mill which will be second to none in the South. The marked and rapid success of the Charleston Bagging Company shows what can be done here.
"The undersigned, therefore, being those named in the charter and their associates, lay the matter before you, and respectfully urge your co-operation in carrying the work into effect.
"For this purpose Books of Subscription to the Capital Stock of 'The Charleston Manufacturing Company', under the charter granted by the last Legislature, will be opened on Thursday next, 27th instant, at 10 o'clock A.M., at Office of the Carolina Savings Bank, corner of East Bay and Broad Streets, and continue open from day to day until the entire Capital stock issubscribed. Shares One Hundred Dollars each. Ten per cent. of the amount subscribed will be called for when all the Capital is taken and the Company organized. Further instalments will be called for as needed."[247]There follow the twenty names of those obtaining the charter.
The dignified yet homely character of this advertisement is made even more intimate by a dispatch from the capital, Columbia, to the same paper two months later, in which it is announced that over $90,000 had been subscribed in amounts of $2,500 and $5,000 to the project of "The Columbia and Lexington Water-Power Company" (a plan for a large development of cotton mills). The charter provided for a minimum capital of $500,000 and a maximum of $1,000,000. "The present object (in opening books of subscription before calling upon first subscribers for more) is to give everybody in the State an equal chance.... It is designed to visit each county of the State, with a view of making it as far as possible a State institution. It is expected that the $500,000 necessary can be easily secured in the State, but as much in addition will be welcomed to complete the capital stock ... nearly every man who is able will contribute toits (the undertaking's) speedy fruition." There is added the significant circumstance that "Governor Hagood will accompany the committee when they go to Charleston (to open books there) and use his influence in behalf of the enterprise."[248]
The plant of the Pelzer Manufacturing Company is in the so-called up-country of South Carolina, but its projectors were Charlestonians, and Charleston was the financial center of the State and of the South, indeed, at that time. Consequently books of subscription were opened in Charleston,[249]rather than in Greenville or Spartanburg, the little cities they were then, near the water power which should drive the mill. Ten per cent. of the amount subscribed would be required in cash.[250]
The time necessary to secure the needed subscriptionsmay be checked up by following the optimistic notices that appeared in the paper from day to day as the capital grew. In this instance books were opened on January 25th, and on the twenty-seventh it was published that "the subscriptions to the stock ... amounted yesterday to $30,000, leaving but $50,000 to be subscribed. The books remain open today...." Toward the Trough Shoals (South Carolina) mill project of Walker, Fleming & Co., $50,000 was subscribed in capital stock in one week.[251]Subscriptions to the Charleston Manufacturing Company, pursuant to the advertisement already quoted, were first received on January 27th; by February 4th, 189 subscribers had taken stock to the amount of $206,600.[252]Two days later the amount had reached $220,200 representing 195 shareholders.[253]
Mr. Converse, one of the proprietors of the Glendale Factory, which had proved itself successful, bought up the site of the Rolling Mill of Mr. Boles, at Hurricane Shoals, seven miles from Spartanburg; the first $200,000 was quickly subscribed for, and books of subscription for $300,000 additional stock were opened January 1st; February 14th they were closed, the amount having been taken.[254]
This suggests a practise which was and still is frequent in the development of cotton mills in the South, namely, that of increasing the capital stock over the amount first proposed, as soon as the original sum had been subscribed, or when subscriptions somewhat in excess of the intended maximum had been received. In the case above, the additional stock was larger by $100,000 than the amount first offered. The Cannon Cotton Mill, Concord, North Carolina, was organized with a capital of $75,000. Before the building was completed, the capital stock was increased to $90,000 or so, most of the stockholders adding to the amount of their subscriptions.[255]The Seminole Mill, now erecting at Gastonia, was designed to have $175,000 capital. Mr. Armstrong, its projector, saw that more persons wanted stock, and he increased the capitalization to $225,000. The plant was intended first to have 10,000 spindles, later increased to 12,000 or 15,000 spindles.[256]Similarly, some others of the new mills under construction in Gastonia are capitalized above the amount named in their charters.[257]
A very usual occasion for increase in the capital stockof a mill company has been the enlargement of the plant. Thus the Enterprise Factory, Augusta, Georgia, declared a 10 per cent. dividend and decided to increase its capacity by 125 per cent. or more.[258]In this case the entire $350,000 extra capital stock was being negotiated for by M. J. Verdery & Co., brokers of Augusta; it was understood that one man and his friends would take stock to the amount of $140,000.[259]If the statement of a rather flambuoyant trade review of three years later may be trusted, the entire stock of this mill after enlargement was $500,000 which would make the increase in stock $200,000 greater than the original capital.[260]It is probable that the stock was doubled to bring it up to $500,000;[261]three months after the decision to increase the stock, it appears, all but $50,000 had been secured, and this would be placed within the week. The directors of the Louisville and Nashville Railroad took $95,000 of the stock—"of course as individuals."[262]Evidently, the plan of the brokers did not carry through, and the mill corporation put its stock regularly up for subscription.
The mill projected by Walker, Fleming & Co., already mentioned, was intended to have $100,000 capital as a beginning, this later to be increased to $200,000.
At a meeting of the organizers of the Salisbury Cotton Mills, held in November of 1887, "The capital stock was upon motion fixed at not less than $50,000, and not exceeding $100,000."[263]A month later at a meeting of the subscribers, it appeared that $66,400 had been subscribed.[264]Later the stock was increased; those soliciting subscriptions to the original stock experienced no difficulty in securing increase of these subscriptions. By March, 1893, the capital stock of the company had reached $250,000.[265]
This last instance accords with what was told me by a gentleman of wide experience in the business, that the plants now having a stock of $100,000, etc., got their large capitalization by selling additional stock to the original subscribers at a reduction—say at 75 or 80 when the par was 100. The ventures were profitable generally, and the stock was maintained at its par value.[266]
The character of the promoters of a venture always carries weight, but this was peculiarly true in the establishmentof cotton mills in the South. Today, truly prominent men are known all over this State, and all over the section. Thirty-five years ago this was the fact even more than at present; the signatures to prospectuses were important through personal qualities as well as through business reputation. When it was said that those back of the scheme to build a factory in York County, South Carolina, were "among the most reliable and responsible men" in the county, the statement probably carried as much earnest of good faith as the accompanying notice that $25,000 toward $75,000 had already been taken.[267]
The size of the plant to be erected was given consideration in financing a mill, though this did not enter to the extent that one would think. Opposite views were held as to the practicability of financing small mills. As far back as 1849 it seems natural to find a plan for financing a mill, by which fifteen planters would take each $4,000 worth of stock, select a site near their plantations, each detail three men, making a building force of forty-five, with teams and an overseer and general manager, the latter one of the stock-holders; these proceeding to put up a wooden building of three rooms.[268]Apersistence of the economy which suggested this arrangement is reflected, perhaps, in an editorial of The Daily Constitution, Atlanta, thirty years later, in which it is pointed out: "The people of the South who have money to put into manufacturing enterprises should build spinning mills. The South is not rich enough to do much weaving, but there is no reason why it should not convert a good part of the great crop into yarns.... There is plenty of surplus money in the South with which to establish spinning mills.... We do not refer now to mammoth mills, but to little neighborhood spinning mills."[269]
The mills about Greenville are nearly all of considerable size. This is due perhaps to the effect of the example of the failure of the Huguenot and Campderdown mills, small ventures, both located within the city limits, as contrasted with the success of Pelzer, built later, and in the depths of the country. It is said to be the impression around Greenville that the small mill is hard to finance; so far from considering the small project suitable to the financial strength of the community in which the plant is proposed to be located, the reason for the lack of favor for small concerns was given the writer in the opinion that they could not attract outside capital, and thatconsolidations had recently resulted in South Carolina from this fact.[270]For different reasons, principally considerations of managements, there is now a well discerned tendency in the Carolinas, at least, back to the small mill.
Mention has been made of the power of reputation in the financing of a cotton mill. Not only was this stressed in suitable ways by those concerned in securing funds directly, but it was used in another way. This may be conveniently illustrated by the history of the great mill at Albemarle, North Carolina. Some years ago this village was an isolated one of five or six hundred inhabitants. A family of planters near the place, the Efirds, wanted to see a cotton mill located at Albemarle. They were probably as little able to attract capital as the village was uninviting to the industrialist. In this situation, the Efirds approached J. W. Cannon, of Concord, a town nearby, who had succeeded in the cotton manufacturing business and had extended his interests to mills in other places, and asked him to take the presidency of the mill proposed, and subscribe to $10,000 of stock. Mr. Cannon was not much inclined to go into the venture, but the Albemarle family showed determination. The plant today is a mile long, and represents an investment of some$3,000,000.[271]It is said that most of Mr. Cannon's mills outside of Concord had birth in the minds of people of the several communities; for instance, a merchant named Petterson interested him in a mill at China Grove.[272]
One of the most interesting cotton mills in the Southern States is that of the Gaffney, South Carolina, Manufacturing Company. The mill was conceived by a building contractor of the place while working upon churchs and cottages in a nearby mill village, that of Clifton. When he had planted his idea in the minds of the leading men of Gaffney, spurred them to local subscription and then to seeking money at the North, and because receiving small encouragement in New York and Philadelphia, their enthusiasm subsided, Mr. Baker, considering home enterprise and outside assistance unavailing, went to Mr. Converse, head of the successful Clifton Mill, and asked him to take over the Gaffney project at the point at which it had been dropped. Mr. Converse was aged, and felt himself overburdened with mill cares, but he encouraged the Gaffney man in his ambition, saying that mills in the South would pay better dividends than Northern mills, either large or small.
Meantime, however, Mr. Baker had come to know H. D. Wheat, the superintendent at Clifton. The indomitable promoter had hard work to persuade the practical-minded superintendent to leave his good position at Clifton for the uncertain fortune of a factory at a town which had failed to establish the mill itself, and could not interest Northern support; but finally, Mr. Wheat agreed to raise $20,000 besides his own subscription, to add to the subscriptions still in force at Gaffney, and to take charge of the mill as its active president. The $20,000 was invested by friends of Mr. Wheat at Clifton and at Kings Mountain, nearby. Directors were soon elected, and the imported president with his contributions to the venture, was installed.[273]
At the commencement of the great period of cotton mill building in the South, every town which could make any pretensions to ability to establish a mill was engaging the utmost resources of the moneyed men it had—capital was hardly seeking opportunities for investment. Sometimes, however, a place with almost no resources and with only a few enterprising citizens, perhaps, would advertise itself openly as an inviting chance. An advertisement in the winter of 1881 read: "We will give to a Cotton Manufacturing Company, that will organize and locateat Landsford, S.C., with a capital of $300,000 a site, 20 acres of land and 300 horse water power." Those interested were directed to apply for particulars to three gentlemen living respectively in Rock Hill, Landsford and Charleston.[274]These were doubtless promoters who had settled on this particular town as worth effort, or who were burdened with real estate of no value unless the town could be built up.
But these instances were the exception at a time when everybody was too much concerned with the cotton mill in his own town, to think of the needs of another place. There is a notable instance of the bidding of one place against another for a proposed cotton mill, however, in recent years. Captain Ellison A. Smythe announced that he would put up a fine goods mill as all of his interests in the Piedmont of South Carolina have prospered, there was keen rivalry between Greenville and Laurens for the plant. There were campaigns in both places, much enthusiasm being evidenced; Greenville was able to offer the best proposition, and got the Dunean Mill.[275]
In the methods of securing capital at home, two co-operative schemes are to be considered. The plan that comesfirst to mind as co-operative is said by Mr. Holland Thompson book to have been often employed in the building of cotton mills in North Carolina; shares would be of $100 par value, made payable in weekly instalments of one dollar, fifty or even twenty-five cents, thus attracting the very small investor—operatives took shares under such an arrangement. The last payment plan requires eight years for completion, as against four or two for the first plans; those wishing to do so might pay cash, less six per cent. for the aver payment-time, the discount bringing the share down to $89.60 plus.[276]
The second mill—the Cabarrus—built by Mr. Cannon at Concord, North Carolina, was financed in this manner. Its plant was an old wood-working and iron establishment slightly modified to house cotton machinery; its capital stock was only $15,000 one-half paid up, and the other half payable in fifty cents weekly instalments, the whole to be paid in two years. Mr. Hartsell of Concord, remembers seeing the old secretary-treasurer of the mill going about the town with his collection books under his arm.[277]The Spartan Mills, Spartanburg, South Carolina, were rected under a building and loan scheme whichgave the mill management little ready money.[278]Besides the expense of collecting the small and frequent payments, serious disadvantages might result from such a method of financing a mill. For instance, in the case of the Spartan Mills, John H. Montgomery, the projector, was persuaded to buy the old machinery of a mill at Newberryport, Massachusetts; he lacked capital to purchase machinery otherwise, and the Newberryport mill took payment in stock. The machinery thus installed was worn out, out of date, showed quick deterioration and proved very expensive.[279]
The other co-operative plan is said to have been followed in the case of a good many South Carolina mills. All of those who might contribute to the erection of the plant—dealers in lumber, paint, tin, brick, etc.,—would be asked the question: "If you get this contract, how much stock will you take?"[280]
Some account has been given of the additional issues of stock on account of extensions in plant. There is evidencethat very often, however, increases in capacity were made through earnings and credit rather than by the issue of more stock. Indeed, the latter method has been much more frequently followed, if the opinion of one of the best informed of the younger cotton mill men is to be taken.[281]He recited in support of his contention the typical case of the 5,000 spindle mill at Williamston, South Carolina, which issued extra stock to $30,000 and increased its spindleage to 15,000. Since then, the plant has grown to have 32,000 spindles, its capital standing at $300,000; this was accomplished through earnings and credit. It is fair to say that the normal capitalization of a plant of 32,000 spindles would be something in excess of $600,000, computing the cost at $20 to the spindle.
The first two-story addition of the Gaffney Manufacturing Company was rected upon earnings of the original plant in the first three years of its operation.[282]The finishing plant of the same mill, erected some years later, had to be dismanteled and given over to looms because the stockholders in the company would not give the president the required support, and the debt incurred was pressing.[283]
The Young-Hartsell Mill, at Concord, North Carolina, has been built up in plant by putting earnings back into the factory. Considerable enlargement, on the most approved lines, has recently been completed, the end of the extension being weatherboarded to allow of easy further addition.[284]
The capital stock of the Arlington Mill, Gastonia, organized by G. W. Ragan and some of his friends who had withdrawn their holdings in the Trenton Mill, at the same town, was over-subscribed in fifteen minutes. At organization, the stock was fixed at $130,000 for 3,000 spindles; in three years an additional stock dividend of $45,000 was issued, and the spindleage increased to 9,500 and later still to 12,000.[285]There evidently was not here, as it has been intimated there sometimes was, an impetus toward expansion by reason of over-subscription at the time of organization, for the additional stock issued, presumably at least, went automatically to the original subscribers. It was a case of extension from earnings.
The mills established at the opening of the era made frequently huge profits, which made increases in size from earnings to the natural course.[286]
Also, just as earnings have in such cases quickened plant extension, so the investment of profits back into the business has in turn increased efficiency and earnings. The capital of the Salisbury Mill, as has been said, has now reached $250,000, but much of the increase in size of the plant has come by the agency of gains reinvested.[287]
Having seen some of the ways in which capital was secured from Southern sources, the paragraphs following deal with the means through which capital was induced to come to the Southern cotton mills from without the section.
From a reading of the preceding chapter, the question might naturally be asked: By just what methods did a Southerner anxious to establish a cotton mill secure financial assistance at the North?
Not a few Southern mills were projected by merchants, frequently small country store-keepers, as they would be called; but it is to be borne in mind that the proprietor of a general store in a rural community or in a small town in the South occupies a position very different from that of the small merchant elsewhere. The economy of the neighborhood pivots upon him—he is the agent of the fertilizer manufacturers, and extends,credit for fertilizers and food until the cotton crop is gathered; he probably markets the cotton when the bales are hauled. He is the link between the great sphere of business without and the little world of affairs within. What the country lawyer is as real estate broker and arbiter of landed fortunes, that, and a great deal more, is the country merchant in all other departments of material activity. Holding, as he did, the contacts of the community with moneyed interests without, it was natural that the merchant should often be the leader, and also natural that he should turn to his mercantile connections for assistance. One case will illustrate how this worked out.
James W. Cannon was born at or near the little place of Concord, North Carolina. He early went into a general store as clerk, and through successive stages, largely aided by his attention to business and his civility, he came to own a general merchandise business of his own in the town. He was in the habit of buying brogans from the house of Albert Stone; cloth he got from Leo Loeb, and he had an arrangement by which he shipped raw cotton to William Wood and Son. He decided to build a cotton mill at Concord—really the first at the place belonging to the great period of establishment—and got some $60,000 in subscriptions to stock locally. This was not sufficient capital, $75,000 being aimed for. Mr. Cannon under these conditions went to Stone, to Loeb and to Wood and Son and explained his plans. The mill would enable the town of Concord to grow, and he coulddo a larger business with each of them. Whether moved by this reasoning, or influenced by the fact, that it was almost worth the amount of the subscription to keep Cannon's business and good will, each of the three firms subscribed to $5,000 worth of stock.[288]
Judging from the statement made by an old gentleman who has seen the whole development of Mr. Cannon's interests, he has held to these former merchant-day connections, though he is now as far from country store-keeping as could well be imagined. After explaining that Mr. Cannon in the early days was merchandising and could get money from his mercantile connections at the North, he said that retired wholesale merchants of Philadelphia, New York and Boston have so much confidence in him that they give him any amount of capital he needs.[289]