Duel of the Aristocrats O n November 24, 1817, a young ferry captain named Cornelius Vanderbilt was approached by a dark-haired, double-chinned businessman with a seemingly simple proposition. Thomas Gibbons addressed the 23-year-old entrepreneur as „Captain Vanderbilt‟ and briefly introduced himself: a rich planter from Georgia who had recently relocated to New Jersey. His new ferry line ran up river from Elizabethtown, New Jersey to New York and his ferryboat captain had inexplicably quit. He needed someone to temporarily captain the Stoudinger “on this day, and, I expect, for a few days to come.” Would Vanderbilt be interested? The young captain accepted, much to the surprise of his friends. Why would the fiercely independent Vanderbilt agree to take orders from an aristocratic businessman, especially when Vanderbilt‟s own ships were larger and faster than the Stoudinger? No one knows for sure why Vanderbilt agreed to the deal but one possibility seems likely: unlike any other ship in Vanderbilt‟s small fleet the Stoudinger ran on steam. Eager to learn by experience everything he could about the newest technology to hit the market, Vanderbilt couldn‟t resist the notion. But he had unknowingly plunged himself into the middle of a titanic legal battle that would transform business as usual in the United States. That route was already spoken for, you see. A monopoly had been granted by New York State to steamboat entrepreneur Aaron Ogden, which gave him exclusive rights to ferry those waters and profit from the venture. Gibbons at the time knew he was taking on more than just a competitor, he was challenging the government of New York and the repercussions of this war would reach far beyond a Hudson River ferry line. A t its inception, America was not the capitalist behemoth it would later become. The economy was still stuck in the stratified world of the 18th century culture of deference. It was a culture defined by class and hierarchy: it was right for some to be rich and educated while others were poor and ignorant. Political and economic leadership in that world naturally belonged to the upper classes. Since many among the wealthy were land owners who did not work directly for their income, especially in the 18th century, they had ample time to refine themselves through education. The refinement made them as a class the obvious choice for political and business leadership. But they weren‟t just a landed gentry, they were monied as well. Seeing themselves as the driving and ordering forces of economic progress they ran merchant operations, invested in real estate, ran shipping routes, expanded road and canal networks, and promoted stock and other financial markets. Any enterprise, political or economic, that served the public interest should be undertaken and managed from the top of society; any other approach would be chaotic. The line between public and private service among the wealthy was often blurred. It had long been the practice of wealthy merchants and land owners to use their government positions and contacts to grant themselves monopolies over various business operations. Corporations were chartered only for the well-connected, banks lent out money only to close friends, family, and cronies. Government safeguarded these networks and privileges rather than attempting to dismantle them, mostly because the aristocrats that undertook business operations were also chief officials in government. But it wasn‟t cronyism in their opinions. If the rich were going to risk their personal wealth on an economic venture that satisfied a public need, or so the logic went, government owed it to the public to assure the success of that risk. The simplest method for guaranteeing success was the granting of government monopolies. By protecting the profits of the rich, all society was benefitted. But some were beginning to believe in a more individualized competitive system where business and political success could be earned, not just inherited. Alexander Hamilton, for one, envisioned a „meritocracy‟ where individual effort set individuals apart rather than birth. Gibbons‟ name would become forever associated with that cultural shift. And the particular monopoly Gibbons was fighting was the handiwork of one of New York‟s most powerful elites: Robert R. Livingston. Robert R. Livingston had an impressive resume: he served on the Committee of Five that drafted the Declaration of Independence, was the first chief judge in New York, was secretary of foreign affairs under the Articles of Confederation, had administered the Oath of Office to George Washington, and rented out vast tracts of land to hundreds of tenant farmers. Entrepreneurial minded, Livingston became drawn to the possibilities of the steam engine as early as the 1790s. He was granted a steamboat monopoly for all New York state waters in 1798, but failed to produce so much as a prototype engine himself. As minister to France under Thomas Jefferson and principal negotiator for the Louisiana Purchase, however, Livingston met the inventor Robert Fulton. The combination of Livingston‟s money and Fulton‟s inventiveness was a potent one: Fulton‟s first steam boat ran up and down the Seine in 1803. In the US, Fulton unveiled his newer, faster model (topping speeds of 5 mph) in 1807, the same year he married into the Livingston family. Livingston got his original monopoly extended and partnered with Fulton on a New York to Albany steamboat line. Though Livingston may have believed it was his right to create such an arrangement, he was not without opponents. Chief among them early on was Aaron Ogden, steamboat entrepreneur and governor of New Jersey in 1813. Angry that New York State handed out monopolies for waters shared with New Jersey, and certainly wanting to open the route up for his own ferries, Ogden instigated a legal challenge to the Fulton monopoly. Ultimately Ogden lost and the monopoly stood. But Fulton died in 1815 and the Livingston family (Robert Livingston was dead by then) followed the old maxim of keeping enemies closer than friends: it issued a partial license for Ogden to run a line from Elizabethtown, NJ to New York. But Ogden came to the Livingston table with heavy baggage: an ongoing war with the pugnacious Thomas Gibbons. Thomas Gibbons seemed such an unlikely foe of aristocratic privilege. And had the steamboat monopoly not have become so personal, he may never have led the charge that drastically altered the US economy. He was a Georgia-born rice planter, with a large headcount of slaves and an incredibly rich plantation. In addition to accumulating other plantations in domino-like succession, Gibbons was a successful attorney in Savannah, later the town‟s mayor, and the only British loyalist in his family when the revolution broke out. He was a patrician through and through. In 1801, he established “bachelor quarters” in Elizabethtown, New Jersey so he could act as his own merchant middleman while his son managed the planting and harvesting down south. But business was not his only reason for escaping Georgia: his marriage was on the rocks, too, and Gibbons likely widened the rupture when he impregnated one of his New Jersey maids. But he continued to live the good life, eating and drinking himself up to about 300 pounds and into a severe case of diabetes. He mingled among the political and economic socialites, building a network of partners and associates that would facilitate the buying and selling of his plantation goods. One partner in particular was his neighbor and the governor of New Jersey, Aaron Ogden, the man who would become his most detested rival. I t all started simple enough: Ogden rented a pier from Gibbons and the lease was up for renewal. Gibbons demanded a price too high in Ogden‟s judgment and the negotiations were bitter. Where Gibbons was explosive and contentious, Ogden was calculating and sneaky. He tried to pressure Gibbons into a lower price by alternative means. Gibbons had cut his wife, daughter, and son in law out of his will during their marital dispute. Ogden surreptitiously gave free advice to them on how they could legally maneuver to force a reinstatement. Maybe Ogden thought it was a good bargaining chip: he could offer to cease advising them if Gibbons gave in to his price demands. The plan backfired, though, Gibbons was furious when he found out about Ogden‟s treachery. But Ogden didn‟t stop there. By chance he was given a promissory note originally written by Gibbons to a third party. In an economy with almost no circulating currency, promissory notes (paper statements similar to checks) written by the wealthy functioned as cash. The one Ogden acquired, however, was past due. He promptly deposited it with his bank and had Gibbons arrested for nonpayment. That was May 1816. (It didn‟t help that at the time of the arrest Gibbons was being ferried on one of Ogden‟s steamboats.) Gibbons bailed himself out and stewed for months. In July he trekked the ½ mile to Ogden‟s house with a horsewhip in his hand. Ogden fled out the back and over a fence while Gibbons pounded on the front door. Gibbons later said in court that had he found Ogden home he would have “whipped him within an inch of his life in his own house.” Ogden, for his part, had Gibbons arrested for trespassing and for challenging him to a duel. Business had become a seething personal matter in Gibbons‟ honor- obsessed mind. At length he devised a plan for revenge: he would open his own ferry line from Elizabethtown to New York and drive Ogden completely out of the steamboat business. Though it was probably conceived as a business war, the dispute between Gibbons and Ogden involved much more than price wars and cutthroat competition. Backed as he was by the Livingston license, Ogden‟s business was impregnable unless Gibbons could somehow dismantle the entire monopoly system. For his scheme to work he had to take on the government of New York and win. On the whole Gibbons was no opponent of monopolies, neither was his young captain, for that matter. He felt they were justified when an inventor produced a new technology for public use. But Ogden and his ilk? “Locusts and blood suckers,” Gibbons wrote, “They have no claim to useful invention” and thus were not entitled to any special privilege or protection. This monopoly served only one purpose: “to enrich himself,” adding “we cannot get to New York without their consent at their price.” Ultimately Gibbons came to see the larger implications of his personal vendetta. “The present question is not…of pounds shillings & pence…it is the great question of sovereign rights—the right of navigating your own waters, under the laws…of the U. States.” This was no isolated grudge match. Gibbons intended to argue that the United States should be one common market under the authority of Congress. If he won, it would do away with the old notion of each state imposing its own barriers and privileges on business activity. He was probably also aware that his would be the first case in the republic‟s history that focused on the commerce clause of the US Constitution. Fabulous steamboat profits certainly motivated his drive to win as well: Ogden‟s line profited about $61,000 in 1818, in an era when $30,000 was considered immense. Gibbons approached the head of the Livingston clan in 1817 and quietly informed him that he was building a new boat to compete with Ogden on the Elizabethtown line. It would be christened the Bellona, named for the Roman goddess of war. John Livingston, it turned out, didn‟t like the license arrangement with Ogden and didn‟t care if Gibbons challenged him for business. It isn‟t likely that Gibbons let John in on his ultimate goal, though, or the conversation might have been different: Gibbons wanted Ogden in debtor‟s prison when all this was over. He wanted to crush him in hand-to-hand business combat out on the open water. And the man he would use to accomplish that bloodier goal was the young combative captain he had hired just a few weeks before meeting Livingston: Cornelius Vanderbilt. The Bellona began its service under Vanderbilt‟s command in October 1818, completing the trek at greater speed and charging half what Ogden charged for the upriver trip. New York‟s high society instantly regarded such a maneuver as scandalous. But Gibbons didn‟t care. The trap was baited and set and Ogden walked right into it: he filed an injunction against Gibbons for him to cease and desist operations. Now Gibbons had legal grounds upon which to stage his assault on the monopoly. He almost immediately began the appeals process. Meanwhile Vanderbilt carried out the war on the waterfront. Crews from each firm resorted to stealing each other‟s fuel wood and more than once fist fights broke out (one of Ogden‟s men attacked Gibbons‟ process server on the docks, kicking and punching and repeatedly calling him a “damned son of a bitch”). Vanderbilt kept up the pressure. Though he was ordered by a New York court not to run the ferry, he ignored it and was once or twice imprisoned for it. He routinely dodged New York authorities out on the river as if he were running a blockade. Gibbons stepped up the business conflict by merging with other ferries and a stagecoach line to form one solid route from Philadelphia to New York, the two largest cities and economic centers of the young nation. This move even angered the heretofore passive John Livingston, he issued an injunction against Gibbons as well. New Jersey entered the fray in 1820, passing a law that allowed Gibbons to seize the ships of any firm that impounded his own as a result of the New York monopoly. He promptly seized all of Livingston‟s and Ogden‟s vessels and held them until they allowed the Bellona to continue its run. The competition became fiercer in 1821. In that year Gibbons cut his fares yet again, forcing his competitors‟ hands once again. Upper society reviled him, calling him a rascal and accusing him of unprovoked malice. In fact, Gibbons and Vanderbilt shared a belief in a growing market. It is a notion we take for granted in modern times but one that was spurned in the early 19th century. Aristocratic business men such as Livingston believed in stable markets, i.e. that there was only a certain number of ferry boat customers in a given location. That number would neither swell nor shrink with time. Given that stubborn reality, the ferry could only charge one stable price in order to profit. Lowering prices would cause a loss, raising them would be unjust. Gibbons, however, believed that by lowering prices he could expand the number of people wanting to ride the ferry. Almost anyone would pay to ride if the fare was right, in his mind, thus to increase profit he could lower the retail price. The increase in customer volume would raise total revenue and more than offset the decline in price per each paying customer. As if to prove his point, Gibbons slashed fares again in 1822 and drew enough business away from his rivals that Ogden teetered on the edge of bankruptcy. He put one of his boats, the Atalanta, up for sale and then begged Gibbons for a truce, an offer that was sternly rebuffed. A senior Livingston even approached Gibbons and asked him to give up his grudge for the sake of preserving aristocratic harmony. Gibbons rebuffed him, too. By 1823, Livingston was filing injunctions against Vanderbilt daily, leading to $100-per-day fines every time he docked in New York. Vanderbilt grew increasingly adept at avoiding arrest: he created a subfloor compartment to hide in and once trained a woman dressed as a man to pilot the Bellona into the dock. Officers boarded to make their arrest but left in embarrassment upon seeing the woman. Vanderbilt once defiantly pushed off from the dock with a New York officer on board then gave him a choice: swim back to the city or spend the day in New Jersey. It isn‟t recorded which course the officer took. Gibbons had a stroke in 1823 and spent most of his time isolated at home, unsure of how the war was proceeding. Doubt began to plague him such that he once asked Vanderbilt‟s opinion if they should close down and give up their boats. His captain never replied but it‟s certain Vanderbilt had taken Gibbons‟ cause as his own and was determined to see it through. He secretly bought the dock lease Ogden was paying in New Jersey and once the ferry season began Vanderbilt evicted his opponent and had the entire crew arrested. The Livingston‟s made one last peace offering to Gibbons in January 1824, one week before the Supreme Court would hear the case. If Gibbons would withdraw, Livingston would extend to him a partial monopoly over the New Jersey run. Through his son William, Gibbons replied that it was too late. A t last Gibbons v Ogden was heard before the Supreme Court in February 1824. Even here the matter became somewhat personal: one of Ogden‟s lawyers was Thomas Emmet. Emmet had fallen into the icy Hudson from a steam boat in 1815 and Fulton leaped in to save him. Emmet lived, of course, but Fulton suffered an illness that killed him as a result of his heroics. Ironically, they were returning from a trip in which they lobbied the New Jersey legislature to stand against Governor Ogden‟s push to dismantle the New York monopoly. Ogden‟s lawyers argued that the New York monopoly was a property right, one the court was bound to uphold and protect. They also concluded that sovereign states should have the right to enact economic policies for commerce within and across their borders. Harkening back to the ideas of the revolution: without states‟ rights a congress in Washington was the same as a parliament in London. Gibbons‟ lead attorney, the notorious Daniel Webster, took a different tack. The Constitution envisioned a national arena where commerce could flow freely across state borders. Feuding states, each with its own set of trade restrictions, did not constitute the vast, uniform commercial unit called for in America‟s founding document. The commerce clause did not apply in this case, Ogden‟s lawyers contended, because commerce was the buying and selling of goods not the transportation of people. They further argued that state powers over commerce had existed under the Articles of Confederation and did not change with the new Constitution. Webster and Wirt fired back that the Constitution created a new paradigm of national unity that forsook the ramshackle assembly of states under the Articles. Three weeks and a dislocated shoulder later, John Marshall read the majority opinion of the court to a packed house. The Chief Justice was characteristically long and thorough in his treatise. And in support of his decision to strike down the New York monopoly he was highly technical in dismantling Emmet‟s arguments. True the states at one point were a loose league of principalities that had the right to establish laws affecting commerce. But, he said, “when these allied sovereigns converted their league into a government” under the new Constitution “the whole character in which the States appear underwent a change.” Thus, Marshall stated, the Court‟s opinion would derive from the text of the Constitution and not from the mantra of tradition. And power over commerce among and between states had been expressly delegated to Congress alone. But Marshall also felt it necessary to define the word commerce, especially since Emmet had argued that it didn‟t include the transport of passengers from one location to the next. Commerce did include the trafficking of goods and services, he conceded, but “it is something more. It is intercourse…between nations, and in parts of nations, in all its branches.” In that sense commerce was the great unifying force of national life, a force which would bring people of otherwise disparate geography into one cultural whole. Commerce, in Marshall‟s estimation, was one of the “primary objects” in mind when the people adopted their Constitution. The spirit of Marshall‟s opinion, and the concurring brief by Justice Johnson, suggests that the United States would be brought into full, united harmony by commerce regulated by one national legislative body. The New York state monopoly, one of the last bastions of the old aristocratic order, had been felled. T rue to Gibbons‟ design, Aaron Ogden went bankrupt and landed in debtor‟s prison. He was there until Aaron Burr lobbied the New York legislature to pass a law banning veterans of the Revolution from serving prison sentences due to debt. He served as customs collector for New Jersey from the time of his release until his death in 1839. By most contemporary accounts Aaron Ogden was universally liked and respected with only one known enemy: Thomas Gibbons. Gibbons himself was practically bedridden for the rest of his life. Vanderbilt continued to run his steamboat operations, most of the time without informing Gibbons of his decisions. In May 1826, Gibbons feebly ventured on a walk out of his home. He collapsed on the block outside and died the same day. For the public in 1824, Gibbons v Ogden was a major step towards freedom; one historian has even called it the “Emancipation Proclamation of American commerce.” The world now offered unbelievable new possibilities for aspiring merchants and entrepreneurs. No longer be barred from transactions by state monopolies granted to old guard elites, they could bask in the new era of competition. Free and plentiful commerce, many thought, was crucial to a free and abundant people: the national state would be held together by a national market. Steamboats registered with the state of New York rose from 2 per pier to 22 in just a year. That was fortuitous timing, it turned out. In 1825 the Erie Canal was opened, bringing inland farmers contact with urban coastal markets. The New York piers were swamped with goods in need of merchant middlemen and shipping services; the rising tide of prosperity practically created a new middle class. The Canal would carry 185,000 tons of freight along its 364-mile course in the first year alone, in 1880 it was moving 4.6 million tons per year. By 1830, a whole network of Erie-inspired canals and accompanying railroads would drastically reduce shipping costs for American farmers and make their wheat cheaper than European wheat for the first time in history. Suddenly global markets demanded cheaper US grain, a radical change in market dynamics that propelled America‟s rise to economic might and created a major impetus for expansion inland. Illinois and Iowa took the place of New York and Pennsylvania as the American cornucopia, pushing pioneers more inland to reap agricultural fortunes and widening the variety and influence of merchants. The modern America was being born. But, strange to relate, this major revolution in American commerce—the beginning of what is now called “American capitalism”—started with a simple grudge match over the lease price of a single pier in New Jersey.
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