u.s. grant’s humiliation — 8/04/17

Today’s selection — from American Ulysses: A Life of Ulysses S. Grant by Ronald C. White.
U.S. presidents did not receive pensions until well into the 20th century. Prior to that time, a president was expected to return to work to earn his living after serving. For U.S. Grant, who was never well situated financially, this was a challenge. For this reason, late in his life, he joined a small Wall Street firm that had been started by his son Buck and Buck’s friend Ferdinand Ward, who was reputed to be a financial wizard. Soon he learned to his horror that his firm was nothing more than a Ponzi scheme, and he was soon destitute:
“Today, we might call [Ferdinand] Ward’s maneuvering a Ponzi scheme, made infa­mous by Bernie Madoff in 2008. In Grant’s day, it was called ‘rehypoth­ecating.’ It worked like this: Ward paid abnormally high interest to his customers by pledging securities as collateral on a loan, whereas the same securities had previously been pledged for other loans. As a result, Ward was able to pay his investors their interest by siphoning off money from new investments. None of his customers knew, including the two Grants. [By late 1883, Grant] estimated his wealth at $1.5 million, mostly thanks to Ward’s investments.  …
Wall Street Panic of 1884
“Sometime in early 1884, Horace Porter, Grant’s former aide and now president of the Pullman Palace Car Company, felt compelled to warn the general that the profits he had heard about could not be legitimate. It just so happened that when he arrived at Grant’s house, Ward was pres­ent. And after listening to the enthusiastic Ward and watching the gen­eral’s appreciative response, he withdrew, deciding not to interfere.
“On Sunday afternoon, May 4, 1884, Ferdinand Ward rang the door­bell at 3 East Sixty-sixth Street. Ward’s visits to Grant’s home were always welcome, but usually he did not come uninvited. A maid escorted him into the parlor, where he was greeted by Grant and Buck. He told the two men the Marine Bank was in grave difficulty because the city chamberlain had decided to withdraw some of the city’s funds.
“Grant expressed surprise and asked how this matter concerned him. Ward replied that since Grant and Ward had $660,000 deposited there, this could put the firm’s financial position in jeopardy.
“Buck interjected, But isn’t the bank good for the funds?
“Certainly. Nothing to be worried about in the long term. But the firm would need money to cover the potential shortfall. Ward said he already had checks for $230,000 but wondered if the general could borrow an­other $150,000 that day. Ward assured Grant the money would be needed for only twenty-four hours.
“Grant agreed to try to borrow the money. With Ward and Buck in tow, he traveled in his carriage down Fifth Avenue, stopping at the tur­reted fifty-eight-room home of William H. Vanderbilt. Once inside, em­barrassed by his unannounced call, Grant explained the reason for his visit. Vanderbilt, eldest son and heir of Commodore Cornelius Vander­bilt, made it a habit not to make personal loans. Known to be a cantanker­ous man, he told Grant, ‘I care nothing about Marine Bank. To tell the truth I care very little about Grant & Ward. But to accommodate you personally I will draw my check for the amount you ask. I consider it a personal loan to you and not to any other party.’
“Grant accepted the check for $150,000.
“He rejoined the younger men in the carriage and returned to Sixty­-sixth Street, where he endorsed the check and handed it to Ward. [The] young Napoleon assured the old general the whole matter would be all right.
“On Tuesday, May 6, the Marine Bank opened its doors promptly at ten A.M. The bank’s directors arrived and assembled for their weekly meeting. But … where was Ward? Someone contacted his office, but no one had seen him.
“The directors’ meeting ended at eleven A.M. A few minutes later, all doors to the bank were locked even as depositors began to congregate outside. …
“In midday, Grant arrived at his office at 2 Wall Street. Crowds milled in the street, but newspaper reporter Alexander Noyes wrote, ‘The gen­eral looked neither to right or left.’ As Noyes watched, ‘Nobody fol­lowed him, or spoke to him, but everyone in the cynical “hard-boiled” group took off his hat.’ The young reporter declared, ‘It was not so much a tribute of respect to a former Chief Magistrate as spontaneous recognition of the immense personal tragedy which was enacting before our eyes.’
“Behind closed doors, Grant asked Buck what had happened.
” ‘Grant and Ward has failed, and Ward has fled. You’d better go home, Father.’
“Not saying a word, Grant steadied himself on his crutches, which he still used five months after his [recent] fall, walked silently past the gathering crowd, and made his way home.
“Deeply humiliated, he told Julia all that had happened. Then he opened his wallet and removed its contents: $81. She had $130. All his dreams for retirement had vanished….
“Grant determined he would repay every debt, starting with what he owed William Vanderbilt. He prepared an accounting of all he owned: his farm in Missouri, homes in Galena, Philadelphia, and Washington, plus land in Chicago. He gathered his swords, campaign maps, the gold medal awarded by Congress, the pen used to write orders for the Battle of the Wilderness, and rare souvenirs acquired on his world tour. Julia con­tributed jewelry and vases, including her prize vase filled with gold coins given them in many countries. Grant held back nothing. In the end, he believed the total amounted to almost exactly $150,000.
“He sent everything off to Vanderbilt. Upon returning from a Euro­pean vacation to find Grant’s shipment, the financial titan was perplexed. He notified Grant he would return everything. Grant would not hear of it.
“In the end, Vanderbilt accepted the repayment and wrote Julia, ‘All articles of historical value and interest shall at the General’s death, or if you desire it sooner, be presented to the government at Washington where they will remain as perpetual memorials of his fame, and of the history of his time.’ Vanderbilt acted both to preserve Grant’s pride and to preserve his story for future American generations.
“Even though Vanderbilt took title to the house at 3 East Sixty-sixth Street, he insisted Grant and Julia continue to live there.
“The public did not blame Grant. Most Americans believed him an un­informed bystander to Ward’s gigantic swindle. Known and unknown persons stepped forward to help.
“Charles Wood, who owned a brush factory in Lansingburgh, New York, wrote the general, ‘I enclose check for five hundred dollars on ac­count my share due for services ending about April 1865.’ He did so be­cause ‘I owe you this for Appomattox.’ Reading of ‘the Grant Failure’ in the Troy Daily Press, Wood simply wanted to help.
“Grant immediately wrote Wood to acknowledge this gift from a stranger. Within days, two more checks from Wood totaling $1,000 ar­rived. ‘The country will rally for you but large bodies move slowly,’ he encouraged. …
“On the afternoon of May 27, the doorbell at 3 East Sixty-sixth Street rang. Once again, Ferdinand Ward stood at the entrance. Having been arrested on May 21, and destined to spend the next eight years in jail, he was free on bail. He wished to see Grant for only a few minutes. The general sent his answer: he had no more to say.”
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American Ulysses: A Life of Ulysses S. Grant

Publisher: Random House
Copyright 2016 by Ronald C. White
Pages 629-633

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ancient pensions

Today’s selection — from A History of Public Sector Pensions in the United States by Robert L. Clark, Lee A. Craig, and Jack W. Wilson.  Public pensions, which have become a source of controversy in contemporary finance and politics, have been used since ancient times as a way to engender loyalty among military troops. The problems resulting from pensions were fully present in these earliest programs:


Imperial Roman legionaries in tight formation

“From the Roman Empire to the modern nation state, rulers and parlia­ments have found it expedient to provide pensions for the workers who carried out their policies and, thus, helped perpetuate their regimes. The history of these public sector pension plans is both colorful and instructive. More than two thousand years ago, the fall of the Roman republic and the rise of the empire were inextricably linked to the payment, or rather the nonpayment, of military pensions.

“During the American Revolution army pensions became such a sensitive issue that only the personal interven­tion of George Washington prevented a mutiny of Continental troops over their promised pension payments. In the nineteenth century the U.S. navy pension fund went bankrupt on no fewer than three occasions, only to be bailed out by Congress each time. The management of the navy pension fund involved misfeasance, malfeasance, and nonfeasance of a strikingly bold nature. These and other episodes … provide the reader with a chronology of these historic events and a series of policy lessons pertaining to current employer-based pension plans. …
“It is typically thought that employer-provided pensions in the United States are a relatively recent form of compensation having been introduced by employers late in the nineteenth century or early in the twentieth. This perception is correct concerning private pensions and most public pen­sions for civilian employees; however, pensions for disabled and retired military personnel predate the signing of the U.S. Constitution.
“Military pensions have a long history in Western civilization and have often been used as a key element to attract, retain, and motivate military personnel.”

A History of Public Sector Pensions in the United States

Authors: Robert L. Clark, Lee A. Craig, and Jack W. Wilson
Copyright: 2003 Pension Research Council of the Wharton School of the University of Pennsylvania
Publisher: University of Pennsylvania
Pages: 1-2

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to delegate or not to delegate

Today’s selection — from The Miles Davis Quintet by Bob Gluck. Most organizational management styles fall into roughly two camps: those managers that manage very closely, dictating each decision and keeping very close tabs on each detail, and those managers that are more inclined to delegate and give their subordinates freedom and latitude. Miles Davis, perhaps the most revered and successful jazz musician of the twentieth century, fell into the latter camp. His energies were directed at finding the very finest musicians he could possibly find — in fact a huge number of his band members went on to become legends themselves — and then giving them the space to explore and create:

“He was at the time a nondirective bandleader. Members of his quintet were given wide latitude to play what they wished. The ‘just going places’ ethic noted by Corea was pregnant with possibilities, opening tremendous space for unan­ticipated musical creativity. Corea observes that Davis’s method was focused on the choice of musicians:
Miles … was a chemist — a spiritual chemist — as far as putting musicians together, because he himself didn’t really compose tunes that much, although he developed styles and arrangements but he chose musicians that went together a way that he heard and that he liked. And he went from this piano player to that piano player or from this drummer to that drummer — he chose these guys so that it went together in a way that he heard it. And I guess that’s leadership, you know, it’s like the choosing of the way and the treatment of the group.
The 2nd great quintet: Wayne Shorter,  Herbie Hancock, Miles Davis, Ron Carter, and Tony Williams
“In a 1969 DownBeat interview with Larry Kart, Corea relates that in their first conversation, Davis told him about how to interpret Shorter’s compositions: ‘I don’t know what else to tell you except that we’ll go and play, but whatever you think it is, that’s what it is.’ Hancock remembers Davis’s leadership of the previous quintet in a similar way. He explains in a 1971 DownBeat interview:
“With Miles’ band we were all allowed to play what we wanted to play and shaped the music according to the group effort and not to the dictates of Miles, because he really never dictated what he wanted. I try to do the same thing with my group. I think it serves this function that I just mentioned ­– that everybody feels that they’re part of the product, you know, and not just contributing something to somebody else’s music. They may be my tunes, but the music belongs to the guys in the band. They make the music — it’s not just my thing.”
The Miles Davis Lost Quintet and Other Revolutionary Ensembles

Author: Bob Gluck
Publisher: University Of Chicago Press

2016 by The university Of Chicago Press, Ltd., London

Page 14
 
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henry ford doubles his workers’ wages

Today’s selection — from Railroading Economics by Michael Perelman. As the Industrial Age took hold, workers did not adapt well to the regimented hours and crushing and monotonous life in the factory. The problem became so pronounced that Henry Ford’s factories of the early 1900s had turnover of almost 400 percent — meaning he had to hire 50,448 men in a given year year to maintain a workforce of 13,623. So in 1913, he famously doubled wages — not as a matter of largesse but in order to reduce his expenses. However, as with all things involving Henry Ford, there was a catch:

“Nowhere was the problem of turnover and absenteeism more severe than in the factory of Henry Ford, where workers’ dissatisfaction was running dangerously high. Absenteeism in the Ford plant in 1913 had reached 10.5 percent.
“Turnover at the Ford plant had soared to 370 percent by 1913. The company had to hire 50,448 men just to maintain the average labor force of 13,623. Company sur­veys at Ford revealed that more than 7,300 workers left in March 1913 alone. Of these, 18 percent were discharged; 11 percent formally quit; and 71 percent were let go because they missed five days in row without excuse and so were deemed to have quit. On each day, it was necessary to make use of 1,300 or 1,400 replacement work­ers without any experience. One observer remarked, ‘the Ford Motor Co. had reached the point of owning a great factory without having enough workers to keep it humming.’
“Hiring new workers, even unskilled workers, and offering them a minimum of training turned out to be an expensive proposition. Stephen Meyer estimates that Ford spent $35 to break in each new worker. With 52,000 workers entering the Ford factory in 1913, the company lost $1,820,000 because of turnover. In addition, although conventional union organizing was not much of a threat for most industrial­ists at the time, the Industrial Workers of the World was threatening to organize Ford’s factory.’
The day after the Jan. 5, 1914, announcement of the 5-a-day wage an estimated 10,000 job seekers stood outside the Ford plant in Highland Park despite the frigid temperatures. /The Henry Ford
“These conditions prompted Ford to initiate what was perhaps the most dramatic precursor of welfare capitalism: his famous introduction of the $5 a day wage. Although Ford’s gesture seemed unexpectedly generous at the time, Ford himself freely admitted that his motives were entirely self-interested:
There was … no charity involved. … We wanted to pay these wages so that business would be on a lasting foundation. We were building for the future. A low wage busi­ness is always insecure. The payment of $5 a day for an eight-hour day was one of the finest cost-cutting moves we ever made.
“Although Ford based his policy on sound business principles, the business com­munity was aghast at his behavior, excoriating Ford as a ‘mad socialist’ and a ‘traitor to his class.’ The Wall Street Journal and other financial papers enthusiastically joined in the attack.
“Nonetheless, the $5 wage was a brilliant stroke of capitalist genius. In 1914, the first year after Fordbegan the $5 wage, turnover fell dramatically to 54 percent, By 1915, it dropped still further to 16percent. Absenteeism also subsided, falling to 0.4 percent in 1914.
“Despite its effectiveness, the $5 plan was not exactly what it seemed to be. It included a basic hourly wage of only 34 cents per hour plus a profit-sharing rate of 28.5 cents. Workers did not automatically receive the profit-sharing rate. Instead, eli­gibility profit sharing depended on a number of special conditions. To begin with, workers had to perform satisfactory work to participate in profit sharing. In addition, Ford disqualified all women. According to one source, ‘Women did not work on the assembly line, and were not likely to drink and fail to show up for work. They did not jump from job to job. So there was no reason to include them.’
“According to a 1914 Ford pamphlet, to qualify for the plan, a worker also had to be at least twenty-two years old, with six months seniority. Ford imposed numerous other conditions for profit sharing that seemed to be unrelated to work. The company established a Sociological Department, initially consisting of 200 inspectors, to investigate the workers to see if they met the company’s qualifica­tions. They ‘visited workers’ homes gathering information and giving advice on intimate details of the family budget, diet, living arrangements, recreation, social outlook, and morality.’
“For example, the company had to be ‘satisfied that he [ the qualified worker] will not debauch the additional money he receives.’ Toward this end, the Sociological Department had to be certain that the workers maintained a suitable home, refrained from taking in boarders, operated no outside business, made sure that the family did not associate with the wrong people, avoided excessive smok­ing or drinking, and demonstrated adequate progress in learning English. In addi­tion, wives of qualified workers could not work outside of the home. Furthermore, the inspectors had to determine whether the workers displayed suf­ficient thrift, cleanliness, ‘good manhood,’ and good citizenship. Workers also had to tend gardens that the inspectors deemed to be adequate. Not surprising­ly, during the first two years, 28 percent of all male workers were disqualified from profit sharing.
“Ford expected more than improved family life in return for his plan. He expected near absolute obedience. One contemporary study of the Ford system concluded that Ford ‘desires and prefers machine-tool operators who have nothing to unlearn, who have no theories of correct surface speeds for metal finishing, and will simply do what they are told to do, over and over again, from bell-time to bell-time.’

“Ford also expected that this obedience would translate into greater effort from the workers. A production foreman named W. Klann reported, ‘[They] called us in and said that since the workers were getting twice the wages, (the management) wanted twice as much work. On the assembly lines, we just simply turned up the speed of the lines.’ “

Railroading Economics: The Creation of the Free Market Mythology

Author: Michael Perelman
Publisher: Monthly Review Press
Copyright 2006 by Michael Perelman
Pages: 135-136
 
 
 
 
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the cold reality of child labor

Today’s selection — from Empire of Cotton by Sven Beckert. Little 10-year-old Ellen Hootten testified to the working conditions in British cotton mills during an 1833 investigation by the British government:

“Like Brecht’s haulers and builders, few cotton workers have entered our history books. Most left not even a trace; too often they were illiterate, and almost always their waking hours were occupied with holding body and soul together, leaving little time to write letters or diaries, as their social betters did, and thus few ways for us to piece their lives together. One of the saddest sights to this day is St. Michael’s Flags in Manchester, a small park where allegedly forty thousand people, most of them cot­ton workers, lie buried in unmarked graves, one on top of the other, ‘an almost industrial process of burying the dead.’ Ellen Hootton was one of these rare exceptions. Unlike millions of others, she entered the histori­cal record when in June 1833 she was called before His Majesty’s Factory Inquiry Commission, which was charged with investigating child labor in British textile mills. Though only ten when she appeared before the committee and frightened, she was already a seasoned worker, a two-year veteran of the cotton mill. Ellen had drawn public attention because a group of middle-class Manchester activists concerned with labor condi­tions in the factories sprouting in and around their city had sought to use her case to highlight the abuse of children. They asserted that she was a child slave, forced to work not just in metaphorical chains, but in real ones, penalized by a brutal overseer.
“The commission, determined to show that the girl was a ‘notorious liar’ who could not be trusted, questioned Ellen, her mother, Mary, and her overseer William Swanton, as well as factory manager John Finch. Yet despite their efforts to whitewash the case, the accusations proved to be essentially true: Ellen was the only child of Mary Hootton, a single mother, who was herself a handloom weaver barely able to make a living. Until she turned seven, Ellen had received some child support from her father, also a weaver, but once that expired her mother brought her down to a nearby factory to add to the family’s meager income. After as many as five months of unpaid labor (it was said that she had to learn the trade first), she became one of the many children working at Eccles’ Spinning Mill. When asked about her workday, Ellen said it began at five-thirty in the morning and ended at eight in the evening, with two breaks, one for breakfast and one for lunch. The overseer, Mr. Swanton, explained that Ellen worked in a room with twenty-five others, three adults, the rest children. She was, in her own words, a ‘piecer at throstles’ — a tedious job that entailed repairing and reknotting broken threads as they were pulled onto the bobbin of the mule. With constant breakage, often sev­eral times a minute, she only had a few seconds to finish her task.
Men, women, and young children worked in the cotton mills in Lancashire, England
“It was all but impossible to keep up with the speed of the machine as it moved back and forth, so she sometimes had ‘her ends down’  — that is, she had not attached the loose and broken ends of the thread fast enough. Such errors were costly. Ellen reported being beaten by Swanton ‘twice a week’ until her ‘head was sore with his hands.’ Swanton denied the frequency of the beatings, but admitted using ‘a scrap’ discipline the girl. Her mother, who called her daughter ‘a naughty, stupid girl,’ testi­fied that she approved of such corporal punishment, and had even asked Swanton to be more severe to put an end to her habit of running away. Life was hard for Mary Hootton, she desperately needed the girl’s wages, and she begged Swanton repeatedly to keep on the girl, despite all the troubles. As Mary said, ‘I cries many a times.’
“The beatings, however, were not the worst treatment Ellen experi­enced at Swanton’s hands. One day, when she arrived late to work, Swan­ton penalized her even more severely: He hung an iron weight around her neck (there was no agreement about whether it weighed sixteen or twenty pounds) and made her walk up and down the factory floor. The other children heckled her, and as a result, ‘she fell down several times while fighting with the other hands. She fought them with the stick.’ Even today, nearly two hundred years lacer, the pain of the girl’s life, from the tedium of her work to the violence of her abuse, is hard to fathom. …
“Like Ellen Hootton, thousands and, by the 1850s, millions of workers streamed into the world’s newly built factories to operate the machines that produced cotton thread and cloth. The ability to mobilize so many women, children, and men to work in factories was awe-inspiring. Many a contemporary was overwhelmed by the sight of hundreds or even thou­sands of workers walking to and from their places of toil. Every morn­ing before sunrise, thousands of workers walked down narrow paths in the Vosges to the factories in the valley, crawled out of dormitory beds just up the hill from Quarry Bank Mill, left their struggling farms above the Llobregat River, and made their way through crowded Manchester streets toone of the dozens of mills lining its putrid canals. At night they returned to sparse dormitories where they slept several to a bed, or to cold and drafty cottages, or to densely populated and poorly constructed working-class neighborhoods in Barcelona, Chemnitz, or Lowell.
“The world had seen extreme poverty and labor exploitation for cen­turies, but it had never seen a sea of humanity organizing every aspect of their lives around the rhythms of machine production. For at least twelve hours a day, six days a week, women, children, and men fed machines, operated machines, repaired machines, and supervised machines.”

Empire of Cotton: A Global History

Author: Sven Beckert
Publisher: Vintage Books, a division of Penguin Random House LLC
Copyright 2014 by Sven Beckert
Pages: 176-179
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