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Marathon to the Moon

Beautiful, beautiful. Magnificent desolation. Buzz Aldrin, 1969

Apollo’s moonshot gambit in the volatile years of the Cold War also witnessed a series of contributions from DuPont to place a man atop the lunar regolith ahead of the Soviets. From the WWII surplus of corporate R&D the company was primed to produce spin-offs earmarked for the space race. Commercial technology antedating the gauntlet thrown down by President Kennedy’s for manned spaceflight found a buyer in the Apollo program without any de novo development. The maturity of these innovations after long gestation in the marketplace was a boon to the alacrity of triumphs between the mastery of cislunar navigation and Neil Armstrong’s boot print on the moon. America in short order boasted an asymmetric advantage. Unlike the Soviets whose materials science lumbered under the yoke of siloed bureaucracy the private sector supplied off-the-shelf solutions at scale for NASA. Stockpiles of technology long vetted against failure could be requisitioned posthaste. Production could be ramped up seamlessly. So great was the industrial ecosystem that over 20,000 companies were mobilized to partake in Apollo (Reynolds 2013: 47). This pluralism was the seminal difference in the space race where Soviet central planning fell woefully short. Knowledge as per economist Friedrich Hayek (1945) is diffuse and the innovations from its decentralized experiments shaped by profit signals cannot be replicated by any politburo. Market feedback and the trial-by-error of entrepreneurs thus delivered the best technologies to NASA after many iterations for consumers.

Command economies are deprived of such market signals from customer defections whereby the Soviet technocracy may have first triumphed with Sputnik but later failed to solve the complexities of lunar landing. The iterative learning from competition in free markets was how NASA leapfrogged over its adversary. The marathon that was Apollo’s success hinged on the hybrid system of dirigisme and liberalism rather than the fake omniscience of apparatchiks in design bureaus. NASA harvested mature technologies everywhere whilst the hubris of Soviets sought creations ex nihilo which were untested and problematic to scale without market discipline. Apollo would emerge victorious from this epistemic difference. Frontier technologies subsidized by the creation of demand from years of industrial policy had a material advantage over analogue systems prided by Soviets. As government provided capital and businesses sold their intellectual property the Americans were able to reach the moon sooner. The workforce ledger from Apollo corroborates this public-private partnership as 36,000 civil servants worked on technologies in-house versus an army of 377,000 contractors (Burnham 2019; Binder 1953). In this ratio the minority of bureaucrats outsourced the production of hardware to specialists who could innovate unconstrained by the vice of risk aversion inherent in government. This incentive obviously mattered.

The self-interest of prestige and future contracts sought by private contractors guaranteed good work. The budget-maximizing model of bureaucracy conversely would have invited inefficiencies. Merit rather than political horse-trading therefore governed the allocation of resources. Bureaucrats provided benchmarks and the profit-motive of businesses achieved them in a timely manner lest penalties be risked. One established grand objectives whilst the other turned them into reality. Each exploited their comparative advantage. The complexities of the Apollo mission hewed well to this institutional format. A constellation of businesses would thereby have the latitude to freely innovate bereft of the need to be micromanaged by NASA. Strict adherence to schedules were simply policed by fiscal payments released in tranches upon completion of work by capable firms. A species of Darwinism ejected the less qualified in the supply-chain. By contrast the handful of Soviet design bureaus (OKBs) were fraught with the political terror of being dispatched to the Gulag. In a profession where discoveries derive from past failures of many iterations the politburo was less sympathetic to such learning-by-doing of engineers. Hence Soviet scientists were far more conservative in their research since they had all been incarcerated in a Gulag at one point or another (Erickson 2018:382). The reticence to share knowledge would be the bane of progress.

The Soviet program’s dysfunction made it prostrate before legacy companies like DuPont whose know-how of chemistry after decades of patents ensured success. The suite of materials developed by the company’s long-horizon R&D prior to Apollo would eventually protect astronauts and equipment from the hostilities of space. Moscow’s quantum leap of Sputnik and maiden spacewalk might have aroused panic at first but existing technologies like DuPont’s inventory quickly eroded the early primacy. The Soviets plateaued. Apollo required a greater degree of sophistication particularly for cislunar navigation. The desiderata to place a man in orbit versus on the moon were markedly different. The longer the sojourn in space the more avionics and astronauts had to be protected from cryogenic temperatures and fires in oxygen-rich cabins prone to ignition like a tinderbox. Low-earth orbit was more forgiving than the eight days of travel to the moon. Indeed mission brevity limited exposure as danger rose commensurately with time. Existential threats between inter alia the vacuum of space, radiation, or the dust of jagged glass on the moon all diminished the survivability of Apollo (Gaier 2005). It was incumbent on DuPont then to maximize the tolerances of hardware and mitigate such risks. Thereafter the company’s technologies were ubiquitous in spacesuits, the lunar rover, the lunar module and wiring insulation.

As Apollo wore on DuPont’s inventions were integrated as mission-critical components in correlation with the growing stakes of the program. Nylon alone initially pressurized early prototypes of spacesuits and carpeted the interior but catastrophe struck in 1967. During a dress rehearsal simulating a launch an electrical arc from internal batteries ignited the nylon netting used for stowage of tools and checklists. Three astronauts perished in the inferno. This coffin of pressurized oxygen heralded an inflection point whereby a reoccurrence of this tragedy would be averted by the fire-retardant properties of substitute fabrics. The postmortem audit of the fire adjudicated that Nomex subsequently be a staple of the space program. This miracle material would in turn upholster the insides of both the Command and Lunar Modules in tandem with extensive use in the A7L spacesuits (De Monchaux 2011). NASA’s Beta cloth composed of DuPont’s Teflon also clothed astronauts in that iconic matte white finish seen in the outermost layer of spacesuits. Quite famously twenty of the twenty-one layers in this portable habitat were engineered by DuPont between Kapton, Lycra, Neoprene, Nomex, Nylon, Teflon and Mylar (Lantry 1995). These quiet contributions made the company one of the most significant benefactors.

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Patmos

It is easier to find men who will volunteer to die, than to find those who are willing to endure pain with patience. Gaius Julius Caesar, 100-44BC

DuPont has long been a darling of government procurement just as it evolved into a quasi-public firm for military contracts awash with money during WWII. Akin to other postbellum years after similar conflicts guaranteed risk-free capital the company once again ploughed its savings into diversification of its inventory. Such are the perquisites of having technologies subsidized by public funds. As a bipolar world reached critical mass between America and the Soviets whose vassal states partook in proxy fights the Cold War like WWII also came to be sustained by DuPont. Defence procurement soon enlisted the company to become a sentinel for America’s nuclear doctrine of mutually assured destruction (MAD) in the face of this existential threat. Whilst DuPont commercialized its wartime technologies it still remained a handmaiden to the state. Most notably the firm became the primary source of fissile material for a second-strike deterrence against Soviet aggression. Indeed any first-strike would be irrational when DuPont supplied the instruments of death across a nuclear triad hedging against attack. Between Minutemen missiles on land, Polaris missiles at sea and payload of the B-52 Stratofortress in the air the probability of neutralizing all three simultaneously was vanishingly small. At the epicentre of this redundancy stood DuPont which sustained the system upstream with the replenishment of tritium and plutonium for warheads.

The former for use in hydrogen bombs was a radioactive gas produced at the company’s Savannah River Plant under contract to the Atomic Energy Commission. No other could rival the institutional memory and experience of DuPont as it inherited primacy over nuclear material from the Manhattan Project. Hence analogous to how government procurement financed operations in WWII so too would the favouritism continue in the Cold War. An umbilical cord irrevocably bound government to the storied company. The symbiosis was typical. Public investment does not flee a legacy firm whose long history across nearly two centuries of business in national defence has been mutually beneficial for itself and lawmakers. DuPont’s mastery over the science of nuclear technology then saw the company build a second complex of reactors on a greenfield site away from its WWII Hanford Plant. Unlike its predecessor the Savannah River Plant heralded a paradigm shift for an entirely new age of applied physics. Erstwhile the energy release from pure fission bombs made of plutonium measured in kilotons to the ruin of cities. Hydrogen bombs of tritium in contrast devastated civilizations in the metric of megatons. The asymmetry in the potential of destruction between the two was stark. Death scaled exponentially. Ironically the brinkmanship of the great powers flirting with total annihilation stabilized relations amongst themselves as DuPont mediated the ‘long peace’ with its preparedness (Gaddis 2006).

Since 1954 the path-dependency of industrial policy for upstream inputs from DuPont conduced to the output of 65,000 warheads out of which 7,700 still remain intact (Kristensen and Norris 2013). The stockpile fluctuated as a corollary to disarmament treaties and the retiring of relics whose operational life expired. The net outcome from this collaboration would deter Soviet adventurism as the backstop to George Kennan’s 1946 ‘Containment Strategy’ against the proliferation of communism past the Iron Curtain. Bereft of such an omnipresent threat the formation of NATO in 1949 would have been toothless. The ensuing stalemate was therefore honoured lest any belligerence invite the death of all. Energy that might have otherwise been profligately spent on violence was invested in the space race instead. Should the risk of an apocalypse preempt a hot war then the rivalry would continue in a different forum. An audit of things past therefore makes Sputnik and Apollo the children of this fragile truce. The suicidal logic of Armageddon coupled to the marginal utility of every extra missile in an arsenal being overkill then migrated technology meant for ballistic missiles into space. Ergo the pedigree of the Saturn V rocket fathered by Wernher Von Braun traces back to the baser instincts of man to wage war. Or more pithily space exploration proxied as a surrogate for thermonuclear explosions. DuPont in turn influenced this transition towards conquering the cosmos.

Since none wished to court mutual suicide the Cold War evolved from a kinetic war into a war of ideology. Each superpower sought to export its competing vision of modernity to the rest of the postcolonial world. In short order did the graveyards of empire in the Global South host the showdown as they themselves transformed into proving grounds for the efficacy of either free markets or centralization. Patronage from the superpowers onto these countries concealed the true motive for the humanitarian aid which was to determine the better weltanschauung of the two in organizing society. The third-world represented a referendum for this experiment: Chile in South America was dragooned into adopting neoliberalism from the Chicago School of Economics by Pinochet; Cuba under Castro chose revolutionary communism; Vietnam adopted socialism; Kim Il Sung’s North Korea decided on the autarky of Juche; and South Korea’s Park Chung Hee privileged state capitalism. Under nuclear deterrence purveyed by DuPont the postwar centre of gravity moved from Europe towards the third-world. The first became a museum as the Berlin Wall epitomized a monument to frozen hostiles. The second fell victim to chronic violence from regime-change. The paranoia of President Eisenhower’s ‘domino theory’ prophesying the proliferation of communism akin to a chain reaction was what fuelled the never ending crusade.

Au fond this ideological battle issued from the industrial policy of government procurement for DuPont’s plutonium and tritium which provided the material foundation for war by other means. Between the choice of World War Three and testing the legitimacy of economic models in societies less advanced where the stakes were less dire it was decided that the latter would be best. The cascade of conflicts in the Global South culminated with the ideological exhaustion of Gorbachev who forsook communism in favour of liberal reforms like glasnost and perestroika (Battle 1998). By the 1990s the bipolar world summarily ended: capitalism won by endurance. DuPont’s niche role as the builder of nuclear deterrence by scaling its ingredients to plenty bought enough time for communism to eventually implode under its internal contradictions. Time was the deciding factor. Liberalism was the last man standing. In this sense the war was not won by America but rather lost by the USSR. Moscow had simply overextended itself. A stagnant economy could not generate the wherewithal necessary to compete against free markets in the West. The asymmetry thus bankrupted the Soviets in a war of attrition as their monomania for military and space dominance crowded out other investment. Unbeknownst to the politburo their flawed logic ignored the crux of the conflict of which country could outlast the other.

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The Scaffold of Technology in War

In a sort of ghastly simplicity we remove the organ and demand the function. We make men without chests and expect of them virtue and enterprise. We laugh at honour and are shocked to find traitors in our midst. We castrate and bid the geldings be fruitful. C.S. Lewis, The Abolition of Man, 1943

The sequel to WWI equally saw factories inform foxholes vis-à-vis DuPont’s production at scale. From the sands of North Africa to the hedgerows of Normandy and the Pacific’s Guadalcanal it was DuPont which supplied a vast spectrum of materiel to upset the Axis powers. R&D lab curiosities made during the interwar years became wartime essentials over the course of WWII: Between Duco lacquer to camouflage planes which took hours rather than days to cure; the introduction of neoprene to offset natural rubber disruptions upon Japan’s seizure of Malaya; nylon that substituted for silk parachutes in airborne assaults for D-Day; Teflon whose anti-corrosive properties saw application in gaskets to enrich uranium for the Little Boy bomb over Hiroshima; plutonium in service to the Manhattan Project from the company’s Hanford Plant plied in the Fat Man bomb over Nagasaki;  or Freon which pressurized aerosol cans of insecticide to combat vectors of malaria and typhus for the preservation of manpower in the Pacific; the foregoing innovations put into practice the cardinal rule of logistics in war — always maximize ratios. Higher throughput of planes, tires, parachutes, uranium, plutonium, uniforms, and bug repellent promised the war would at the very least not be lost due to scarcity.

DuPont’s Duco lacquer for commercial use from 1920 revolutionized the aesthetics of automobiles in an era of assembly-lines whose efficacy proved decisive in WWII. This invention would be a boon to mass production. At the time the zeitgeist of consumerism amid the Roaring Twenties required methods to align supply with high demand by paring down the lead times for fabrication. From the widespread adoption of automobiles there soon emerged two disparate industrial strategies. Fordism set greater store in scale economies insofar as variety would be sacrificed in favour of volume. All Model-T cars were thus painted in quick-drying black enamel hence the famous quip by Henry Ford that customers are limited to ‘any colour as long as it is black’. Sloanism conversely privileged differentiation. No longer just a utilitarian object the automobile would transcend such banality courtesy of Duco lacquers at General Motors. Individuality and affordability were suddenly bedfellows. Bespoke cars of many colours now hewed to the unique personalities of their owners. The chemistry behind Dupont’s paint dispensed with large drying bays and long finishing cycles. A process once laborious and artisanal became standardized and quick. This mechanized spray application unlike traditional varnishes by brush cured in hours as the cadence of output ramped up exponentially. When America eventually did mobilize for war this technology would be exploited in the skies.

Lofty production targets for wartime aircraft would have been chimerical were it not for Duco paint. Rather than some heroic gadget it was this quiet process of creating a numerical advantage of planes that would overwhelm the Luftwaffe. Once civilian production lines were repurposed for jeeps, Sherman tanks, aircraft and the like such equipment inherited the same finishing systems without retooling. The footprint of a factory remained the same. A great injection of capital investment for capacity was moot. Such chemical engineering might appear to capture marginal efficiencies at best but further downstream across millions of units the dividends were many. Laboratories win wars just as soldiers do. Dupont’s proprietary technology would namely be a force multiplier in the high throughput of Curtiss P-40 escort fighters and Boeing B-17 flying fortresses. Whereas this olive camouflage covered the outer skin of the fuselage in the first it would be confined to the interiors of the second. Thousands of airframes were delivered in the form factor of these two leading candidates for DuPont paint (Clift 1999). A third noted beneficiary in prolific numbers of this silent guardian against solar radiation and humidity was the Consolidated B-24 Liberator bombers whose aluminium alloy was wedded to this coating. Fast curing times saw over 18,000 units manufactured (Faulkner 2018). As WWII’s attrition intensified Dupont then assured America’s defiance.

Nowhere was this pushback more evident than in the Pacific theatre once the Empire of Japan arrogated to itself the supply chain of natural rubber in Southeast Asia. Prior to Pearl Harbour was America captive to 97 percent of this commodity from abroad (Gordon 2004). Fortuitously during the interwar period did DuPont diversify from explosives into synthetic materials which later parlayed into the strategic asset of neoprene. The company’s investment into research for this trademarked synthetic rubber filled a very specific niche of application where failure might equate to death. Since other materials swelled or were embrittled after prolonged exposure to petroleum products like lubricants or fuel it behooved DuPont to find a miracle in material science. Neoprene quickly proved impervious to the gremlins of mechanized warfare between ultraviolet radiation, thermal variances and oils. This premium product for mission-critical uses in hostile environments would be employed in a sundry of gaskets, hoses and seals between army vehicles and aircraft (Reimer 1942). Neoprene became a mainstay of self-sealing fuel tanks in planes for instance where any bullet penetration invited combustion or the risk capture by enemy forces because of disabled engines. The spectre of immobilization under fire could not be tolerated. Were it not for this godsend of a material the attrition rate of America’s air campaigns would have been prohibitive.

The advent of nylon in the throes of WWII also found its raison-d’être from the geopolitics of Japan’s embargo over silk. To preempt the interruption of imports and any acute deficits therefrom it was determined during the antebellum years that DuPont’s nylon would remedy this vulnerability (Ndiaye 2007: 107). As America’s supply chain became untenable and fraught with incertitude just as the country began mobilizing for war the pivot was made towards this alternative. Indeed a salutary outcome of Japan’s expansionism was that nylon showed itself to be far more superior to its predecessor. The higher tensile strength and elasticity were ideal for parachutes as they later billowed over Sicily, Normandy and Arnhem. This miracle fibre was instrumental for D-day and Operation Market Garden. Between 1940 and 1945 the annual production of nylon soared by a factor of seven from 4 million to 24 million pounds (Bunn 1952). In 1942 the War Production Board became a de facto monopoly in the mass adoption of the material as any nonessential use became verboten (Webb 1942:892). Nylon signalled a profound shift in the grammar of war. What resulted was an Americanized version of Blitzkrieg that was christened ‘vertical envelopment’. This doctrine added a third dimension in the art of war as paratroopers attacked from the air behind enemy lines. Such a high-risk gambit devastated supply lines in the rear. Nylon thus scaled up these airborne insertions so vital to victory in WWII.

In the same crucible of war did DuPont’s development of Teflon inform uranium enrichment under the clandestine efforts of the Manhattan Project. The original albatross to development was the seminal stage of converting the said metal into a gas so the rarer isotope of uranium-235 could be extricated from the more common uranium-238. Midway in this process would the corrosive nature of the gas wreak havoc on pipes, valves, and seals until failure. A nonstick polymer was needed to resist such degradation hence the discovery of Teflon would be machined into the bevy of paraphernalia for this highly-technical enterprise (DuPont 1963). WWII thereby accelerated the maturation of DuPont’s technology to hasten the capitulation of Emperor Hirohito. In the absence of Teflon a stalemate without a viable substitute would have halted any atomic arsenal and result in the invasion of home islands at the expense of blood and treasure. Instead the Little Boy bomb inaugurated the nuclear era to avert a larger kinetic war in the Pacific. In the same vein did the alchemy of DuPont furnish the 6.2kg plutonium core for the Fat Man device detonated over Nagasaki (Morse 2016). To scale up the fissionable material in the atomic frontier the company’s Hanford Plant hosted a labour force of 45k engineers. From Enrico Fermi’s proof-of-concept of a chain reaction at the University of Chicago to the making of the bomb itself it was DuPont in the vanguard of development.

The endgame of WWII would also come to hinge on another lesser known innovation from the stables of the company. Since time immemorial the paucity of pest control has ravaged some of the world’s most revered armies. Insect-borne diseases silently sabotaged a great many campaigns from Napoleon to Genghis Khan due to excessive rates of malaria. This intractable problem however found its antidote once insecticide was dissolved in the propellant of Freon to disperse a fine mist of bug repellent on both skin and surfaces. This technology that made refrigeration safe by foregoing the volatility of ammonia or propane sought to transform the epidemiology of warfare after it had democratized the luxury of food preservation. In the prelude to this deterrent any acquired immunity was medieval: repeated exposure to disease characterized the phenotype. America and Japan were thus both at a disadvantage. In the battle for Guadalcanal malaria became the leading cause of morbidity for American troops as every servicemen contracted infection at least once. Japan fared worse when 30 percent of their own perished to the scourge (Joy 1999). This charnel house of fever reached a crescendo between 1942-3 amidst the island-hopping campaign of Admiral Nimitz to seize forward bases by leapfrogging from the Marshalls to Okinawa for the inexorable push on Japan. The quiet marvel of Freon eventually abated the attrition.

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Pyrrhic Victory: A WWI Forerunner to the Manhattan Project

The fellowships of old will find resurrection in the new. Salvation shall follow from the blood and bonds of brotherhood between the ancient Serbs, Greeks and Copts. The East will save the West: the stories of Constantine XI Palaiologos and Alexander the Great told together. Anonymous

WWI logistics equally fell in the preserve of DuPont’s proprietary technologies amidst the clash of empires between 1914 and 1918. On the eve of the Great War the company had long perfected the mass production of smokeless powder to enhance the range of artillery shells flung downrange by howitzers. In this bleak war of attrition such protracted barrages frequently interrupted stalemates fought across a labyrinth of trenches. DuPont thus thwarted the Kaiser by meeting the demands of total war in Europe whose own crisis of munitions was the reason for the company’s foray into the conflict. It was the desperation from the beleaguered Allies of Britain, France and Russia to provision trench warfare that would invite help from America. The legions of brave men fighting in the mud of Verdun, Somme and Passchendaele would subsequently be well provisioned by DuPont until the crescendo of the 1918 Armistice. A supply in excess of 40 percent in explosives throughout the entirety of the European fratricide originated from the company alone. Over 1.47b pounds of ordnances were manufactured in-house over the course of the war. Payroll soared from 5,300 to 47,914 men once hostilities began (Williams 1920:20). A monumental sum of $425 million would be awarded to this legacy firm (Smith 2006: 168).

Monopoly over powder production which DuPont inherited from its efforts during America’s Civil War proved decisive in Europe’s own apocalypse whose supply chain could not have been sustained bereft of the foregoing contributions. What truly made the company so adept at scaling production in the most hazardous of industries was its adherence to the methods of theorist Frederick Taylor (1911). Taylorism as it was later eponymously known derived from the author’s treatise ‘Principles of Scientific Management’. This business doctrine rooted in empirical observations limited the ‘systemic soldiering’ of workers which throttled productivity at a factory’s expense. The antidote was the implementation of sufficient laws and incentives to increase a company’s output. This school of thought was essentially an evolution of economist Adam Smith’s 1776 pin-factory analogy in the division of labour. On top of the said specialization the addition of wage premiums, benchmarks and process standardization begot new efficiencies. DuPont might have exercised a bit more discretion however and curate a hybrid model for its own use lest the fetish for productivity ignite a catastrophe from accidental detonations because of haste. Taylorism wedded to the imperative of safety thereby established the company’s Efficiency Division to optimize workflows (Stabile 1987).

The craze of productivity du jour in the wake of Taylor’s book would not be adopted companywide by DuPont’s new department. Best practices were enshrined but otherwise the pecuniary incentive and the stopwatch cadence of labour ran afoul of safety. What did eventuate instead was the company reverse engineered a few of Taylor’s principles: tasks were simplified and superfluous motions on production lines came to be fewer not as a fillip to efficiency but rather to limit the dangers inherent in the manufacture of explosives. This bespoke method of business operations in a slight departure from the purists of Taylorism expedited the making of dynamite and powder (Ndiaye 2007:20). The wholesale adoption of Taylor’s core tenets could not be justified when such ideals of modernization were incongruent to the perils endemic to the explosives industry. Indeed teething mishaps resulted in two deadly explosions at the Repauno works in 1913 after which the Efficiency Department was quietly disbanded (Ndiaye 2007:22). Parts of this scaffolding system of efficiency nevertheless remained intact enough to ratchet up DuPont’s output for the Great War. These reforms proved to be a boon to throughput in the transition between peace and wartime production. 

As the market for commercial blasting gave way to military application the manufacture of powder would be scaled up from a trivial 1m to 52m pounds per month (Williams 1920:8). Once Europe’s powder-keg of sabre-rattling did finally explode upon Archduke Ferdinand’s assassination by the Serb Gavrilo Princip the furnace of industry was mobilized with alacrity. In many respects this herculean feat informed WWII’s development of the atomic bomb in later years. The clarion call of war came to rouse sleepy townships to industrialize posthaste so munitions could be delivered forthwith to the frontlines. So capital intensive was this effort that DuPont’s expenditures to fund the buildout exceeded the Panama Canal’s annual budget threefold with the construction of infrastructure and housing for workers: daily water consumption for manufacturing was greater than the combined use by cities of Philadelphia and Boston; ice consumption of 9.3m pounds per day for refrigeration eclipsed the quantities in Chicago; hundreds of miles in new railroad tracks shuttled raw goods; homebuilding saw 10k new units together with hotels, dormitories and bunk houses for 65k persons; over 570 community buildings were inaugurated like cafeterias, schools, churches, post offices, pharmacies, banks and gymnasiums to house the Young Men’s Christian Association (YMCA) and the Young Women’s Christian Association (YWCA) (Williams 1920:20).

Such welfare capitalism of company towns in the wilderness which brought a vast array of civilian workers and their families in proximity to workshops was what fed WWI its materiel. WWII would replicate this exact same paternalism where economies of agglomeration could be had in the race to split the atom for a nuclear bomb when entire new cities like Oak Ridge, Hanford and Los Alamos were founded overnight (Gao 2009). Necessity is the mother of invention and the symmetries between DuPont and the Manhattan Project abound. The powder company pioneered production at scale within the Darwinian time constraints of war which was later cribbed for the purposes of WWII. DuPont’s bravura in its mobilization might be more prodigious however. The demands of WWI were astronomical by modern standards. Capacity had to be scaled up exponentially lest the esprit de corps of the Allies wane from the paucity of projectiles. In the battle of the Somme a total 1.7m tons of shells were used in a single week alone (Bond 2001). This paroxysm of demand was what invariably transformed DuPont into a global empire as future production dwarfed its prewar baseline to rain an inferno of metal upon German fortifications. Enemy lines broke asunder. Logistics wins wars and DuPont’s supply-chain dominance roundly beat the Central Powers.

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Wartime State Capitalism

The nation that will insist on drawing a broad line of demarcation between the fighting man and the thinking man is liable to find its fighting done by fools and its thinking by cowards. Sir William Francis Butler, Charles George Gordon, 1889

A perpetual state of high-output from the ebb and flow between civilian and government demand then knighted DuPont into the pantheon of national champions. A company of strategic value rather than just a fungible enterprise like any other. This entente most practical in times of war conduced to a mixed-military economy whereby lawmakers were insulated from capital risk and the perils of public ownership which itself was anathema to market discipline. Such cost control inherent in public-private outsourcing represents the crown jewel of industrial policy. DuPont would in turn be elevated to its position of prominence with America’s treasury as its patron. Public procurement of this discriminatory sort still inspires modern defence contracting to this day. Au fond this path-dependency bespeaks the pragmatism of wheeling and dealing with few steadfast producers to curb the profligacy of bureaucracy in times of distress. DuPont’s mass-production at the time would go on to sustain the Union’s war efforts amidst the Civil War between 1861 and 1865. Confederates in want of materiel were left jealous of this corporate leviathan with its vertical integration of charcoal houses, Kentucky nitrate caves and private wharves. The determinism of logistics is what invariably wins wars.

Bref it was the abundance of explosives which laid waste to the Southern insurrection whereas the paucity of quality powder inflicted even greater pains on the Rebels. This deprivation became so acute in the later years that guns were limited to firing only once every hour against Union forces (Bell 2003:12). The mastery of making choice blackpowder by DuPont from the knowledge accumulation after decades of knowing-by-doing could not be replicated by others of less stature. Asymmetry in materiel translated into battlefield supremacy amidst this carnage and it was the lineage of industrial policy tracing back to 1802 that would alter the destiny of a nation. DuPont as the leading manufacturer sold circa $4m (nominal dollars) or $97m (real dollars) of munitions to both the Army and Navy over the period of four years (Hancock & Wilkinson 1966:222). Conversely so much of the Confederates' supply of powder and fuses were of such poor quality that munitions failed to detonate upon hitting their targets to the chagrin of grey-coat infantry (Johnson 1956:609). Misfires were too common. Hence President Lincoln not only boasted a numerical advantage of army volunteers for his cause but equally a Praetorian Guard of industry in the form of DuPont and its means to wage war.

The courage of men was reified with the ubiquity of powder in their artillery and rifles. The umbilical cord of logistics that joined DuPont’s Brandywine Creek with the killing fields fundamentally shifted the balance of power in the Union’s favour. A foil to this primacy was the Confederates’ own supply of the reagent. Georgia’s Augusta Powder Works had been belatedly constructed in 1861 a full year after the Rebels made mincemeat out of Fort Sumpter whose seminal event let slip the dogs of war. Such a hurried improvisation of supply however betrayed the many shortcomings of subpar quality and scarce volume as the conflict progressed. Even worse was the Union’s Anaconda Plan of blockading supply lines at sea which further exacerbated the inferiority of logistics. Industrial maturity of the North proved insurmountable. A last-ditch effort by the South to remedy this disparity made the 1863 Confederate Impressment Act into law whereby supplies were requisitioned at prices below market value. In hindsight central planning simply could not compete with market mobilization. The former served only to disincentivize entrants into powder production when it was most critical. By contrast DuPont’s established economies of scale conferred a bottomless supply for the preservation of the Union.

The long heritage of industrial policy in the North was a harbinger of the Civil War’s outcome. Hitherto the economic model idolized by physiocrats agitating for agrarianism in the South poorly prepared its ragtag militias. Scarcely a round of ammunition had been manufactured in the region since America’s founding. A token of redemption might have been the single foundry of cannons in Richmond. Otherwise a vacuum of arms manufacturers, powder producers, saltpetre excavators, lead mines and skilled workforce to man the said industries beleaguered the Confederacy (Hall 2012). Neither an arsenal nor the basic materials for its creation existed on the eve of war. Between the Augusta Powder Works and DuPont the former was outproduced by 48 percent whilst this figure omits the application of blasting powder for the Transcontinental Railroad (Rains 1882; Hancock & Wilkinson 1966). The variance in scale cannot be understated. DuPont won a war and built America’s largest piece of infrastructure simultaneously. This feat finds no equal to this day. Whilst the South fought on a razor’s edge of supply the North fired its batteries to no end. Confederates elected to be more sparing with munitions whereas saturation bombing became unique to their counterparts. Industrial might and ordnances were not mutually exclusive.

This gulf of supply portended General Robert E. Lee’s capitulation. Such industrial mobilization in the North saw the conversion of prewar manufacturing for wartime production with incredible haste. Subsequent to this watershed did heavy and prolonged barrages inform key battles in Gettysburg, Vicksburg and Petersburg. In Gettysburg the statistics speak loudly to the imbalance. The Union unleashed a hailstorm of 33k pounds in artillery or 34 percent of their supply versus the Confederates’ 22k pounds or 50 percent of their stock (U.S. Ordnance Corps n.d.). General Lee throttled fire lest his reserves be depleted ad extremum just as the Union’s General George Meade intensified volleys. The scars of a moonscape battlefield littered with massive craters and death were a telltale sign of the North’s inordinate firepower. In Vicksburg during the forty-day siege a total of 131,966 mortars were fired downrange to stanch Confederate soldiers. A rain of shells pounded the city into submission with the climacteric surrender of 29,495 men (Mansard 2025:15). In Petersburg the attrition continued and introduced the novelty of trench warfare. Here the South’s Götterdämmerung manifested after the shock and awe of rolling barrages. Any sober post mortem of the Civil War would conclude that General-in-Chief Ulysses S. Grant bested his foes since he could haemorrhage weapons with total abandon. The omnipresence of DuPont informed this calculus.

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The Big Bang: The chemistry behind infrastructure mania

I know my fate. One day my name will be associated with the memory of something tremendous — a crisis without equal on earth, the most profound collision of conscience, a decision that was conjured up against everything that had been believed, demanded, hallowed so far. I am no man, I am dynamite. Friedrich Nietzsche, Ecce Homo, 1888

The cascade of coin purveyed by state favouritism amidst the War of 1812 ensured the infant republic would never be hostage to a foreign supply of gunpowder again. This formidable capital base would in turn inform the legacy of DuPont as it later evolved into a polymath of production with a vast spectrum of household and industry goods. In the interim until the scourge of war resurfaced the State continued to smooth demand based on a tacit promise that the company would never be left idle due to constant output from explosives. Clearly state procurements were de facto subsidies of fresh capital germane to growth but postwar industrial policies in the tenor of nation-building were of no less import. The magic here of industrial policy are the many unforeseen synergies that create an entire ecosystem from its use downstream. Observe how the single common denominator for the canal and railroad mania that gripped a hopeful nation in the early 19th century was DuPont. Scale economies from war production would invite demand from civil engineers in what otherwise became a captured market. The atomizing of ancient rock into regolith past limestone ridges in the construction of vast trenches for canals and railways would be the brainchild of explosives. This captive market of infrastructure prostrated itself before DuPont.

Not only were public works a captive market but more saliently they were a niche market. In the excavation of slate and sandstone did the detonation of blasting powder and later dynamite represent a godsend to paring down lead times and labour intensity of such mega-projects. A wholesale reconfiguration of America’s geology brought forth an industrial economy from the annihilation of distance by DuPont’s exothermic technology. Productivity gains imputed to terraforming land with explosives curtailed these lead times from years or perhaps decades to mere months. It was only by the scale economies and sophistication of war production that DuPont’s efficacy proved instrumental later in the construction of waterways and railways. Wartime begot great dividends downstream in the civilian market. The organized violence of explosives rather than the chisel alone thereby midwifed a nation. America’s Manifest Destiny was invariably the child of chemistry. Ironically enough it was in fact little boys with the fastest gait who lit fuses then ran to safety since men were less nimble for the athletic task (McNeese 2009:102). The consumption of DuPont’s product thus became the stuff of life for canal contractors and railroad barons. Where earth and stone resisted manual pick-axes would the presence and potency of DuPont’s powder be felt.

Human muscle and oxen alone could never clear the dense primeval forest in the path of the Erie Canal without the threat of insolvency from protracted timelines and cost overruns. DuPont’s blasting powder resolved this productivity deficit. Bereft of controlled detonations to shatter rock and clear earth the canal’s completion would have most certainly fell in breach of its predicted lead time. Actually these pyrotechnics minimized the project’s lifecycle from an expected fifteen years to eight (Rubin 1961). In the summer of 1823 the segment fraught with the most difficulty by the town of Lockport saw a desiderata of four thousand kegs each with twenty-five pounds of blasting powder to carve through three miles of dolomite rock (Wilkinson 1993:29). The percussion of explosions was a proverbial workday metronome timed so crews could enjoy their midday prandial break. Akin to the cadence of a production-line the dust and debris would have dissipated sufficiently enough before work resumed. DuPont’s explosives were not a footnote in the genealogy of the Erie Canal but a mainspring whose defiance against inhospitable geography cut costs and time. Naturally the proliferation of this technology vivified the esprit de corps of workers just as supply scarcely kept up with demand. Rich perquisites of being DuPont at this time were many.

Infrastructure like the Erie Canal’s fusion of the seaboard to the interior further consolidated the company’s market dominance as its wages increased 0.5 percent per annum (Mayer 2003:20). The very next generation of industrial policy which paired DuPont’s bailiwick to engineering marvels would be the edict for the Transcontinental Railroad. At the project’s inception over 40 percent of America’s blackpowder issued from this single corporate giant (Hancock 1966:213). Hitherto the arcana of chemistry for this compound from its researched potency across various stages of granularity had been studied religiously. Canal-building and later the stampede of prospectors into California’s Gold Rush of 1848 motivated the single-product firm to refine this flagship product. In that time the blasting of quartz substituted for riverside panning in search of treasure as advanced methods subverted this cottage industry to maximize yields. DuPont’s dalliance with canal beds and miners in general furnished the company with the know-how to push the frontier of its technology. The Gold Rush’s demand shock would be a laboratory for applied science to test proprietary formulations. In short order was a franchise inaugurated on the West coast in 1849. By 1857 a new ‘B’ powder was introduced to markets for industrial-scale mining and earthmoving (Wilkinson 1984:40).

This intellectual property could be made more cheaply than the traditional alternative of blackpowder but boasted greater kinetic energy for blasting application. The economies stemmed from the substitution of sodium nitrate sourced from mines in Chile for potassium nitrate from the British Raj. The latter suited ballistics of projectiles whereas the former compounded the explosive yield to fracture the most stubborn rock. The company’s consistent percentage increase of sales in the double digits during the Gold Rush would fund this discovery to later sunder granite ridges of the American West for the Transcontinental Railroad (Hancock 1966). Legions of blackpowder kegs were metabolized by the charters of the Central Pacific and Union Pacific Railroads in the frenzy to complete this infrastructure which transcended the scale of the Suez Canal. The Central Pacific company alone devoured five hundred of seventy-five-pound barrels a day at a cost of $6 each (Bain 2000). Having previously supplied the Army and scores of mining firms with explosives only DuPont was poised to bring such volume to market in virtue of its robust supply-chain. Mountains therefore succumbed to the attrition of being pulverized by this incumbent’s concoctions. DuPont’s powder was no longer a passing curiosity but an industrial necessity.

If the saving grace of the Transcontinental Railroad borne by President Lincoln’s industrial policy was blasting powder the same could be said for President Roosevelt’s Panama Canal thirty-five years later. More explosive energy informed this feat of engineering than what was expended throughout all of the nation’s previous wars combined (Dutton 1942). The Canal’s fifty-one-mile construction across the Isthmus brought to bear more than 61m pounds of dynamite largely acquired from DuPont. Once more the cross-fertilization of statecraft between infrastructure and industry was a fillip to the legacy company which could be likened to American capitalism writ large. Spillovers abounded from the coronation of the Canal by industrial policy as its completion ratcheted up commerce universally whilst enshrining DuPont’s own monopoly. The company would actually create bespoke remote detonations and pyrotechnics to preempt premature explosions or misfires lest the cancer of moisture from Panama's heat and humidity go unchecked. The chemical engineering of tropical-proof nitrostarch dynamite did not sweat unlike nitroglycerine making its stability far more hospitable to storage and transportation (Caesar 1958). R&D of this ilk would be a function of Dupont’s size and scope attributed to American industrial policy.

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War of 1812: A Patriarch of Vertical and Horizontal Integration

When goods don’t cross borders, soldiers will. Frédéric Bastiat, 1801-1850

In an audit of Dupont’s ascent from cradle to colossus it is the bricolage of industrial policy between tariff walls and public procurement which kept its production at-capacity. The state would pump-prime this strategic industry of gunpowder for the preservation of its sovereignty over would-be adversaries. Alexander Hamilton’s 1791 apologetics from his Report on Manufactures for infant industry protections thus came alive as this French exile slowly fledged into an empire. Not long after did President Jefferson’s liking for neutrality rear its head again amidst the Napoleonic Wars when both British and French navies confiscated American merchant ships to great material injury. A veto of commerce was believed warranted and so the Embargo Act of 1807 came to be enacted. London would be starved of cotton and Paris of flour (Irwin 2005). Although the policy failed spectacularly after a mere fourteen months at a welfare cost of five percent to GNP the DuPont mill did partake in generous profits (Irwin 2005:631). Whilst trade diversion by the metropolitan powers offset supply disruptions a more fortuitous outcome privileged DuPont. Amidst the ruin of an acute bust in exports and imports by this experiment in autarky an ambivalent vacuum appeared for domestic producers whose primary buyers were state militias and government.

The throughput of the DuPont works soared nearly threefold overnight from such import substitution courtesy of Washington and the War Department (Fagal 2018). This supply shock padded the company’s war chest quite well in the ex post period of the embargo. A captive market left alone by British industrial supremacy with the abeyance of Atlantic trade promised DuPont a monopoly. Since demand inelasticity inhered in ordnance supplies with armouries always in need of stock an infusion of capital saw the company become a trust. Border skirmishes abreast of westward expansion and interstate warfare created a steady demand for the procurement of gunpowder. DuPont’s strategy of growth thus hinged first and foremost on product concentration prior to its later stages of diversification (McNamee 1987:3). Necessity is the mother of invention and the embargo’s hiatus of imports would also have DuPont flirt with vertical integration as a function of the ban on saltpeter from Bombay and Calcutta. The whole supply of nitrates were summarily replaced with deposits sourced in Kentucky, Virginia, Missouri and Tennessee (George 1988:19). Were it not for the embargo such vertical integration would have been stillborn devoid of this stimulus for a new source of production factors.

A forensic chronology of DuPont actually reveals it to be the prototypical company of this practice in the firmament of American business. Well before vertical integration was plumbed by Carnegie’s steel empire and Rockefeller’s Standard Oil it was this maker of musket and cannon powder which linked the many stages of production: the very patriarch of this growth model. America was in fact fertile land for such innovation after Great Britain had long destined its colonies to be a perpetual feedstock for raw materials without any manufacturing capabilities. DuPont would seize the opportunity midwifed by the 1807 embargo to aggressively begin its quest of expansion. With so few manufacturers to date the company’s capital accumulation quickly revamped the Brandywine Creek mill into a sprawling complex to shore up output. Tracts of willow tree ideal for charcoal would be felled under coppice rotation (Winkler 2019). Saltpeter would be extracted in situ across the Upper South to preempt the vagaries of foreign diplomacy. The rents collected from federal largesse as import bans inflated domestic prices would finance the scaling of DuPont’s operations. The company’s sheer size became a de facto entry barrier to dissuade competition as vertical and horizontal integration were standardized.

The growing constellation of Dupont’s business operations was made manifest most prominently at the onset of the war in 1812. This struggle cast America once more against its archenemy alongside the Indigenous confederacies led by the war chieftain Tecumseh. Britain still smarting from a deep-seated vendetta for its former colony ginned up support amongst the Shawnee and Creek Nation to resist the erosion of their land borders. Tecumseh then sought a modus vivendi for Native sovereignty without future encroachments on his territory (Stockwell 2014). The bigger provocation was how American seamen were continuously at risk of impressment by being deemed deserters as former British subjects and forced into service for the navy. A conservative estimate of 10k men were deprived of their liberty between 1796 and 1812 (Arthur 2011:20). Extraterritorial abduction of this species after nearly twoscore years following the 1775 Revolutionary War deeply grieved Washington. Half of the British Navy was manned by these hapless sailors at the start of the war. By contrast the United States were raring to annex Canada knowing Britain would be overextended from its endless war with Napoleon. Europe was riven by great power politics and it was believed Westminster would not mortgage itself for the survival of a satellite on the periphery of its empire. So began the War of 1812.

As war drums intensified the federal government procured 50k pounds of gunpowder from DuPont on the eve of conflict. Once the sabre-rattling crescendoed that order jumped to 200k pounds. In 1813 a further 500k pounds were coveted. Between the demand for both the Army and Navy over one million pounds was manufactured by the company until the Treaty of Ghent silenced the guns in 1814. As DuPont charged the highest prices for its signature product of high purity at 58 cents per pound in the first year alone did sales gross at $148,597.62 or $3.5m in real dollars (Colby 2014:66). This exploit of profit would not be left idle and was parlayed into the company’s subsequent buildout. The first fruit of such princely profits was the acquisition of thirty-two acres christened the Hagley Yard a bit downstream from the Brandywine in 1814 on the former site of an Iron mill (Du Pont 1920:189). Here manufactories of powder and textile mills were built in tandem as the latter would militate against postwar slumps should they occur in the future. Such expansion entailed an increase of manpower in the company’s employ to one hundred (Mulroney 2022:20). These bumper years of war were ploughed into productive capital that would groom the company’s primacy. DuPont’s formative period then was intimately informed by industrial policy.

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A History of DuPont: Push-Pull Policy for Powder

War is merely the continuation of policy by other means. Carl von Clausewitz, On War, 1832

Historically the crucible of war has been the muse for a great many businesses when public procurement of technologies assists in the telos of victory. Often science and engineering therefrom find new application in civilian markets upon the return to peacetime normalcy. In the throes of internecine conflict the money invested in R&D opens a vista of discovery that later translate wartime gains into postwar booms. The fortunes from munitions enable an ambidextrous company to diversify its repertoire of inventory for ordinary consumption upon cessation of hostilities. For example the storied chemical-cum-material producer DuPont ploughed its WWI windfall of capital from explosives towards a 23 percent stake in General Motors. Fabric and finishes by the company thereafter became the exclusive supply for the young automaker (Woelfel 1981:51). Many such cases exist wherein the revenue base for companies under the aegis of the federal purse is eventually used to create a monopoly of industry. Since America’s founding has government solicited the ingenuity of private contractors in an arms race against the spectre of defeat from foreign foes. Whenever the country has been unready or under-tooled has the need arose for firms to supply the defence establishment with materiel to stave off belligerents.

America’s industrial policy is at the heart of the story for the legacy company DuPont. The history of one is the life of the other. Despite independence from tired feuds of old Europe a similar fate befell the budding republic: the War of 1812, Mexican-American War of 1846, Civil War of 1861, Spanish-American War of 1898, Word War I, World War II, Korean War and Cold War were all formative to the mastodon of DuPont. Over two centuries from the dawn of the 19th century onward did the company and government share a mutually beneficial friendship of sorts. One would be a benefactor and the other a supplier of gunpowder for militias in the many fights to come. The scion Éleuthère Irénée du Pont who himself was a close confidant to Thomas Jefferson fled the Jacobins of revolutionary France to export his chemistry know-how. This refugee exchanged the guillotine for Brandywine Creek in Delaware where he founded a mill with the seed capital of $36k from likeminded French investors (Rose 1988). In this hamlet far from civilization began the import-substitution of gunpowder for self-sufficiency to counter supply shocks from the dominance of a jilted and bitter Britain. At the time the share of this exotic material by the metropolitan powers of Britain and France stood at 90 percent of America’s supply (Harsanyi 2018:41).

Soon enough a sure market of pre-existing demand by government would be captured by this one domestic producer. In 1801 the du Pont brothers repatriated to France briefly so they may return the most advanced machinery for this new enterprise to their adopted home. The comparative advantage was manifest. The scarce few firms which did operate in America were artisanal with a pittance of output. A mechanized mill would be a force disruptor to the cottage industry of dilettantes manufacturing gunpowder. After the first round of investment a second bandwagon of shareholders sought equity in the firm upon word of President Jefferson’s close affinity to the family. Such privilege of federal imprimatur convinced French investors of the guaranteed dividends should they buy into the prospectus. The geopolitical incentive here was not lost on these Francophiles either whose Anglophobia further galvanized investment. The House of du Pont monetized their amity with America’s leadership class to coax capital from French nobility for the mill at a building cost of $7k or 70 percent of the firm’s liquidity (Fagal 2018:324-6). Partisan patronage notwithstanding President Jefferson had sought to establish a robust industry to hedge against supply-chain deficits and thus a push-pull industrial policy materialized.

The push issued from President Jefferson’s repeal of export tariffs and bans from the previous Federalist government which hamstrung domestic manufacturers (Boyd 1950:36). Since supply-chains were dangerously foreign with upstream raw materials of saltpetre from British India and downstream gunpowder from the Isles the consensus would see that retained earnings were not taxed. The abolition of excise taxes would vouchsafe a friendlier business atmosphere for working capital to entrepreneurs like du Pont. Now the pull factor would be Jefferson’s appeal to his War Secretary Henry Dearborn to procure fresh gunpowder from the young scion as a courtesy to the family’s patriarch for his diplomacy in the Louisiana Purchase (Heim 2014:260). The result was no mere tokenism. From an initial acquisition of 10,200 lbs in 1803 the following year saw a precipitous increase by a factor of nine to 95,000 lbs or 62 percent of the firm’s total production (Boyd 1950:329). Marketshare of this magnitude would be replicated elsewhere as farmers solicited powder for earthmoving or fur trappers were raring the same for their rifles (Dutton 1942). Furthermore this coveted substance was the object of inelastic demand and not at all pro-cyclical. Whilst being immune to economic downturns there prevailed a constant need to replenish stockpile reserves.

Indeed gunpowder epitomized a necessity synonymous with the staples of bread and butter. A predictable revenue stream then defined the pecuniary model espoused by the Eleutherian mills in Brandywine Creek. In business scholarship the government personified a whale client whose inordinate share of consumption quickly made fortunes for the du Pont dynasty. This corporate strategy harpooned the Jeffersonian presidency for monopoly rents to finance the learning-curve of scale economies. America would no longer be a chronic importer of gunpowder from overseas and DuPont would be the darling of government for many years to follow. Additionally with the export prohibition defunct the company would exploit the arms trade of the Haitian Revolution and Napoleonic Wars. This salient point throws into relief the last push dynamic under President Jefferson’s foreign policy of neutrality. The du Pont brothers trafficked in gunpowder to both Spain and France which were embroiled in an incandescent war between slave rebels and French colonists in the Caribbean. In 1805 the Spanish bought forty-thousand pounds of this combustible material at a cost of $13,600 to claim the other half of Hispaniola (Fagal 2018:329). Despite the DuPont's own Huguenot pedigree, ethics do have a curious way of being neglected in war.

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Railroads and Nationhood

Our Constitution was made only for a moral and religious People. It is wholly inadequate to the government of any other. John Adams, Letter to the Massachusetts Militia, 1798

Activist industrial policy in the development of railroads wrought the cardinal prerequisite to any serious form of economic growth: market access. When one county can trade with another more cheaply the result expedites wealth creation. The provenance for America’s phalanx of industries then issued from the many spillovers by the aforementioned physical infrastructure. Upon secession from the archipelago of Britain statesmen and technocrats alike were keen on competing against their old metropole. The value-added of canals and turnpikes was substantial to this end but railroads were the real totems for the economic renaissance ahead. Upstream industries like Carnegie’s mines and foundries boomed from the vertiginous rise of demand for steel. Others like Rockefeller’s oil interests also prospered from this new means of transportation. Downstream industries which traded in commodities and Western Union’s telegraphy equally discovered a new lease on life. Market adjacencies of the railroad boom were many. This inflection point mobilized dormant factor endowments otherwise left unused from the penury of easy transportation where isolated regions once subsisted à la autarky. Hitherto water and wagon-borne commerce dependant on fair-weather access fell woefully short against the friction of distance.

Federal patronage of railroads on the other hand became the precursor to America’s industrial take-off. Hinterlands evolved into breadbaskets. Cities urbanized into metropolises. An agrarian republic that privileged prairie wheat turned into an industrial one built upon pig-iron. Where disparate regions were once siloed their new integration revealed unique comparative advantages as specializations emerged from capital deepening: farmers in the Midwest harvested greater cash crops; bourgeoisie Wall Street saw a mania of trading securities; stockyards and abattoirs in Chicago scaled operations to meet the protein needs of society; innovations like Bessemer steel for rails marked the advent of high-rises in cityscapes; timber and steel mills partook in intense capital accumulation to increase output. Railroads were the main causal vector for this rapid industrialization and demand shock. It is a truism that predecessors like canals and post roads informed America’s ascendency but nothing akin to the scale and scope wrought by railroads. This sector was the unwitting godfather of a great many handsome externalities. Lower barriers to trade from the mobility of goods democratized capital and labour markets by permitting greater participation in moneymaking for agriculture, manufacturing and retail.

In a single generation the railroad birthed mass production of consumer and capital goods. Quite suddenly from the division of labour between regions did interdependencies materialize. Neither transportation by barge nor beast could compare to the speed and scale of this phenomenon. Economist Wassily Leontief’s input-output model (1936) aptly explains the anatomy of this Cambrian explosion. As raw materials and finished goods swiftly crossed the continent the output of one sector was recycled into the staple inputs of another. Thus followed backward linkages from a massive retinue of steelworks for the conversion of ore into rails or the forward linkages of the livestock hecatomb for consumption by the carnivorous public. Upstream and downstream industries thereby grew in unison as the geometry of markets indelibly changed. This supply-chain revolution between inputs and outputs precipitated a frenzy of aggregate growth due to the price elasticity of manufactures, commodities and other end products: less transportation costs lowered factor prices for these same goods and therefore aroused more quantities of them. Railroads were central to this calculus. Savings in transportation buoyed up the purchasing power of producers and consumers for universal gains in productivity and welfare.

The propensity to spend rose markedly just as factories ploughed investments into new technologies and households luxuriated in a sundry of domestic comforts. Indeed innovations elevated production capacity and the gastronomy of American kitchens saw their caloric intake increase. Prior to the Railroad Age America’s biggest sin was its vast distances which were inherent taxes on the public. Being at the mercy of rivers or roads for transportation exacted great pains on economic growth from the premiums on freight. But once the fragmentation of markets between the interior and seaboard was negligible America’s take-off of industry commenced. Not only would the cost efficiencies derived from railroads augment producer surplus and the outlays of consumers it also commanded improved wages for labourers everywhere. The factor mobility from railroads did create a spate of business formation from economies of agglomeration but so too did it beget a footloose labour market. Owners had to forfeit higher wages for employee retention or risk haemorrhaging labor. New machinery was equally a fillip to productivity hence the moral and economic imperative to remunerate labourers pro tanto. This legacy of railroads would invariably lift national industrial output and raise living standards for staples and luxuries.

But unmistakably it was the civic importance of this infrastructure courtesy of industrial policy which holds the most reverence. If arguendo railroads came to naught then America would simply not exist as it does today. On the eve of civil war President Lincoln’s legislated the founding of the Transcontinental Railroad to be an expression of unity. The construction epitomized a referendum on nationhood. Beforehand the landmass was merely a continental silhouette of 34 states whose diverging interests were centrifugal forces on any common identity. This parlous state of national destiny balkanized Congress: the North sought an umbilical cord of rail to consolidate the Union; the South likened such a proposal to a Trojan horse. Disunity was profound and American exceptionalism was fraught with an existential crisis. How to keep the nation whole? By providence the salutary effect of secession by Southern states at the time annulled their veto power and permitted a unilateral proclamation that the railroad be built. Once complete and the Confederates were vanquished this infrastructure transcended geography and homogenized an entire republic to become an empire. Strangers now saw themselves as countrymen. A monoculture of patriotism would be the epiphenomenon of railroads and industrial policy.

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Bilateral Monopolies: A Double Helix of Industrial Policy

The worth of a state in the long run is the worth of the individuals composing it. John Stuart Mill, Principles of Political Economy, 1848

The real yoke to an economy’s development where early-stage capital is seminal has perennially been the deterrence established by risk. The pecuniary logic of skepticism for front-loading major costs inherent in businesses in turn compels the state to always be a first-mover lest inaction hobble aggregate growth. Where inertia persists a critical mass of public support to stimulate investment can only be fostered by government. Capital markets hedge risk and by nature the first link of the innovation chain is the riskiest. But Washington’s proof-of-concept capital for telegraphy and railroad land grants were the remedy to this market failure of disinvestment. Once the spectre of risk was no more only then did Wall Street buy into the buildout of communication and transportation infrastructure. Complementarity of rail corridors and the telegraph meant economies of scale begot those of scope as the two raced to integrate the single market. The coexistence of government and entrepreneurs was the sinews to nationhood in America’s early years. Since the profit motive limits the time horizon of businesses it behooved Washington to reduce the payback period with the incentives of fiscal stimuli and frontier real estate. Rather than outright mercantilism this industrial policy allowed free markets to create wealth in the wilderness from nothing.

Here the mixed economy’s policy architecture proved the feasibility of telegraphy to leery investors by deferring to the wisdom of markets. The gambit parlayed railroads into the backbone of modern communication as one defrayed the costs of the other. Synergies abounded: a) railway shoulders were ideal for the footings of cedar poles; b) maintenance was simplified over the lifetime of these wires from routine track patrols; c) railroads were anchor tenants of said communications for the punctuality of dispatching trains to avert head-on collisions and derailments; d) stationmasters doubled as telegraph operators (Grant 2023:21). The two technologies were the perfect kin of parallel infrastructure as they reduced the marginal costs of the other. More railroads meant more telegraphs; more telegraphs meant more railroads. This double helix of industrial policy created an orgy of industries downstream between meatpackers and media press. By wagering its illiquid asset of land against kinetic infrastructure the minimal state aroused maximal development as the beginnings of America’s mixed economy took shape. It was nothing short of alchemy. Parallel infrastructure of this species transformed what was otherwise greenfield investment into a brownfield one. The gridiron of rails were thus springboards of telegraphy built in lockstep with each other.

Such industrial policy was a child of America’s zeitgeist of hostility towards national debt and allowed the latitude for Western Union to monopolize early communication. Without relinquishing a veto on predation should it arise the government’s hybrid statecraft purveyed a carte blanche to the company in its bid to scale up telegraphy. Once Washington proved the technology companies like Western Union bore the lion’s share of costs related to this information revolution. Railroad barons were quick to lease their rights-of-way to such a captive client. Over time perfect competition gave way to the consolidation of rivals into the legacy company that exists to this day. In less than two decades 90 percent of America’s telegraphy fell under the purview of Western Union and 90 percent of that said monopoly was sourced from train routes alone. If railroad barons fathered their steel and oil counterparts they manifestly did the same to the privileged few in the telegraph industry. This single piece of infrastructure was critical to coordinate train movements hence the reason for the partiality towards one supplier. Railroad companies were in fact the principal agents of Western Union’s ascendency: thousands of telegraph-cum-stationmaster staff were on the payroll of railroads. In its heyday less than a quarter of all offices and salaries of this entire infrastructure was borne by Western Union (Wolff 2013:204). 

The telegraph monopoly was a direct creature of the railroad monopoly as labour from the latter subsidized the revenue of the former. The utility of instant messages would be exploited in return for shared use of land. The symbiosis was such that by 1866 Western Union came to be heralded as the first to monopolize a national industry (Wolff 2013:2). But the unspoken protagonist here of this triumph was in reality the railroad syndicates: a silent partner in this quasi-public utility. Greenfield investment of station houses became brownfield investments when these structures doubled as telegraph relay centres. Apart from field wires and poles nothing was built de novo. Railroad cartels were thus the bona fide progenitors for rents lavished on telegraph monopolies. In the absence of Washington’s double helix of industrial policy that countenanced both it is doubtful the electromagnetic marvel could have been scaled apace. Prior to the 1862 Pacific Railway Act which codified the fusion of rails and wires did Washington build a standalone transcontinental line under the Pacific Telegraph Act of 1860. The mistake was manifest: the moonshot was quite labour-intensive. Seven hundred oxen coupled with one hundred mules, four hundred men and an itinerant beef supply of one hundred cattle risked life and limb into the frontier (Lewis 1993:40).

Transportation of materials over longitudinal real estate of rail made the ordeal far simpler. The verdict saw barriers to commerce from America’s information deficit gone by Western Union’s empire from its aggressive acquisitions of regional competitors. Over the span of two decades between 1867 and 1887 the company prided itself on geometric growth of 2k to 15k offices, 85k to 525k miles of wire and 5m to 47m messages. If railroads were the proverbial backbone of industrialization then Western Union was its lingua franca. One made a single market conceivable whilst the other made it governable. The joint costs of brawn and brains would be a boon to industries everywhere upon the dissemination of knowledge and know-how. Spillovers from this synthesis revolutionized supply-chain logistics when stockpiles and inventory buffers began to be plied more efficiently. Commodities could now race to their destinations with pinpoint coordination and consumers were their beneficiaries as arbitrage windows were cut down to minutes. Being an informational laggard condemned any business to irrelevance. What had beleaguered Manifest Destiny was distance and this bogey no longer had a purchase on industries. Western Union and railroads were icons whose alliance would prime the machine age.

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The Goldilocks Zone: Pareto-superior asset-swapping

Men did not love Rome because she was great. She was great because they had loved her. Gilbert K. Chesterton, Orthodoxy, 1908

Capital markets in peacetime left to their own devices are simply not poised to build infrastructure at scale in the absence of Hamiltonian dirigisme. Should risk-premiums be prohibitively high to hedge against it is then incumbent on government to be a de facto developmental bank: a prerequisite to any species of serious industrialization. The Transcontinental Railroad made flesh by statecraft thus conscripted private firms in service to a public good. The animal spirits of laissez-faire capitalism alone could never be a prime mover of such ambition. Ergo state paternalism must seed the prototype of industry and retreat upon the latter’s maturation. Indeed America’s proper Industrial Revolution was a function of this largesse between, inter alia, chartered companies, land grants, postal contracts and military procurement. What became of the subsidization of railroads was the wholesale replacement of an ancien régime defined by loose markets. Not only would Congress see to the construction but it would also wed this technology to a novelty in communication: those electrical signals of dots and dashes eponymously named after inventor Samuel Morse. Telegraphy thereby entered a symbiotic relationship with locomotives. Poles and overhead wires sunk into rail beds would mark the advent of the Gilded Age.

The value proposition of packet-boats and pony-express couriers regressed into an anachronism upon telegraphy’s emergence. Information latency once commonplace became a relic of the past in the wake of realtime messages. Whilst the 1862 Pacific Railway Act enshrined by statute that railroads and telegraphy be built in tandem there did exist ex ante precedent for merging the two together. This saga harkens back to when Samuel Morse petitioned 30k USD (1.2m in constant dollars) from Washington for a proof-of-concept two decades prior. In 1843 Congress appropriated the said subsidy for Morse’s telegraphy experiment with two sui generis provisos: a) the wire must follow Baltimore & Ohio Railroad’s right-of-way easement; b) upon success any priority access thereafter would be conferred to government telegram dispatches. Congress parted with coin from its purse to court innovation whose breakthrough later opened a portal to continental integration. Lawmakers sued for use of the railroad between Washington and Baltimore as a laboratory since the ready-made infrastructure commons was already graded for such an experiment. As a result of pure utilitarianism the B&O minimized capital and marginal costs to inaugurate a maiden message of Bible origin ‘What hath God wrought’ over the wire (Howe 2007). A halcyon era began in earnest.

Deadweight loss from information asymmetry was ended with the marriage of iron and copper. Railroads and telegraphy soon proxied for America’s nervous system which gave credence to Metcalfe’s Law: that the dividends from this industrial policy increased commensurately with the growing number of users in this new network. The social and economic returns therefrom were aplenty. Behind such statecraft lay the genius of its high-externality investment of modest means to galvanize private capital en masse. From an acorn grew a forest. Rather than nationalize telegraphy like Whitehall did at the mercy of its leviathan of a bureaucracy in London it was decided by Washington that a market strategy would fare better (Perry 1997: 416). Congress pump-primed an entire industry and allowed private investors and their speculation to scale up the result. A Pareto-superior outcome was had. The minimalism here of abstaining from public ownership would be the catalyst to discovery and innovation. The difference in philosophies is stark: Britain’s mandarins haemorrhaged funds whereas the discipline of capital markets in America expedited commercial infrastructure. Such a development model wherein telegraph entrepreneurs rode the coattails of railroad land grants was what spurred industrialization.

This doctrine of oblique intervention by government mitigated risk in new markets for captains of industry to be seduced into speculation. America’s Goldilocks zone in its state paternalism was enough to be a fiscal multiplier for large-scale investment in railroads and telegraphy bereft of any massive public debt: not too little, not too much, but just the right amount of industrial policy ensured the parsimony of not having pork-barrel waste to the benefit of a few monied interests. Therefrom the provision of land and some seed capital revolutionized supply-chain logistics to feed the factories and furnaces of a fledgeling empire. The potent combination of government and investor discipline was a prophylactic against any rent-seeking moral hazard where risk might be fully socialized as in bailouts. Any loose resemblance to Crown monopolies was therefore anathema to Congress for good reason since the latter’s industrial output languished over time. America’s industrialization came to hinge on the adventurism of businesses within the parameters and guardrails provided by Congress. This early species of public-private partnerships avant la lettre proved instrumental since onerous taxes would not be levied on the public for critical infrastructure of national importance.

Citizens were spared the eye-watering expenses of nation-building under this model of industrial policy. Budgetary debates and their inflationary finance were sidestepped with asset swaps: public land in exchange for a few telegraph poles and railway sleepers. Such a quid pro quo in the company of a modest subsidy was emphatically the sine quo non of this Industrial Revolution. Asset-swapping built America! The most austere version of development saw idle resources like prairies traded for infrastructure. Assets of differing maturities and risk profiles were then swapped for each other. That iconoclasm not seen in Europe eliminated moral hazard since land grants were predicated on specified benchmarks throughout the lead time in construction. Were federal cash used alone to subsidize such vast infrastructure without the miscellany of other incentives the nation would have been torn asunder by bankruptcy. Instead the non-monetary asset of land underwrote the fixed capital of tracks, stations, poles and wires to transform America into a single market. A Pareto-superior outcome delivered: a) preferential rates of telegraphy and carriage to Congress; b) social returns on investment for the many; c) riches for railroaders and companies like Western Union. Nowhere was this industrial policy replicated: shareholders rather than taxpayers industrialized a nation.

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Factor Mobility: New Economic Geography Theory and Icebergs

The blood of the heroes is closer to God than the ink of the philosophers and the prayers of the faithful. Julius Evola, Revolt Against the Modern World, 1934

The philosophical wellspring for the Pacific Railroad Act of 1862 was anything but an article of faith as big and small government proponents were hostile to each other. Were it not for the loss of veto power of the Jeffersonian South upon the Confederacy’s secession in 1860 it is certain the Transcontinental Railroad would have floundered. The federal government’s industrial policy was the vanguard of this infrastructure bereft of which the private sector would have spurned participation. State paternalism reached an entirely new watermark of efficacy through its horse-trading with the private sector to birth this public good. The abundant factors of production between public land and private capital were masterfully exploited to be springboards of industry. In the midst of bloody conflict with the outbreak of Civil War this feat of policy brought together a vast continent. The use of land grants were of particular note. By parceling out plots in a mosaic pattern to the dual franchises of the Union Pacific and Central Pacific companies a monopoly of transportation and real estate was established. Both companies became gatekeepers to industry and population as the mobility of goods grew commensurately with frontier homesteaders. Rather than be subject to the capture by bureaucracy America’s empire was delegated to business buccaneers so it may be actualized within an abbreviated timeline.

The Gilded Age was the child of this 1,776 miles of track. Above all limiting factors to productivity it was transportation costs which eroded profit margins most acutely. Thus infrastructural deficits had to be remedied first and foremost as a prerequisite to industrialization. Factor mobility then is the single most salient variable to affluence. Infrastructure meant to expedite the movement of capital and labour with minimal friction is the surest way to expand the production possibility frontier and create wealth. Since time immemorial the logistics of such supply chains have been a bellwether for civilization. Empires of old were therefore always keen to invest in maritime trade or roads for merchants. Factor mobility is thus directly correlated to the efficiency of resources. And just like Economist William Stanley Jevons famously observed the more something is used efficiently the more consumption of that said resource will be. To wit, this principle informs steel manufacturers whose revolutionary Bessemer process stimulated consumption other than for railroads as cost reductions prompted the technology’s adoption in construction. Higher efficiency equates with greater output not less — Jevon’s Paradox. Hence America’s economic miracle stemmed from lower prices buoying up demand courtesy of critical infrastructure.

By the eve of the Civil War the application of railroads were by no means a novelty when short-lines dotted American pastures. What did differentiate the Transcontinental Railroad however was its scale. The tyranny of distance had perennially been a scourge on commerce — an entry barrier to markets. Washington redressed this fragmentation. What ensued was a wholesale reorganization of economic life. Economist Paul Krugman (1992) in his New Economic Geography theory (NEG) would expound how the Pacific Railroad Act exerted a centripetal force on major commercial centres. The advent of this infrastructure prompted businesses to gravitate towards particular nodes of industry in tight clusters to reap economies of agglomeration. Companies backpedaled on being widely dispersed to concentrate themselves so they may produce at scale more gainfully in concert with one another. Shrinking time and space lowered transportation costs to incentivize greater production and capital into homogeneous havens where likeminded businesses proliferated: close proximity cross-fertilized know-how. Case in point, between 1870 and 1890 Chicago’s population soared 268 percent from thirty thousand denizens to over a million. A once humdrum outpost matured into a teeming metropolis of industry.

Greater factor mobility lends itself to capital formation whereby industries plough higher profits into rationalizing production so they may in time scale up output. Economist Paul Samuelson (1954:268) analogized this phenomenon quite brilliantly in his ‘Iceberg Cost’ model for trade. This iceberg is an avatar for any generic good that is shipped. Distance or time thereof are the real bogeys problematizing such transportation. The longer the trip, the more the iceberg melts prior to reaching its final destination as value depreciates. By extrapolation the same dilemma afflicts goods that must travel afar. If transportation costs exceed the value of the shipment itself then it is illogical to trade. A quid pro quo of this nature between buyer and seller would not be one of capitalism but rather of charity — giving away things for free at one’s own expense. Any merchant of sound mind would be deterred from a money-losing venture of this kind. If the friction of distance across the hinterland is too onerous then a shrewd business will refuse to partake in it. Hence the reason for the torpor of industry before the Pacific Railway Act of 1862 since the right infrastructure had yet to be conceived. Wagon caravans or steamships of old failed to make the cost-benefit ratio of long-distance commerce favourable to monied interests.

As a matter of fact, mail subsidies were ubiquitous for over a century just to artificially create markets for transportation where none existed. The Postmaster General first patronized overland stagecoach lines whose services could accommodate the delivery of parcels. Packet lines of steamships were next to be made viable by the regular revenue from government largesse. The solvency of these companies and their routes were guaranteed by this influx of capital. Even amidst the nascent era of railroads the operators were party to a baseline income for mail carriage. A dependable traffic base would fund tangible assets for companies to ferry evermore greater numbers of packages and people to faraway places. But these ameliorations in logistics were too minor to disrupt the status quo of isolation that arrested interstate commerce. Trade at scale was moribund in the absence of the right infrastructure. In the main the problem echoed Samuelson’s Iceberg Model whereby any profit was cannibalized by the transportation cost or more figuratively the iceberg would melt on route. No value inhered in long-distance trade. Until the introduction of railroads the disincentive of distance made America’s backwardness a foregone conclusion. The industrial policy of the Pacific Railway Act of 1862 would be an inflection point.

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The Civil War's Black Swan

The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. Abraham Lincoln, Annual Message to Congress, 1862

The nerve centre for the Industrial Revolution would be the Transcontinental Railroad which barrelled through miles upon miles of unsettled territory after its completion in 1869. Inspiration for this infrastructure was twofold: (i) tether the Pacific shores into the bosom of national unity; (ii) stimulate heavy industry with its many spin-offs downstream. The wilds of the Great Plains thereafter were terraformed into farmlands and a paradise for millions of hardy settlers. Volumes of interstate trade crested to new heights as frontier outposts transformed into cynosures of business. Consolidation of a continent manifested in tandem with the territorial aggrandizement afoot between the Louisiana Purchase (1803), Texas’ annexation (1845) and Mexican Cession (1848). The short-line railroads scattered about the Northeast became the ideal muse for the federal government’s adventurism in the unification of these vast tracts of land. One major pillar of protest had to be quashed however — the South. Southern Democrats balked at a lateral railroad up north for fear it would create an apartheid of wealth against their cotton agrarianism. As differences turned toxic a bandwagon of states seceded under the Confederacy beginning in 1860 thus Washington’s balance of power shifted in favour of Republicans.

With a major bloc of opposition in exile this vacancy bestowed a carte blanche for Republicans to be the architects of an American renaissance. Endless deadlock over the proposed route became a footnote once control of both legislative chambers in Congress were seized by votaries of this new infrastructure. Legislative assent would be given amidst the throes of the Civil War in 1862. The genesis of the railroad was anything but bipartisan. In the absence of a splintered government the Senate approved the project 35 to 5 and the House of Representatives followed suit 104 to 21. With President Lincoln’s acquiescence by signature a whole army of likeminded lawmakers busied themselves to mobilize the capital and labour for this feat of de jure construction. This symbolic victory of binding California’s material wealth to the Union gave credence to the legitimacy of the North and its continuity. The latter could lay claim to the true guardianship of progress despite the holdouts when stagecoaches, wagon convoys and ships circumnavigating the Cape Horn would become obsolete. The law was a masterclass of realpolitik. America’s Manifest Destiny was on the verge of realization since fortune-seekers could migrate west with dispatch. If the interregnum of secession had not occurred the railroad would be stillborn.

The pro-business leanings of the Yankees codified in the Pacific Railway Act of 1862 was a fait accompli of American empire. The Industrial Revolution continued apace. This infrastructure sprawling the inhospitable Sierra Nevada over the Great Basin and Great Plains would establish two discrete companies: (i) the Union Pacific Railroad which oversaw the eastern segment from Omaha, Nebraska; (ii) the Central Pacific Railroad which occupied itself with the western leg from Sacramento, California. Such bilateral construction meant both companies would meet halfway at Promontory Summit in Utah. Provisions in this Act were quite inventive: ten land grants of 6,400 acres or one-square-mile each on alternating sides of the railway akin to a chessboard was gifted for every mile of track laid; government bonds were issued for every 20-mile section of track (Klein 2019:24). Railroad companies availed themselves of the first stipulation to have settlers and businesses buy or lease the land adjacent to their tracks for raising capital. Future revenue was also guaranteed since these communities would be subservient to the utility of railroads for goods and people. The second provision of bonds enabled the two companies to layer their capital structure with loans sponsored by the full weight of the federal government.

These thirty-year bonds at 6 percent interest were released in tranches to the Union Pacific and Central Pacific railroads for every mile of track laid to incentivize speed in the infrastructure’s lead time (White 2011). The opulence of these tranches hewed to terrain difficulty. The sum of $16,000 per mile was unlocked for the plains, another $32,000 for the Rocky Mountains and $48,000 for the Sierra Nevada range. Washington was an intermediary in these bonds which reassured investors and railroaders alike as the risk profile of this enterprise would be borne by the treasury to reduce market imperfections. Over the construction’s lifetime these capital infusions approached $65 million (Uschan 2009). But deadlines and benchmarks were enshrined in the Pacific Railroad Act to deter any slipshod work with the forfeiture of privileges at stake. Such structure of incentives and disincentives truncated the gestation of the Transcontinental Railroad to less than seven years between its ribbon cutting and completion. Market failures abound for any project of this scale which tends to attract unsavoury characters with rent-seeking cupidity. But the federal government’s industrial policy did mitigate the excesses of capitalism from sabotaging infrastructure that reduced cost-to-coast mobility from months to a week.

The Pacific Railroad Act with its unique blend of property rights and fiscal ingenuity might be likened to a work of art. A perfect instrument was introduced to make manifest what was otherwise a unicorn of an idea. Companies were entrusted with prime real estate to mortgage or sell across a patchwork of private land interspersed between public ones so the government could also reap value from this corridor at the backend. Subsequently property value soared from speculation. The Union Pacific and Central Pacific Railroad companies were also less skittish about amortizing their liabilities courtesy of the front-loaded financing from homesteaders who purchased their lands. These generous grants were not some negligible perquisite but rather invaluable to recoup costs before train traffic had matured. Early settlers were then initial guarantors of the railway’s solvency prior to the scale economies from every extra mile of track accessing additional government bonds. Ergo land grants jumpstarted operations and loans predicated on miles sustained them; each promised the influx of capital. Over twenty million acres of public land and $60 million in bonds would be dispersed between the Union Pacific and Central Pacific Railroads (Bain 2000:128). This unique quasi-public plan militated against inertia in the project.

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The Tenth Amendment: A Trickle-Up Developmental State

The coming of the railroad was the death knell of the old frontier. Frederick Jackson Turner, The Significance of the Frontier in American History, 1893

Already dispelled is the fallacy that America’s railroads were the sole preserve of men with private means since Washington’s industrial policy was the vanguard of this sprawling infrastructure. There was more at work than just rugged individualism. The young Republic’s fixation on ‘internal improvements’ predated locomotives as the government was already the benefactor of canals, roads and the like. Hitherto waterways were the darling of subsidies only because the locomotive had yet to be invented until the Erie Canal’s inauguration in 1825. But the adoption of this new technology from England occurred posthaste. The embryo of railroads was first conceived in the lower tiers of the federal system where the impetus to such infrastructure resided with state and local governments. The Maryland General Assembly was the first to enact a charter officially sanctioning a railroad between its port city of Baltimore and the Ohio River after its anxiety over losing the race for westward expansion. Provisions therein included the right for municipalities to be substantial stakeholders in the newly formed company should they choose. This business interest was also bestowed eminent domain rights to veto holdouts in its acquisition of land (Dilts 1996).

The charter established 30,000 shares in the company valued at $100 apiece. Maryland became a vested interest with an equity of 10,000 shares; the city of Baltimore reserved 5,000 shares (Stover 1987:17). Thereafter the remainder of capital was raised from merchants and financiers alike. Half of the financial scaffolding for America’s first railroad therefore emanated from legislative bodies. Private investors were then raring to invest based upon such asymmetric risk. In effect public ownership at any scale hedges against losses or failure for the quorum of shareholders in question. Whether intended or not, whenever a company’s investment becomes quasi-public it can automatically be considered a de facto monopoly. Government bristles at the idea of competing interests upsetting its stake in that said company and will thus preserve its marketshare at all cost in this public-private partnership. Although ethically dubious the practice of privatizing profits and socializing risk often yields great prosperity in a positive-sum game. For the city of Baltimore the solvency of the B&O Railroad venture was itself an existential imperative. Further to the south the city of Washington D.C. enjoyed a head start to secure business for its port of Georgetown by chartering the Chesapeake and Ohio Canal (C&O).

This new waterway between the Potomac River and Ohio presaged the diversion of trade away from Baltimore. In response the B&O would be Baltimore’s gambit to safeguard the city’s future primacy when the proven technology of canals were well known to create wealth and jobs. The railroad’s construction was a canal-adjacent investment to stave off the spectre of economic irrelevance. Although partisan dissent did oppose the idea of underwriting massive debt on behalf of a private company the rich dividends were not so easily dismissed. A windfall accompanied Baltimore’s unbridled access to America’s interior from the traffic of agricultural commodities like grain, tobacco and pork. The fusion of public and private interests by the coalition of railroad boosters bestirred the latent forces of production as this iron link reconciled Baltimore to the Ohio valley. Years later this industrial policy offered a blueprint espoused by the federal government in founding the Transcontinental Railroad. The saga of the B&O Railroad charter really is a case study of industrial policy avant la lettre. Prior infrastructure in the likes of canals, ports or lighthouses came to fruition from subsidies in contractual form by tender. The B&O separately materialized as a sui generis venture: half public utility; half private company.

State and municipal legislatures both held equity in a corporate charter which was itself an aberration. This novelty broke with tradition of passive investment by placing government at material risk in an otherwise speculative pursuit. No precedent existed hitherto whereby the public treasury was a vested interest alongside private shareholders. Over a century later the staying power of this practice would be seen in the bailouts of distressed companies like Eastern Airlines, Alaska Airlines, Chrysler or General Motors. But otherwise no ex ante reference could be consulted at the time to expound the agency of government taking a direct stake in a company deemed critical for the commonwealth. So whilst both Maryland and Baltimore were adamant on preserving their place in the national supply-chain they were equally seduced by the dividends for their electorate. Micromanagement of a company thereby substituted for the more aloof method of soliciting contract bids which were common for mail routes. But ephemeral subsidies like the foregoing did not confer the same control as the quasi-nationalization of a company. Such a hybrid structure in ownership of public investment in corporate equity acutely differed from the state-owned model of public works whose costs were recouped by tolls.

An outright purchase of stocks was the polar opposite to service contracts awarded to independent companies which were au fond government proxies entrusted with public monies. Collaboration in those days never included any semblance of equity participation. Indeed canals and turnpikes were funded by state treasuries; postal subsidies would separately spur pan-American or transcontinental routes for commerce. Instead the B&O railroad experimented with a novel instrument to hasten the realization of this public good for transportation by allying public with business interests. The real causality for this innovation can be readily discerned. Maryland and Baltimore were hard-pressed by the spectre of New York’s Erie Canal and the legislative assent for the C&O Canal in 1825. Without a swift correction both the state and city would be fated to be marginalized from trade altogether. It was incumbent on the two to stake their future on a new form of infrastructure. Hence the B&O railroad evolved into a microcosm for a new variant of industrial policy to mobilize functionaries and financiers alike in the first partnership of its kind. Not long after did this mixed model gain currency as Cincinnati acquired the Little Miami Railroad (Hedeen 2021) or Kentucky and its state capital of Lexington exercised part ownership of the Lexington-Frankfort Railroad (Boyd 1964:6).

In time this atomized version of industrial policy for railroads trickled upward to the federal level. The logic behind this statecraft being first under the financial wizardry of state and local governments derived from the Constitution’s Tenth Amendment. Any enumerated powers not explicitly reserved for Washington were delegated to states and municipalities. This omission of plenary authority and its constitutional exegesis still divides Congress to this day. The descendants of Hamiltonian and Jeffersonian schools of thought have long been at cross-purposes over this third-rail of an issue: Alexander Hamilton extolled centralization; Thomas Jefferson adhered to devolution. This feud saw that the federal government directly intervened in markets very seldom. Only twice heretofore had elected leaders sought to correct markets with the Federal Lighthouse Act of 1798 to finance the guardrails for navigation and the Federal-Aid Road Act of 1806 to build the Cumberland Road. So whilst the federal government showed a reticence about its mandate a vacuum was filled by the prerogatives of states. The Tenth Amendment was no dead letter and the fear of the Supreme Court’s policing anesthetized infrastructure at scale for the republic. It was President Abraham Lincoln who would later become the first contrarian.

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Happy Spillovers: Sperm Whale Oil Displaced by Petroleum

The introduction of so powerful an agent as steam to a carriage on wheels will make a great change in the situation of man. Thomas Jefferson, 1802

Railroads were not only a moment of inflection for the steel empire but they equally wrought downstream effects for petroleum by opening America’s interior to industry and speculation. If this new infrastructure coronated Carnegie as the king of steel then it did the same for John D. Rockefeller’s Standard Oil company. Legislation behind the railway boom made this commodity viable for commercial use since extraction, refining and distribution could be scaled up when heretofore waterways limited production to modest quantities. The alacrity of this energy revolution is startling. A paradigm shift of logistics made the whale oil industry redundant overnight. Prior to the railroad mania transportation prices were dearer than any amount of petroleum whose exploitation was itself too labour-intensive and confined to seeps and shallow excavations atop the earth's surface. Hence whale oil’s omnipresence in the economy for lighting and other uses. By providence however Edwin Drake’s first oil strike via his innovation of drills and steam engine in 1859 perfectly coincided with the heyday of railroad construction. This infrastructure was a godsend. Petroleum could suddenly be monetized. A spate of oilfields came online from Ohio to Texas and brought the hydrocarbon to consumer markets as this black gold increasingly rose to prominence.

The genius behind Rockefeller’s alliance to railroads hinged on preferential treatment in a reciprocity based upon steady shipments in exchange for steep discounts. Investors and owners alike took warmly to this guarantee of revenue. No rival could subsequently compete with the conglomerate without operating at a loss since they were saddled with higher freight costs. A raft of bankruptcies then ensued. Rockefeller in turn practiced vulture capitalism through his aggressive acquisitions of companies in distress upon pricing them out of markets. An empire was consolidated piecemeal whereby railroad mania conduced to the oil boom: monopolies created ever more monopolies. Detractors might tar and feather Washington’s succour which privatized gains and socialized risk for railroad barons but there is no ambiguity how a better standard of living summarily followed. Prior to the advent of petroleum the rendered fat of whales had a purchase on artificial lighting in parlours and homes everywhere. Kerosene abruptly displaced the latter as a cheaper fuel of choice for the mundane chores of heating, cooking and the like. The ascendency of oil thus disrupted the whaling trade. Washington’s industrial policy for railroads so became a stimulus-cum-revolution against industries of old which were anachronisms of modernity.

The creative destruction of petroleum-based fuels toppled the whaling stranglehold. Railroad mania abreast of the oil rush would herald the beginnings of the Gilded Age. Why was the boom so immediate? One glaring pitfall of the whaling industry was its vulnerability to supply shocks. Just as Herman Melville chronicled in his chef-d’oeuvre ‘Moby Dick’, whalers voyaged further and further out to sea for months if not years in their expeditions as diminishing returns were symptomatic of fewer and fewer whaling grounds. To this very day numerous species of whale remain on the brink of extinction as a corollary to this systemic culling. Consumers therefore embraced petroleum en masse. Railroads were not tangential but central to this demand shock wherein petroleum evolved into a universal staple for households and businesses. Social and economic activities extended their hours well into the night unbothered by neither the cost nor scarcity of artificial light. As the star of the whaling industry faded, the use of petroleum continued to collect marketshare and mindshare in the last quarter of the 19th century. Energy consumption would be dominated by petroleum in lockstep with the expansion of railroads. The scalability of kerosene unlike the scarcity of whale oil was the death knell for the Atlantic seaboard’s whaling industry.

Scale economies were simply a chimera for whalers when they were destined to wrestle these sea monsters in the open waters as far away as the Arctic or past the equator into South America. Compare this labour-intensive enterprise with the capital-intensive one of boring a rudimentary hole into the earth and pumping fresh crude out of it. Such abundant supply and cheap distribution by railroads were infinitely preferable to multiyear voyages fraught with hazards. Petroleum reserves were seemingly inexhaustible with the discovery of oilfields via onshore drilling by wildcatters. Whale oil was finite. Electricity generation was likewise an adversary which posed an existential threat to the whaling industry as Thomas Edison patented the incandescent lightbulb in 1880 (Scirri 2019: 41). By the end of the 19th century the commercial whaling industry was beset on all sides by competition which proved insurmountable. Capital destined for the harbours of New England where fleets of hundreds once moored found greater returns on investment in petroleum. This transformation became a parable of the ‘creative destruction’ of capitalism’s lifecycle between the obsolescence of an industry and the birth of another. Shipwrecks, mutinies and erratic whale migration simply could not compete with the ironclad certainty of oil.

Petroleum and steel would develop along similar pathways in their ascendency. Namely both industries were critical agents for the buildout of railways in what can be construed as a positive-sum game: (i) oil relied on locomotives for coast-to-coast distribution; (ii) steel sought railroads for the demand of tracks; (iii) railroads vied for the inelastic revenue from oil freight; (iv) railroads equally required steel. Each industry had mutual interests as they jockeyed for favourable terms. The exploits of Rockefeller and Carnegie were also identical in their strategies of horizontal and vertical integration within their respective industries. Standard Oil would seize every stage of the commodity’s life cycle by vertically integrating pipelines, refineries and oilfields. US Steel implemented the same strategy with its acquisitions of mines, lake barges and rolling mills to reduce the volatility of its market. Both entrepreneurs conquered value chains whose economies of integration purveyed a cost advantage which was passed onto consumers. Another likeness was the scale of horizontal integration shared between the two. Rockefeller swooped in to buy competitors in distress. Carnegie consolidated his steel empire in a selfsame fashion. In business lore the legacies of these storied companies share an uncanny resemblance.

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Kingmakers: The Oligopsony of a Monopoly

The railroads are not run for the benefit of the dear public. That cry is all nonsense. They are built for men who invest their money and expect to get a fair percentage on the same. William Henry Vanderbilt, 1882

Prior to the railway boom American ironworks were beleaguered by sluggish growth. Demand by this new infrastructure however quickly distorted markets in favour of these foundries as iron and steel were sold at prices and volumes underwritten by government. How pregnant was this moment? At the outset of the 20th century upon J.P. Morgan’s consolidation of steel acquisitions the market capitalization of his new entity called U.S. Steel was the first to exceed a billion dollars in human history (Hessen 1972). The railroad monopoly became a de facto oligopsony for the vast consumption of durable metals between rails, rolling stock and bridges. In Washington’s economic arms race with Britain the government’s legislative capture gave rise to a captive market for these same manufactures. A staggering 90 percent of all Bessemer steel made in America between 1870 and 1890 flowed directly towards locomotives and their trappings (Misa 1998). The epithet of kingmaker aptly describes the clout shared by barons like Vanderbilt or Gould who themselves deputized steel magnates like Carnegie. The great blast furnaces of the Northeast were creatures of the railroads. The direct pipeline between the two conduced to the scale economies required for the exponential growth of each.

Yet something far more unique other than capital formation manifested in the symbiosis of both industries. Borne out of this marriage came a series of innovations in metallurgy due to the exigencies of railroads. Necessity is the mother of invention and ironmongers were tasked to create a material which would not succumb to the forces of attrition by the frequency and weight of locomotives. The industry thus espoused Darwinism whereby only the strongest metal survived whose properties demonstrated fewer and fewer impurities with each iteration. The first alternative of cast-iron exhibited a failure rate prohibitively high which risked frequent derailment. This iteration befit stationary loads akin to bridges but was too brittle for the stress tolerances of rails. Microcracks symptomatic of metal fatigue called for greater investment in the search for superior iron alloys with a greater lifespan. The next metal of choice to withstand the cyclical stresses of locomotives would be wrought iron known for its improved tensile strength. Yet despite its longevity this metal was also prone to fracture to the consternation of engineers. Recurrent failures spoke to the need to find more robust materials. The next quantum leap in technology was the introduction of puddled iron whose production method controlled for oxidation.

Despite this breakthrough being lightyears ahead of the pig iron of yesteryear it still remained an interim solution since it was liable to wear prematurely. The labour-intensive nature of this metal in its artisanal process meant quality irregularities continued to beset the service life of rails. Such limitations were anathema to the overhead of maintenance for railroad companies which sought to escape these recurring costs. Puddled iron therefore would be a stopgap until a final iteration materialized. Unlike its predecessors the technology of Bessemer steel won the hearts and minds of builders and financiers alike since its automation yielded consistent results. A controlled blast of air through an apparatus called a Bessemer converter produced high-quality grade metal at scale without fail. The pursuit of perfection thereby culminated in the mass production of steel which was well-nigh immune to fatigue from the rolling contact of locomotives. Railroads embraced this new technology with vim and verve as its removal of impurities within minutes generated greater output at less cost. A material upgrade of this sort saw this alloy become the sine quo non of railway construction to universal acclaim. Indeed America’s Industrial Revolution was essentially the legacy of Bessemer steel (Peters 1945).

Railroads were proving grounds for innovation in a race to source the best materials. New technologies in the production of alloys were not made in a vacuum but were functions of a pent-up demand for high-quality rails. The learning-by-doing of various foundries inexorably led to the apogee of Bessemer steel which was the gateway to industrialization. But no other industrialist exploited the captive market for rails more deftly than Andrew Carnegie who vertically integrated his operations to consolidate supply chains. His broad acquisitions of coal mines, iron fields and limestone quarries enabled a seamless transit of raw goods to their final destinations for steelmaking. As soon as Carnegie wedded such vertical integration to the Bessemer process he devastated his competitors with aggressive pricing. The brilliance of this market strategy can be laid bare as thus: the steel baron enriched himself by recouping his margins on the backend of procurement deals based on volume. Carnegie then shaped the purchasing behaviour of railroad companies with discounts in return for volume lest they forfeit premiums for the same product at other manufacturers. Always the shrewd negotiator, Carnegie cornered the market in a mutually beneficial alliance with railroad barons whose oligopsony created a monopoly within the steel industry.

The incestuousness between Carnegie and the railroad industry has no better proof than how his largest mill was a namesake for the president of the Pennsylvania Railroad. The Edgar Thomson Works founded in 1875 near Pittsburgh is eponymously named after the man. What differentiated Carnegie from his rivals was how he dared to capture the business of every major railroad company by creating an empire impervious to the price fluctuations of intermediate goods. What resulted was a closed-loop supply-chain to the detriment of competition. Such centralized control meant ore was sourced in Carnegie’s mines which was transported on his barges or trains which in turn was smelted in his mills. Absolute authority over the entire value chain of steel was the impetus behind the vast fortunes amassed. Carnegie was equally averse to the golden standard of business: diversification. Steel rails were a singular focus unlike other competitors vying for contracts to manufacture naval warships and castings. This specialization and the scale economies thereof locked out any other supplier in the hunt for marketshare. Corporate diplomacy was also an idiosyncrasy unique to the steel baron as he exploited philanthropy to court business like inaugurating the Carnegie Library of Homstead in the hometown of railroad executive William Donner.

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A Cambrian Explosion: Friedrich List versus Adam Smith

God Almighty Himself must have been hilarious when human beings so mingled iron and water and fire as to make a railroad train! Kurt Vonnegut, Bluebeard, 1987

By the twilight of the 19th century no other industry parlayed Washington’s protectionism into a triumph of scale more so than the steel industry. In the wake of a ready market immune to uncertainty, predicated upon the demand for rails, ironworks were poised to mount mass production bereft of any undue fear of idle capacity. Owners felt bullish about expansion and innovation within the parameters of knowing their enterprise would be fully backed by government. Herein a universal theme of incentives can be gleaned in America’s industrialization: the canonical role of government was to reduce risk for business mavericks to invent in their sandbox unfettered by the spectre of loss or regulation until their niche industry became a national one. A heavy hand thus created a domestic market amiable to downstream development under the auspices of government. Provide the fertile ground and all sorts of flora will flower. Heavy industries were then beholden to the paternalism of policymakers. The railroad with its many protections and privileges epitomized a laboratory for industrial expansion. Nearly all of iron and steel consumption fed these locomotives and their grids (Swank 1892:426). The correlation therefore between railroads and industrialization was not at all casual but causal: by the end of century homemade metal blanketed the nation.

The genius of the strategy lay uniquely in the marriage of subsidies and tariffs. The idea was to create a garden and corral it behind disincentives for imports to keep foreign producers at bay. Washington would be the gatekeeper. Aversion to competition from European producers long troubled lawmakers in the post-Revolution period after the War of Independence in 1783. At the crux of this unease was how established manufacturers threatened domestic industries with cheaper capital and consumer goods which would be anathema to industrial growth at home. The corporate welfare of shielding import-competing businesses against such predations was nothing less than an existential matter. Over a longer time horizon the short-term sacrifice of paying a premium for domestic goods would yield long-term gains as smaller companies scaled up their businesses with a pro tanto fall in prices. Economist Friedrich List (1841) in his seminal treatise denominated this phenomenon of dirigisme the ‘infant industry’ theory. Insulate a fledgling company and in less than a generation it will be the envy of global markets. Such a captive market allowed America’s manufacturers to surpass English cities like Birmingham and Sheffield when they were inoculated against the winds of competition from abroad.

List’s ‘infant industry’ theory was an indictment against the universalism of free trade fathered by Economist Adam Smith (1776). In the context of the modus vivendi after the War of 1812, America adhered to the tenets of the former in its bid to rival the Goliaths of European industry because it could scarcely compete otherwise. The economic saga is quite lively. Upon the normalization of trade relations anew Britain sought to recapture its prewar marketshare by dumping its glut of goods which were denied during the internecine conflict. Domestic producers soon reeled from the loss of their foothold in the marketplace. So began the age of tariffs at the behest of homegrown industry. A whole battery of duties followed with each act more intense than the last: the Tariff of 1816; the Tariff of 1824; the Tariff of 1828 or colloquially dubbed the ‘Tariff of Abominations’; the Morrill Acts of 1862 and 1864; the McKinley Tariff of 1890; the Dingley Tariff of 1897. Prohibitive levies as high as 100 percent on manufactures defied Atlanticism. Ironically enough as List’s economic nationalism was made flesh in Washington, London sued for Smith’s thesis of free trade instead by its repeal of the Corn Laws in 1846. One nation repudiated classical orthodoxy whilst the other embraced it — but only after having wed itself to the same statism which enriched it for so long.

America vindicated List’s doctrine with its industrial catch-up to Britain at meteoric speed. Business interests, well ensconced behind tariff walls, fought well to capture scale economies and technologies that were once elusive in the absence of high levies and infrastructure like railroads. A sheltered market and superior logistics were prerequisites for businesses to move up the value chain whose result shattered the illusion of English invincibility in industry (Irwin 2017). It is not reductive to argue America’s ascendency was monocausal: industrial policy was the thrust behind most if not all of it. In the end America would no longer be marginalized as the feedstock of empire but instead become one. Suddenly a Cambrian explosion manifested. Sourced in the crucible of economic nationalism sprouted the pervasive use of machines from the capital deepening of businesses to raise productivity: the McCormick mechanical reaper and John Deere ploughs became mainstays on farms; the McKay sewing machine was embraced in the bosom of textiles; foundries imported Britain’s Bessemer process to smelt iron into steel; Samuel Morse standardized telegraphy for instant communication with his eponymous code disseminating news in seconds; Gustavus Swift’s refrigerated railcars created a national market for perishables. These marvels indelibly altered the DNA of American capitalism.

Like any agrarian society America once languished at a subsistence level with a constellation of cottage industries. Local general stores carried limited inventory; artisans fabricated bespoke items in small quantities; blacksmiths forged metal for the utilitarian needs of a community; farmers were by and large landlocked. America was merely a patchwork of niche markets. In time the creative destruction wrought by railroads completely upended this inertia. Sears, Roebuck, and Co. would be established in Chicago’s epicentre of railroads for its mail-order business;  smokestack industries found a renaissance in major cities; centralized commodity exchanges and grain elevators would become synonymous with railroad junctions. Places which were once trading outposts like Chicago, Atlanta and Houston found new life as cradles of business. Disparate regions discovered new identities as the breadbasket, steel belt, or coal country of the nation. Such diversification is the real legacy of railroads which reimagined supply chains by inaugurating just-in-time deliveries. Rivers were constrained by geography. Roads remained at the mercy of inclement weather. Railroads however transcended the banalities of transportation to consolidate a national market into a primus inter pares of production in relation to Europe.