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Freaks of Fortune

Freaks of Fortune: The Emerging World of Capitalism and Risk in America

Jonathan Levy
Copyright Date: 2012
Published by: Harvard University Press
Pages: 360
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  • Book Info
    Freaks of Fortune
    Book Description:

    Until the nineteenth century, “risk” was a specialized term: it was the commodity exchanged in a marine insurance contract. Freaks of Fortune tells how the modern concept of risk emerged in the United States. Born on the high seas, risk migrated inland and became essential to the financial management of an inherently uncertain capitalist future.

    eISBN: 978-0-674-06720-2
    Subjects: Economics, History, Finance

Table of Contents

  1. Front Matter
    (pp. [i]-[vi])
  2. Table of Contents
    (pp. [vii]-[x])
  3. Prologue: Voyage
    (pp. 1-6)

    In the nineteenth-century United States, voyage was an image that Americans invoked time and again to capture what it was like to live on the stormy seas of capitalism. In 1871 Walt Whitman offered a maritime allegory of the experience of individual freedom. To do so he evoked risk. Long a technical concept in the financial arena of marine insurance, at the end of the eighteenth century “risk” still simply referred to the commodity bought and sold in an insurance contract. Outside the world of long-distance maritime trade risk had very little meaning or use.

    Sometime during the nineteenth century...

  4. CHAPTER 1 The Assumption of Risk
    (pp. 7-20)

    In 1836, Nicholas Farwell was an engine-man on the one-year-old Boston and Worcester Railroad when a train ran off the tracks because a fellow employee mislaid a switch. Farwell and his car were thrown from the rail, and the railcar crushed and permanently destroyed his right hand. His career as an engine-man over, Farwell asked the Railroad for compensation but it refused. Farwell hired a lawyer and took his case eventually all the way to the Massachusetts Supreme Court. He valued his right hand at $10,000.

    Chief Justice Lemuel Shaw’s 1842 decision in Farwell v. Boston and Worcester R.R. Corp...

  5. CHAPTER 2 The Perils of the Seas
    (pp. 21-59)

    Risk’s history began with the extension of commerce over space, with the daring and audacity of long-distance seaborne trade. Risk was the fruit of merchant capital—of the early modern networks of mercantile commerce and credit that mobilized and knitted together different geographical arenas of economic production.¹ The specific branch of merchant capital that invented risk management was marine insurance.

    In North America, the great colonial merchants were the first men to commodify perils into financial “risks”—or “risques,” as they were known in the seventeenth and eighteenth centuries. Through marine insurance they purchased from one another financial compensation in...

  6. CHAPTER 3 The Actuarial Science of Freedom
    (pp. 60-103)

    The brig Creole had set sail for New Orleans in 1841. In 1844 another ship sailed on Atlantic waters, this one carrying the noted American abolitionist Elizur Wright to the city of London. Wright traveled there to solicit the support of his British antislavery brethren. But to earn extra money, he had agreed to take notes on English actuarial science on behalf of a fledgling Boston life insurance corporation and bring them back to America.¹

    In a London alley near the Royal Exchange, Wright came upon a scene that to his eyes appeared all too much like slavery. It was...

  7. CHAPTER 4 The Failure of the Freedman’s Bank
    (pp. 104-149)

    At the close of the American Civil War, 4 million newly emancipated slaves entered the brave new world of capitalism and risk. Yankee emancipators believed that the freedmen should offload their freshly minted personal risks onto the evolving northern corporate financial system, as a consequence of their newfound freedom. A financial experiment was launched as the 1865 Freedman’s Savings and Trust Company, otherwise known as the Freedman’s Bank, was incorporated. Directed by northern white abolitionists, the freedpeople would save their wages, using a financial corporation to hedge themselves against the perils of freedom and of the rising economic chance-world of...

  8. CHAPTER 5 Betting the Farm
    (pp. 150-190)

    In 1873, the German immigrants thirty-year-old Henry Ise and his new eighteen-year-old bride Rosie migrated west from Iowa, settling on 160 acres of fertile western Kansas soil. A veteran, Ise had earned the claim outright fighting for the Union Army in a series of nasty campaigns in Tennessee which had left him with a creaky shoulder. After the Civil War, the freedpeople had failed to get their southern claims as the finance capitalist Henry Cooke channeled their savings into the construction of the western railroad network. But for those willing to head west, even for the trickle of southern black...

  9. CHAPTER 6 Fraternity in the Age of Capital
    (pp. 191-230)

    In 1865, John Upchurch—in search of something like a “personal destiny” to quote William Graham Sumner—quit his job as a master mechanic on the Erie Railroad and set out for the oil regions of western Pennsylvania. From there Upchurch was ideally placed to take into view the enormously speculative economy of the postbellum United States. Ida Tarbell, who spent her childhood in the oil regions, would later write in The History of Standard Oil Company of the presence of so many gamblers and speculators there at the time, all hoping to land a big strike—men whose ears...

  10. CHAPTER 7 Trading the Future
    (pp. 231-263)

    So began the testimony of Charles Pillsbury, the largest commercial flour miller in the United States, before the United States House Committee on Agriculture’s 1892 hearings Fictitious Dealings in Agricultural Products. According to him, the financial abstractions of the Chicago wheat pit had lost touch with the reality of the waving fields of wheat.

    Pillsbury indicted commodities futures trading. Futures contracts, or derivatives contracts, arose in the decades after the Civil War, quickly becoming the cutting edge of the American corporate financial system. Marking a new chapter in risk’s history, a futures contract was yet another complex financial instrument that...

  11. CHAPTER 8 The Trust Question
    (pp. 264-307)

    “[I]n the very beginning,” explained George Walbridge Perkins, Sr., “the universe was organized.” Perkins was lecturing an assembled group of academic economists at Columbia University in 1907 on the topic of the “Modern Corporation.” Perkins however was no academic. A partner in J.P. Morgan & Co., normally he was downtown at 23 Wall Street organizing modern, industrial corporations—including the biggest so-called “trust” of them all, the United States Steel Corporation.¹

    Nothing that man “has done in society,” Perkins continued, would ever bring “to pass so complete a form or organization,” so “vast a trust,” as the “all-including system of organization...

  12. Epilogue: Freaks of Fortune
    (pp. 308-316)

    During the 1970s, American capitalism entered rough and uncharted seas. At the opening of the twentieth century, George Perkins’s U.S. Steel had represented the rise of the twentieth-century industrial corporation. Now its fate was emblematic of the coming postindustrial society.

    In 1979, battered by global competition and a sagging national economy, the board of directors of U.S. Steel named David Roderick CEO. Coming from the financial side of the corporation, Roderick had never managed a steel mill. U.S. Steel radically changed course, quickly closing over a dozen mills. In 1901, Perkins had counted 166,588 U.S. Steel employees. When Roderick took...

  13. Appendix: Tables
    (pp. 319-324)
  14. Notes
    (pp. 325-394)
  15. Acknowledgments
    (pp. 395-398)
  16. Index
    (pp. 399-414)