Financial History Issue 122 (Summer 2017) | Page 11

EDUCATORS’ PERSPECTIVE Brothers Wilbur (left) and Orville (right) Wright spent less than $1,000 in total to develop their flying machine. of money before the BOF sent the next $25,000 installment. When that money ran out, he tapped into funds given to the Smithsonian by Bell and Dr. Jerome H. Kidder to continue the work. Finally, in October of 1903, the manned aerodrome was ready for its first test. Launched from the top of a houseboat on the Potomac River, the craft piloted by Manly immediately plummeted into the water. Langley blamed the failure on a flaw in the launching system. After mak- ing repairs to the aerodrome, Manly took a second bath in the Potomac on Decem- ber 8 — a few days before the Wright brothers’ first successful manned flight at Kitty Hawk. The Wright brothers’ success was witnessed by very few. In contrast, an increasingly skeptical press eagerly cov- ered Langley’s failures and heaped scorn on the crazy professor with wild ideas about flight. Langley returned to the BOF to ask for additional funding, but he was denied. His experiments in manned flight were finished. Two self-taught entrepreneurs spending their own hard-earned money had bested the brightest scientific minds government funding could buy. A similar thing had happened before, in the mid-19th century, when competi- tion began to heat up in the trans-Atlan- tic trade wars between several American steamship companies. A 10-year annual subsidy of $385,000 granted to the Collins Line in 1847 for delivering mail between New York and Liverpool appeared to give the firm an advantage. Many felt the sub- sidy was patriotic, since it allowed Collins to compete on a more even playing field with the British-subsidized Cunard Line. Collins built luxurious steamships that far exceeded the minimum standards set by the federal government. The four ships Collins built to fulfill its agreement with the Post Office each cost an average of $730,000. Moreover, these ships burned twice as much coal as other ships and, according to historian Michael W. Sum- mers, “…cost more in repairs after six years than the original outlay for construc- tion.” The increased repair costs came about partially because Collins ran the ships at full bore in the interests of speed. Unfortunately, the Collins Line was unable to make a profit given its high expenses. In 1852, company head Edward K. Collins decided to lobby Congress for more money instead of cutting costs. In spite of a veto by President Franklin Pierce, Collins was successful in increas- ing the subsidy to $858,000 annually, but there was a catch. Opponents of the subsidy increase included an option in the appropriations bill that gave Congress the right to cancel the subsidy with six months’ notice. Cornelius Vanderbilt was one of Collins’s fiercest competitors. His very public fight against the Collins subsidy increase led to accusations that Vanderbilt bribed the President to veto the increase. Undaunted, the unsubsidized Vanderbilt Line competed aggressively against the subsidized Collins Line by cutting costs and slashing rates. A series of disasters struck the Collins Line beginning in 1854, when its steamship the Arctic struck a smaller vessel and sank. Many of the passengers on board the Arctic perished, including Edward Collins’s wife, Mary, and two of their children. Then, in January of 1856, the Collins steamship the Pacific left Liverpool bound for New York. The ship disappeared without a trace, never arriving at its destination. The final blow came in August of 1856, when Congress notified the firm that its subsidy would be withdrawn six months hence. In early 1858, the Collins Line ceased operations. Vanderbilt received a contract to deliver transatlantic mail after the termination of the Collins agreement. Victory was his, but by now he was already directing his attention toward more lucrative opportu- nities in the railroad business. Today, electric vehicles (EVs) are all the rage. The rollout of the Tesla Model 3 has raised hopes that inexpensive, high quality EVs will soon be available to the masses. However, a recent study from Edmunds.com indicates that once govern- ment subsidies are exhausted, the market for EVs will probably fall dramatically. EV sales in Hong Kong slumped earlier this year, when a dramatic reduction in the tax break for EVs went into effect. This also happened in Georgia with the repeal of a www.MoAF.org  |  Summer 2017  |  FINANCIAL HISTORY  9