By Amanda Porterfield
Corporations play a major role in the organization of American life . In both their commercial and non-profit forms , corporations are everywhere . Much of the food and information we ingest , many of the things we use and most of the services provided to us by religious institutions , medical centers and universities come to us through corporate forms of social organization . Enthusiasm for corporate forms of organization intensified in the first decades of the new United States as independence from British rule led to broader access to corporate charters , and opportunities for commercial and religious growth abounded .
Beginning with the rapid increase in state-issued charters in the 1790s , corporations became primary vehicles of national organization . An 1829 article in the American Jurist and Law Magazine explained , “ Multitudes of companies with corporate powers for banking , insurance , manufacturing , building bridges , roads and canals have been created in all parts of our country , and form one of the striking features of our social system .”
A decade later , the French traveler Alexis de Tocqueville observed : “ In no country in the world has the principle of association been more successfully used , or unsparingly applied to a multitude of different objects , than in America .” Tocqueville noticed that even children at play organized themselves into companies , creating rules for governing their games and punishing infractions . Tocqueville also noticed the galvanizing effects of organizational thinking . “ When an opinion is represented by a society , it necessarily assumes a more exact and explicit form ,” he observed . “ An association unites the efforts of minds which have a tendency to diverge , in one single channel , and urges them vigorously towards one single end which it points out .”
Previous page : Portrait of Alexis de Tocqueville ( 1805 – 1859 ), the French traveler who observed : “ In no country in the world has the principle of association been more successfully used , or unsparingly applied to a multitude of different objects , than in America .”
Aided by government procedures for implementing contracts , the scale of corporate enterprise in the early United States soon surpassed that in Britain , which had led the world in corporate organization and industrial development in the 18th century . In the wake of a disastrous episode of financial speculation in the early 18th century , the British Parliament ’ s socalled Bubble Act had outlawed jointstock companies without royal charters of incorporation . This legislation slowed corporate growth in Britain until 1825 , when the act was repealed . Corporate development in France also lagged behind that of the United States ; in 1791 , during the French Revolution , the French Republic rescinded all corporate charters , and when corporations returned under Napoleon , they operated under strict government regulation . With major implications for the future , commercial corporations grew faster in the United States than anywhere else in the world during the first half of the 19th century , with American law and corporate organization leading the development of corporate enterprise elsewhere .
In the United States during this period , established churches were losing their legal standing , and state governments severed the formal connections to God those churches had represented . In this gradual process of religious disestablishment , churches came to occupy much the same ground as commercial corporations in relationship to state governments .
A new symmetry emerged between religion and commerce based on voluntary contracts . As corporate organizations in both arenas multiplied , legal reason and contract law facilitated expansion in both spheres , along with the flow of ideas and practices between them . Commercial and religious institutions transformed American life together , with religious organizations operating in the forefront of developments in print media , urban planning , interregional organization and ideas about personhood , while commercial organizations expedited advances in industrial organization that transformed relationships among people , removing them from face-to-face contact with the people who made the shoes they wore or produced the cotton they spun .
In human terms , the gap between the rational system of American governance and ordinary life could be disturbing . While corporations had legal standing as artificial persons , real persons could be bought and sold as property , a cruel reality that exposed both the power and the dark undercurrents of legal reasoning . Constitutional protection for slavery was the price that southern leaders exacted for joining the American union , and the price they continued to demand as slavery expanded .
Article I , Section 9 of the Constitution made it unlawful for Congress to restrict the “ Importation of such Persons as any of the States now existing shall think proper to admit ” until 1808 . Article 4 protected the ownership of property moved across state lines , which implied and was consistently interpreted to mean that slaves did not become free by moving to a state where slavery had been abolished . Article I , Section 2 counted slaves as three-fifths of a person for purposes of apportioning state representation in the House of Representatives , where all bills of revenue and spending originated .
As historian George Van Cleve summarized the result of these protections , the Constitution “ gave all the ‘ head start ’ slavery needed to escape from significant federal control until its continued expansion became politically uncontrollable — a raging torrent that leaped the banks of the political river .”
With slavery its driving force , the volume of cotton produced in the United States expanded exponentially between 1790 and 1859 , from 1.2 million to 2.1 billion pounds , feeding American textile mills and 80 % of Britain ’ s cotton industry by the 1830s . Driving this growth , the slave population increased from under 700,000 in 1790 to almost four million in 1860 .
The dramatic expansion of slave labor also contributed to financial disaster , as demand for more and more output from slaves flooded the economy in cotton , contributing to the decline in cotton prices that accelerated pressures on slave labor , wage labor , capital investment and credit systems . Panic fueled by these pressures brought American manufacturers and many small investors to their knees
26 FINANCIAL HISTORY | Spring 2018 | www . MoAF . org