Plutocrat Triumphant: The Life and Legacy of E.H. Harriman
At the height of Edward Henry Harriman’s power in 1906, somebody from the august brotherhood of journalists had the temerity to write that “[i]t may be well to remind Mr. Harriman that the Colossus of Rhodes was destroyed by an earthquake.” The occasion which gave rise to this remark—Harriman’s battle for control of the Illinois Central Railroad—was but one of a series of confrontations that Harriman initiated or was embroiled in during his decade-long crusade to restructure and modernize America’s railroad sector. Yet for all of the ink spilled and all of the opprobrium then directed at Mr. Harriman, his persona, his works, his achievements, his legacy, and his alleged misdeeds have been rendered all but obscure in the present day. To observers of the corporate scene in the twenty-first century, the name “Harriman” would scarcely call to mind the image of a business tycoon so prominent that early 20th-century editors had to draw upon Hellenistic iconography to demonstrate parallels or invoke anamnesis. Probably because railroads have been by and large eclipsed in our day by airlines, perhaps because the so-called “annihilation of distance” has been more or less achieved not only through physical but also through virtual means, E.H. Harriman evokes less awe today than J.D. Rockefeller, Andrew Carnegie, or J.P. Morgan.

But E.H. Harriman (1848-1909) should be remembered less for creating railroads than for reinventing transportation economics and for envisioning a grand scheme to unite US railways into a single functioning organism. In the ruthless pursuit of his vision of an efficient, well-run railroad system in the continental US, Harriman unquestionably attracted many detractors, as he was more than willing to ride roughshod over the hoary traditions of both the railroad service and the money men that financed railway operations. The numerous allegations of business impropriety that had been hurled against Harriman during his reign as American railroad sovereign serve to underscore the inconvenient verity that Harriman’s ‘take-no-prisoners’ approach to business brought into sharp relief the emerging modernity of the fin de siecle business world while drawing attention to the twilight of finance capitalism.

In “The Life and Legend of E.H. Harriman”, Klein presents a burnished picture of the stockbroker-turned-railroad man who, at one point, controlled or exerted significant influence on about 60,000 miles of railroad trackage in the United States. A railroad historian who has earlier attempted to rehabilitate the reputation of quintessential robber baron Jay Gould, Klein is careful not to burnish Harriman’s image too much. While Klein portrays Harriman in a fundamentally sympathetic light, the image that emerges from this book shows the magnate to be an individual who was singularly animated by the prospect of exercising hegemony over US railroads, who “craved power unabashedly” and who saw himself as “wielding power to serve … larger, nobler causes.” Klein’s point of departure is the 1922 authorized biography of Harriman, which--providentially for Professor Klein--perpetuated myths about the magnate which were ripe for perforation. Klein also provides a fuller, more human picture of Harriman, allowing modern-day readers to somewhat empathize with the magnate’s relentless, Roarkian drive to seek power.

Apparently, Harriman’s childhood, which was blighted by his father’s dearth of employment opportunities and his immediate family’s persistent reliance on well-off relatives, made an indelible impression on the young Harriman’s mind, providing fuel for his drive to not only succeed, but also to overcome all obstacles. Seemingly impatient to start accumulating his pile, he left school in his early teens to work in Wall Street as a messenger and “pad shover”. Emboldened by his experience in working the Street, Harriman in 1870 acquired a seat in the NYSE. His marriage in 1879 to Mary Averell of the Ogdensburg banking family enhanced his Rolodex as well as gave him an opportunity to enter the railroad business: providentially, Mary’s father William was the president of the struggling Ogdensburg & Lake Champlain railroad, and he appointed Harriman director of the road so as to improve its access to the capital markets.

The Ogdensburg soon found its finances partly sorted out, due in part to Harriman’s intervention. No one at the time could have guessed that, from this inauspicious beginning, Harriman would never look back, that he would move on to increasingly larger undertakings. Harriman’s next act involved initiating productivity improvements at the Sodus Bay & Southern Railroad, described as a “derelict of grand schemes gone unfulfilled”, to establish an impression of the company’s renewed vigor and profitability. This undertaking was a success for Harriman, and it gave him a taste of what he could accomplish if given a free hand, and also demonstrated unequivocally how lucrative being a corporate turnaround artist could be. Harriman’s initiation into the railroad world allowed him to see that “the only way to make a good property valuable is to put it in the best possible condition to do business.”

Harriman would be given a plethora of opportunities to deliver on this insight. The next phase in his education involved serving the Illinois Central Railroad first as board member, then as vice-president. At the Illinois Central, it was not Harriman but his mentor, Stuyvesant Fish, who pushed for material improvements in equipment and facilities. Harriman would prove to be an apt pupil; he gradually encroached on Fish’s turf, but bided his time until he could bring his faculties to bear on one of the foremost restructuring targets of Harriman’s time: the Union Pacific Railroad.

In 1897, Harriman’s scheme to establish himself as the savior of the troubled Union Pacific bore fruit—he was appointed director and member of the executive committee after the company was ‘privatized’ and its capital structure reorganized. A year later, the other directors, sufficiently impressed by Harriman’s ability and willingness to put the Union Pacific’s affairs in order, elected him chairman of the executive committee—a position which he would employ to great advantage.

Having advanced to the pinnacle of the Union Pacific’s executive hierarchy, Harriman would further consolidate his position, thereby allowing him to wield a free hand in all aspects of the road’s operations. In addition to his insight about improving a railroad’s value through modernization and organizational restructuring, Harriman saw that the economy of the western United States was about to be roused from its long slumber, and that the future of the Union Pacific lay with tapping into this emerging dynamism. With Harriman at the helm, the reawakening of the Union Pacific did not take long to manifest: from $13 million in net earnings in 1898, the railroad’s net income reached $30 million by 1906, while the Union Pacific’s revenue per mile significantly outperformed those of other roads. In 1901, Harriman managed to place under the Union Pacific’s control the Southern Pacific Railroad, which, given its 9,441 miles of trackage and 16,186 miles of water lines, was the largest transportation system in the world at the time. Harriman also applied his ‘modus operandi’ to other major railroads such as the Baltimore & Ohio, the Chicago & Alton, and the Kansas City, Pittsburgh & Gulf, and was instrumental in the creation of the Northern Securities Company, a company capitalized at $400 million and established to hold the shares of the Great Northern Railway Company and the Northern Pacific Railroad.

Harriman’s genius in railroad management notwithstanding, he failed to see that his growing dominance in the industry made him a convenient target of politicians eager to see big business interests brought to heel. Scarcely three months had passed after the Northern Securities Company was created when it found itself the subject of an antitrust lawsuit filed by the federal government. On April 1903, the case was decided in favor of the government, and a subsequent appeal to the US Supreme Court failed to rescind the ruling; the Northern Securities Company was thus compelled to divest itself of its holdings in the Great Northern and the Northern Pacific. In 1908, a suit sought to coerce the Union Pacific to divest its holdings in the Southern Pacific and other railroads.

Harriman’s abrasive personality and uncompromising approach to business ensured that he would have enemies in many quarters. Klein provides interesting details about Harriman’s various clashes with business titans and political figures, such as J.P. Morgan, Theodore Roosevelt, George Gould, Equitable Life’s James Hyde, and Harriman’s erstwhile mentor Stuyvesant Fish. Some observers had noted that Harriman’s ambitions and capabilities exceed those of the great Morgan himself—one publication even declared that “Morgan is said to be [Harriman’s] inferior by capable judges.” Harriman sought efficiency, control, renewal, advancement, and structure; Morgan stood for conservatism, tradition, and concord.

Harriman’s ultimate legacy was his vision of a modern, well-organized, integrated, and efficient transportation system. Indeed, the Wall Street Journal in 1905 recognized Harriman’s unequivocal genius in establishing “a railroad system upon which more than its due portion of the traffic of the world must center.” Professor Klein deserves approbation for presenting Harriman in a more favorable light, and for giving modern-day readers a glimpse of the infamous ‘battleground’ that was the US continental railroad sector in the early twentieth century. ( )