The Handlins' Commonwealth

Commonwealth, A Study of the Role of Government in the American Economy: Massachusetts, 1774-1861

Oscar & Mary Flug Handlin, 1947

Dedicated to Arthur Schlesinger, this was an attempt to look behind economic and political events and actions, to find “a large body of ideas, unformalized preconceptions, that embodied people’s notions of the kind of world in which they lived and the kind of world in which they wanted to live.” The Handlins acknowledged the role of government in granting special privileges to chartered corporations, which in principle had been created to perform a public service or create a public good. Monopoly was one of the many benefits, and “All franchises included an element of privilege, permitting to a few, as special assistance in a worthwhile enterprise, what was forbidden to all others.”

State governments also controlled public land, but typically awarded large tracts to speculators who promised to organize land sales on the frontier. “Toward the end of 1791,” they said, “Massachusetts shed the early reluctance to make large grants. As a sensational boom turned men’s minds to the prospect of getting rich from stocks and land, as the merchants looked about for new channels of investment, the government, like its colonial predecessors, began to seek out venturesome customers. In 1791 it alienated almost two million acres.” The state also chartered business corporations in addition to public service providers, and organizations to promote business. “In 1781 the Commonwealth chartered the Massachusetts Medical Society to regulate and encourage a desirable, but suffering, profession.”

The oldest corporation in American history, of course, was Harvard, chartered in 1650. A medical school was established in 1782, adjacent but at arms length because colleges were at the time also seminaries and medical students dissected human corpses. The Handlins said, “In 1803 the Cambridge corporation [the Harvard Medical department] won the right to bestow degrees which automatically carried the license to practice, a privilege later extended as well to the chartered Berkshire Medical Institute of Williams College.” Another college that held “medical lectures” and conferred licenses was Dartmouth, in Hanover New Hampshire.

In the age of “internal improvements”, states stepped in to curb the excesses of speculation. “William Jackson and Theodore Sedgwick suggested that the state [Massachusetts] abandon the use of intermediaries and adopt instead the alternative of building and operating directly a canal or railroad,” the Handlins said, because “the old canals and turnpikes had fallen into the hands of ‘speculating proprietors’; only direct state control could ensure the management of the new enterprises for the public good.” This argument was made in 1825, the year the Erie Canal opened to spectacular success and profits.

By the early 1830s, Massachusetts was seeing the construction of water-powered textile mills that would dominate the New England economy for decades. “The interests the merchants’ families shared with the rest of the state waned,” and the pretense of incorporating to provide a public good was abandoned. “The industries also lost their ties with the countryside. The new mills, unlike the old, had little contact with the surrounding agricultural areas, drawing their raw materials from distant sources and working them up entirely within the factory.” Cotton, of course, came from the slave plantations of the South. Even the mill girls who left farm families to move to the newly-created cities of Lawrence and Lowell gradually developed new interests and concerns, such as work hours, safety, and the cost of rents in company dormitories and prices in company stores. “The growth of factories further weakened the position of rural Massachusetts by taking away an important source of income, the domestic system.” 

As the mills of the Boston Manufacturing Company and its allies became the major employers in the region, they became too big to fail and the interests of the mills gradually became the interests of the cities, their politicians, and the state government. “Without a common interest to cherish and defend, the General Court merely legislated for the select few,” said the Handlins. This allowed critics to attack every act as catering to the welfare of one interest group or another.

As a wealthy class of industrialists became more visible, “Criticism of banks easily turned into fulminations agains a ‘financial aristocracy’.” The Handlins described “Locofocos and debt repudiators who seized control in other states [and] raised a terrifying specter for this minority: to weaken privilege at any point would be an entering wedge that would ultimately leave all wealth entirely at the mercy of every future legislature.” This seems remarkably similar to the old Boston aristocracy’s claims, when patriots like John Adams complained of the “Democratical” excesses of popular radicals such as Thomas Paine.

But democracy had its defenders. “What right had simple business organizations to the attributes of a governing body?” asked the authors. “‘They are not for the public good -- in design or end,’ complained a moderate newspaper, ‘they are for the aggrandizement of the stockholders -- for the promotion of the interests of the few...We wish to have public good and private speculation more distinctly separated and understood’.” (quoting the Boston Daily Herald, Sept. 6, 1836) This is the key point.  Even where people didn’t necessarily oppose business or corporations, many wanted to specify the difference between business activity and state activity. And to prevent public actions from enabling private fortunes. This sentiment will continue into the anti-monopoly reaction in the Gilded Age.

The Handlins concluded that “Divested of its communal functions, the corporation became an anomalous creature, privileged but unprincipled, armed with power yet devoid of responsibility.” When recession came, blame for the Panic of 1837 “fell upon Jacksonian finance, discredited the conception of a specie-rooted currency, and barred any program of reform that rested on that basis.” Corporations were not responsible, and the limited liability provided by stock ownership protected the wealth of capitalists. The blame was cast for political purposes and the Ohio Whig, William Henry Harrison, held Andrew Jackson’s successor Martin Van Buren to a single term.

I appreciated this book when I read it, despite its limited scope, focusing on Massachusetts politics from 1774 to 1861. The arguments and interpretations seemed sound and reasonable. Later, I developed a greater suspicion of Oscar Handlin’s judgement (which I’ll cover soon) but I attributed the relative reasonable nature of this book to Mary Flug Handlin, the coauthor. She studied at the London School of Economics and edited the Center for the Study of the History of Liberty in America at Harvard. It would have been interesting to see independent work from her, but she wrote six books with her husband.