Before there were tech giants, there were industrial companies. Before there were industrial companies, there were railroads. Before there were railroads, it was banks, all the way down.
A couple economists have put together a list of the 500 biggest corporations in America in 1812. The list — Bloomberg published the whole thing yesterday — is overwhelmingly dominated by banks.
Here, for example, is the top 10:
- Bank of the United States
- Bank of America
- State Bank
- Bank of Pennsylvania
- City Bank of New York
- Farmers Bank of Virginia
- Philadelphia Bank
- Manhattan Company
- American Fur Company
- Boston Bank
I talked today with Richard Sylla, an NYU professor who is a co-author of the list. He made a few interesting points.
The American Fur Company — John Jacob Astor's massive fur business, which spanned the continent — is the only non-bank in the top 20.
You do see other kinds of firms further down the list. There are a bunch that run private turnpikes, bridges and canals, for example.
But the era's severe limitations on communications and long-distance transportation meant that it didn't make much sense to try to build a single, dominant turnpike (or bridge, or canal) company. So you wound up with lots of smaller firms. This was true until the rise of the railroads in the middle of the 19th century.
Banks, on the other hand, need lots of money to function, even in a largely agrarian society. "To operate a bank, you needed to consolidate a lot of capital," Sylla said.
What's more, the banking business had been given a boost by Alexander Hamilton. He was key to the creation of the Bank of the U.S., a weird public-private hybrid that was 20 percent owned by the federal government.
That, in turn, pushed states to create their own banks. They wanted to do this as a check against federal banking power. They also wanted to do it because they saw that the Bank of the U.S. was a profitable investment for the federal government, and they wanted to make their own profitable investment in a state bank.
More broadly, Sylla said, the very idea of corporations was different in the U.S. than in other countries at the time.
"The old idea of the corporation was you did a few favors for the king or the government, and they gave you this charter as a reward," Sylla said. The charter typically gave you some kind of valuable monopoly.
While that was initially true in the U.S., things quickly changed. "The original idea of the corporate charter being a privilege quickly broke down, because we're supposed to be an equal land," Sylla said.
In the 19th century, many U.S. states adopted simple rules that let citizens start corporations without special approval from the legislature.
"It was in the U.S. that the corporation was transformed from something for people who did favors for the king into something that was open to everyone," Sylla said.