Business History: Dividends of Waterloo
- by Drew Keeling
“The history book on the shelf, is always repeating itself.”
–ABBA, “Waterloo” (1974)
ABBA exaggerated. History books don’t always repeat, though they often echo.
The year 2015 is reverberating with anniversaries of wars ending, including the Civil War 150 years ago, World War II 70 years ago and the Vietnam War 40 years ago. Napoleon’s final defeat at Waterloo, 200 years ago next month, is commemorable because it was followed by a century of unusual trans-Atlantic peace, stability and economic growth fostering institutional practices still essential to business today.
President Calvin Coolidge’s 1925 remark, that “the chief business of the American people is business,” exaggerated slightly what many observers, including the 1830s French visitor Alexis de Tocqueville, had long noted. The French defeat at Waterloo, on June 18, 1815, unleashed an American business potential stoked by many years of French involvement.
There were significant business and economic implications of French military support during America’s Revolutionary War. (This support was dramatically recollected when American forces arrived in Paris during World War I to return the favor, saying, “Lafayette we are here!” in reference to the young French volunteer who had fought in the American Revolution and become like a son to the childless General George Washington).
Before 1776, the American colonies had been loyal outposts of Britain’s global economic rivalry with France. Washington was a successful surveyor and land speculator in 1753, when Virginia’s colonial lieutenant governor chose him to join British expeditions into the then disputed Ohio territory. These incursions were a key trigger for the ensuing French and Indian War, known as the Seven Years War, in which Lafayette’s own father died.
France lost the Seven Years War and thereby most of its overseas possessions, and the heavy cost of the British victory prompted King George III to increase taxes on his American colonies. The colonies were largely satisfied business partners in the British mercantile system. (Adam Smith’s famous critique did not appear until early 1776, when the movement towards declaring American independence was already ripening). They were, however, accustomed to local regulation through local assemblies, mistrustful of distant impositions, and eventually—with French help—broke away to become the independent United States.
To recoup the cost of assisting American independence, the French king also sought higher taxes on his subjects. This helped precipitate the French Revolution which, in turn, led to a generation of war across Europe, particularly between France and Britain. The conflict disrupted the transatlantic trade vital to the economy of the young United States.
Napoleon’s rise to power altered these dynamics. He managed to tilt America toward France and reshaped Western Hemisphere geopolitics by selling the Louisiana territory to the U.S. after he had conquered Spain. This tripled the land area of the young republic. With peace in 1815, transatlantic migration and capital investment surged to record levels, helping America exploit this great increase in land and natural resources. U.S. exports rose 50 percent within the first decade after Waterloo. Cotton exports doubled, and the first major textile mill, in Lowell, Massachusetts, yielded shareholders a 100 percent return within seven years. U.S. gross national product per capita grew during 1815-1860 at twice the pace of 1790-1815 (Statistics, Market, Visible, 20,59).
Resumption of peaceful Atlantic commerce bolstered the U.S. economy both directly, and by propelling even greater inland expansion and development of industry.
Joseph Wharton, born 11 years after Waterloo, exemplified this. He parlayed a family fortune made in Atlantic shipping and merchant trading into a business empire based on mining and manufacturing.
After 1815, technological know-how became an even greater factor in production (and diplomacy). Had transatlantic steamships and the telegraph come about a little sooner, America’s late entry into the Napoleonic wars—the War of 1812—might never have occurred. As it happened, however, Britain suspended its blockade of U.S. merchant ships—a key American grievance—only just before the U.S. Congress declared war, because each learned of the other’s intentions only with about a six week delay). At any rate, after Waterloo, American steamboats deployed rose fourfold within three years, and the Erie Canal of 1825 launched a canal boom. Railroads soon followed, and by 1860 had 10 times the mileage of canals. Regular steamship service to Europe began in 1840; within 35 years sailing ships had virtually disappeared from North Atlantic (Visible, Transportation).
Technical know-how and managerial skill—a raison d’être for business schools such as Wharton—became prevalent focuses for business entities. The “legal revolution” helped establish clearer and more effective rules of competition. The Dartmouth court case of 1816-19 laid the groundwork for the modern corporation. Huge railroad networks helped pioneer the modern business organization run by professional management.
Napoleon’s achievements, from his legal and political modernization of much of Europe and the business role model of his leadership style, arguably exceeded in importance his military triumphs, or even the widespread death and destruction they entailed, but what came in the wake of his departure was probably still more significant. Waterloo remains an enduring symbol of ultimate defeat, but in hindsight it was more a beginning than an end. Its symbolism may indeed exceed its substance. After his disastrous Russia invasion of 1812, Napoleon’s second coming in 1815 had a low probability of lasting success even had he won at Waterloo. Nevertheless, the changes Napoleon made, the changes required to defeat him, and above all the changes coming after his demise, have been crucial to many underlying conditions and structures of the modern business world, which is still reaping the dividends of Waterloo.