Energy and Abstraction in the Formation of the National Economy

What does the consolidation of capital actually look like? A sequel to the Gold Room

The great coal-field of the central United States is surrounded on the north, east, and south by the uplifted older rocks of the Wisconsin- Michigan, the Appalachian, and the Ozark regions. This basin and its border contain the fuel and the ore on which and with which the material prosperity of the United States of the twentieth century must be built.

- US Mineral Census, 1880

These plans go deeper into the matter than the application of the questions of transport and safeguard along the lines of communication by the military authorities … They involve the business military organization of the entire country, its people and resources, so that the object of the military, the efficient conduct of the war, may best be consummated.

- Naval officer describing war planning, 1914

As Anthracite stoves replaced wood burning across the Midwest and eastern seaboard, man's relationship to energy changed from a matter of work to one of accounting at the household level. Where before the man had to gather and split firewood to keep his family warm - spending his own time, his own sweat - the introduction of coal heating replaced this task with a trip to the coal merchant. Furthermore, the families were integrated in a mineral economy which operated at an altogether different scale than that at which firewood was collected, cut, burned. Heat was no longer a matter of energy expended, but of energy expenses.

In this there is a microcosm of the industrial revolution with respect to energy in general. As machines came to replace men and animals, labor-power and production were augmented by engines requiring fuel. Labor, of course, remained central, but in a meaningful sense the economy writ large was powered by something beside men. Caloric minerals, wrought from the earth, accelerated industrial power as a function of the rate at which they could be extracted, refined, transported and put to use. As men became aware of this fact, a great impetus developed to economize these resources. And as with the household economy, this shift bound individual capitals together in a network of interdependence, the lifeblood of which was mineral energy.

This paper will explore the shape this process took. Something like a national economy does not spring ready-made like Athena from the godhead. Rather, this process was determined by the specific interstices of state and Capital as they came into play at each stage of its development. I originally wrote it to accompany my article on the Gold Room. What that essay traces in the realm of finance, this one attempts to trace in the realm of resource extraction: the way in which technologically augmented economies of scale automatically encourage centralization of the means of production that are bound up with the state.

The 1880 Report

interstices

The 1880 Report on the Mining Industries of the United States (Exclusive of Precious Metals) was a component of the 1880 US census, undertaken by Professor Raphael Pumpelly, special agent for a division of the United States Geographical Survey which acted in liaison with the Census Office. Clarence King, first director of the Geographical Survey, ordered the survey in 1879. Pumpelly himself eventually became director of the Geographical Survey in 1884.

It was a daunting and originary undertaking, as Pumpelly makes clear in the introduction. In the first place no registry or list of US mining operations existed in 1879; nor was there even a clear criterion of what constituted a mine, or "establishment of industry," the constitution of which, Pumpelly writes, "is not always easily settled."

No one would think of calling the Calumet and Hecla openings two mines, although they are in reality two separate industrial establishments under one general head, nor of calling the sixty-five collieries of the Reading Coal and Iron Company one industrial establishment, they are united in ownership and under the same supervision. (XXIV)

Calumet and Hecla stamp mills, Lake Linden, MI

Moreover, the neat table of questions sent along with investigating agents ran aground on statistical irregularities: “statistics of mining were very different in different parts of the country” and “lack of uniformity in this respect added greatly to the labor of tabulation.” (XXII) The census was therefore a great labor of standardization, which was indeed the great labor of that age. Compounding these issues of data collection was a general inexperience with statistics, meaning that once they got data it was unclear what to do with it. Pumpelly is quick to admit that his team operated in the “absence of definite instruction, and of special knowledge or experience in the art of gathering statistics.” (XXIV)

Fortunately for Pumpelly and his team of investigators and statisticians, there existed a class of mines which knew exactly what they were looking for and had it in spades. These were the large combines. Pumpelly writes that where “special information is desired, either geological, mechanical, technical, or social, it can be best obtained from well developed and established mines.” (xxiv) Furthermore this canvassing was conducted by "special agents," described by Pumpelly as men "more or less acquainted with the region and with the local mining industries." (xxi)

Already, at this most basic level of information acquisition, we can observe a certain confluence between government bureaucracy and large capital. Those conducting the survey were already acquainted with local mining operations, that is to say, they were industry men, familiar with the established mining interests of their respective districts; and where they sought information, they found it best served by the largest and therefore most sophisticated of those interests.

irregular

This framing is reflected in how Pumpelly deals with what he calls "irregular" production. At the time there were over 5,000 small producers, farmers who had some coal or soft ore on their land, and would “do a little irregular surface-work” during the off-season. In General Analysis of the Bituminous Coal Statistics one agent described this micro-industry - in which farmers would mine outcrops of coal to supply their own and possibly a handful of neighboring families - as "analogous to the cutting of wood for domestic fuel," in his insistence that it had no bearing on the industry as a whole. (683)

Here the conceptual dimension of the transition from an economy of energy to one of energy resources supersedes the simple chemical distinction which engendered it, hypostatizing as a formal distinction predicated on two radically different ways of conceiving production's end. To a national statistician, that which did not enter into an integrated energy economy at that scale might as well have been peasants collecting firewood from the common-land. Pumpelly basically dismisses this production from the standpoint of the survey:

As no capital is employed and but very little labor hired, this mining cannot be said to have any influence on the industry at large. (XXV)

Such production is entirely absent from the set of master tables which illustrate in succession the total production, applicable averages, and increase since 1870.

He justifies this in remarks on tables 2 and 3, writing that such production is "probably not included in the returns of 1870" with which they are comparing. He makes this assumption based on the lower bound of $500 annual production set that time, and recommends that such a limit "should hereafter" be taken as "necessary to constitute an establishment of industry." (xxix)

His reasoning is interesting:

The object of this census is, ultimately, the investigation of economic relations, or rather the furnishing the results by which such relations can be investigated, and not an endeavor to swell the arithmetical total of production by collecting items insignificant in themselves and unimportant in their aggregate effect on the industries of the country at large. (xxix)

Pumpelly is not a disinterested scientist seeking neutral information about mineral reserves for its own sake; rather, he is a government agent, interested only in what bears an "effect on the industries of the country at large." But what does this mean? In an abstract sense, all production has an impact here, no matter the scale of the individual establishments in question. In the case of bituminous coal, where irregular product constituted a genuinely negligible 2%, the omission is understandable. But in the case of Iron, the total rendered by farmer-miners is upwards of 12%.

So I don’t think his choice to discriminate is based on simple aggregates. Pumpelly means something quite particular when he refers to the “industries of the country at large” - he does not mean industry en masse, but in concert. Small production does not figure in because it cannot be integrated with an economy of scale, and therefore does not figure as an object from the perspective of national economy.

In the new regime of mineral industry, industrial production at a national scale was a function of the efficacy with which resources could be extracted and employed, engendering a new impetus for accounting. But this new spirit was not a “thing of air,” the birds-eye view of the economy was, in an important sense, collected from the ground. And on the ground, the agents scattered across the country found themselves in contact not with “establishments of industry” already in the abstract, but with real productive forces, that is to say mining operations of varied scale and complexity. The point is not some buddy-buddy relationship between the census bureau and larger, more sophisticated mines; rather, by the very nature of their task - the collection and compilation of data at a certain level of sophistication and abstraction - those already operating at this level were in a better position to become intelligible to, and therefore to exist within the worldview of, a government-turned-accountant.

On the other end there are the small producers, the farmer-miners whose aggregate contribution was not altogether insignificant, but who nonetheless had no place in the neat and useful tables of the census bureau. Again, we could recapitulate the argument from intelligibility - it is certainly possible that accounting for this class of production was more trouble than it was worth from the side of trouble alone. But Pumpelly does not say this. Nor does he say that their small aggregate contribution is the problem. Rather, it is their lack of “effect on the industries of the country at large.” Irregular production did not enter the web of industrial and mineral power which constituted the national economy in the eyes of Pumpelly and others, and was therefore irrelevant. The national economy was no longer the simple aggregate of individuals - it was a totality, a machine within which one was either meaningfully a part or before which one was a statistical irregularity.

All of this points to a new functionalism, to a bourgeois state which no longer conceived of itself as simply the custodian of property rights, but as governor of a total industrial system - one composed of private property, to be sure, but nonetheless a totality to be treated as such. We now turn to the activity of this state.

Standing Reserve - Naval Logistics 1898-1917

After experiencing firsthand how close the United States came to defeat in the Spanish-American war due to fueling deficiencies, George Dewey, whose quick and decisive victory at Manilla allowed the fleet to avoid such a catastrophe, turned his considerable mind to a total reorganization of the Navy. It was he who had (after a string of denials) negotiated the frantic coal purchases which made his own victory possible, and with US possessions now sprawling across the Pacific, coal security for the attendant naval presence was among his top priorities¹

When in 1900 he joined the Navy's new General Board as president, he imagined a more extensive body, expanded to include recruitment, training, intelligence gathering and a library of war plans. As his model he had the general staff of Prussia, but at the same time the board of directors at the head of a railroad, noting their responsibility “to think for the railroad, to observe rival lines, to consider the local laws of towns and states which their tracks traverse, and above all, to watch the future and prepare their system to draw all possible advantage from events.”²

Despite the narrowly avoided fuel crisis during the Spanish American war, it would not be until the 1910s when logistics overtook strategy in the mind of naval planners. “War has become a business,” marine and War College graduate George Thorpe sagely noted, and therefore “preparation for war is a business.” Another officer made an even more telling comparison, calling logistics “scientific management applied to the navy.”³ All through the early years of Navy rationalization schemes, big business was consistently the model.

Ultimately the locus of logistical planning would be the Bureau of Supplies and Accounts under Samuel McGowan. McGowan rose to paymaster in 1906 and began representing the navy at meetings of the Association of American Railway Accounting Officers.

According to a document compiled by their secretary and published 1916, the Association was "exclusively a business organization," consisting of "six hundred individual members, representing over 276,000 miles of railroad." Certain "water carriers" were also involved, altogether encompassing "a geographical territory of United States, Canada, Mexico, South America, Cuba, Porto Rico, Philippine Islands, and South Africa."⁴ The document states their aim as "the common good and advancement of railroad accounting." In short, it was a cooperative association designed to standardize railroad accounting practices in order to streamline payments between lines and rid them of error.⁵ An article in The News and Observer dated April 26, 1911, describes this plucky assemblage of accounting officers as “representing the 'new thought' in railroad management,” a school recommending that “roads be as careful to refund over-charges of their own initiative as they are to collect under-charges.”⁶

In 1907 McGowan helped integrate accounting at the level of state militias with that of the Navy Department - effectively the same exact sort of standardization and integration he would have had ample opportunity to observe in the workings of the Association.⁷

A year later McGowan was paymaster of the Great White Fleet, where he developed a reputation as a man who let nothing slip through the cracks, eliminating waste and honing what he called “comprehensive, fleet-wide organization and standardization.” By his own account navy regulations were "practically nil on the subject of the fleet paymaster’s work," and therefore he "had no instructions or suggestions from any source and not even any precedent to go by."⁸ Certainly it is believable that the navy offered him guidance here, but the kind of standardization he accomplished had clear precedent in the Association of American Railway Accounting Officers which he began his career as emissary to.

In 1914 he was appointed paymaster general, and wasted no time expanding the scope of his innovations. He began by modernizing the office itself, ripping doors off their hinges, standardizing the furniture, requiring division chiefs to sit in the middle of a room with his clerks grouped around him - and in a final act of technocratic cruelty: “roll-top desks were abolished.” Even here there is precedent at the highest level of the business world: Sullivan & Cromwell for instance adopted similar measures and were considered to have one of the most modern offices on Wall Street already in 1900.⁹ During his first six months this Hector of bureaucracy issued sixty-four inter-bureau orders, among them a directive to overhaul the coal contracting system, largely automating it while attending to detail at an unprecedented level. This was in keeping with a broader push by navy secretary Daniels and his assistant secretary Franklin D. Roosevelt to flush out a system plagued by graft.¹⁰

use case

After 15 years of logistical sophistication, WWI proved the ultimate test. It was the first industrial war, and a global war in the age of a global market; to win it was in the final case an economic feat more than a military one. “In these days of invention, rapid transit and quick communication,” McGowan put it, “Things, not men, lose wars.”¹¹

One half of the problem was collecting, organizing, and displaying information. The Bureau's office turned into something like a living and mechanical computer. In the words of one reporter, anyone seeking information needed only "step into the neatly kept offices where McGowan reigns supreme and ask the question, and the answer, backed by any data that may be necessary, is forthcoming." It was available, he wrote, "within a very few minutes."¹²

Contracts were indexed, and the prices of navy staples from steel, coal, and wool to eggs, butter and beans updated daily to form "fever sheets," the department name for these graphs living graphs, which were backlogged with seven years of weekly price data with which they could presage cyclical price fluctuations. With this they could "estimate almost to the day when it is best for the Government to buy."¹³In addition they kept current account of the volume of coal and oil which could reach any given depot within 12 hours, and the current volumes aboard every vessel in the navy. All of this information was fed to mechanical accounting apparatus operated by punch cards, used to automatically tabulate, calculate and visualize information. And everything was constantly communicated to Washington by wireless.¹⁴

On the other hand there was the market itself, and here the methods of manipulation were only slightly less innovative.

In May, a month after the United States entered the war, McGowan and his staff met representatives of twenty-three of the navy's largest coal suppliers in Washington. They subsequently agreed to establish a coal committee tasked with sharing contracts among dealers. They also worked out agreements so that their contracted customers would be supplied by other dealers. Still, the Navy found the committee's prices too high, and ordered them lower. By the end of May Daniels wrote to the suppliers that “I am persuaded that the producers have given too much weight to the prevailing very high market price and have based their figures on an abnormal demand rather than upon the real value and cost of producing the coal.” He even threatened that "everyone ought to be commandeered by the Government and all you gentlemen ought to be enlisted to do the work you are doing.” At a time when low grade coal sold at market for $6 or $7, the navy price was set at $2.24, and the suppliers were forced to comply.¹⁵

Conclusion

As mineral energy supplanted the organic, accounting became paramount. At the national level, the shape this accounting took was determined by the specific interstices of Capital and state. Standardization, the great labor of that age, was furthest advanced in the industrial and railroad combines. So when the state sought nerve centers, apparati with which to comprehend and control the national economy, these were the natural junctures. This produced a notion of national economy in which larger, more sophisticated capitals took greater place, and small producers became statistical irregularities. That which could not be indexed and integrated at scale was of no practical significance, and was therefore discarded. As the mineral demands of mechanized warfare advanced, state servants attended the management of mineral resources with a new intensity. Where logistics and standardization advanced, the charge was led by bureaucrats who had practical experience dealing with organized Capital; and these men took the latter as their model.

The consolidation of capitals is a Marxist commonplace, yet not one grasped concretely. Concretely, this process entangles finance and energy resource production with the state. What these elements have in common is that as economies reach a certain scale and degrees of socialization, they are avenues through which the state can govern the economy. In the postwar period this reality was consolidated at an international level under the order of the Petrodollar.

1. Schulman, Coal and Empire, 164-65

2. ibid. 166

3. ibid. 170

4. Woodson, Eugene Robert. 1916. “Association of American Railway Accounting Officers.” 3

5. From their constitution: “The object of the Association shall be the better organization and conduct of the accounts of carriers and the securing to them of the advantages that should follow the interchange of ideas and experiences among its members; to aid in. securing more perfect means of determining balances between carriers and greater definiteness and promptness in paying the same; greater uniformity in method of adjusting joint accounts; more equitable plans for settling claims between carriers; greater certainty and promptness in collecting freight charges at competing points; better means of adjusting balances at junctions where freight is rebilled; the obtaining of greater uniformity, wherever practicable, in the governmental returns required of railroads; the more general systematization of railway accounts, and, finally, the...benefiting of railways in every proper way that comes within the scope of such an Association.”

6. https://www.newspapers.com/image/650696785/?clipping_id=142356173&fcfToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJmcmVlLXZpZXctaWQiOjY1MDY5Njc4NSwiaWF0IjoxNzA5MjAxNDI2LCJleHAiOjE3MDkyODc4MjZ9.4SPx3zST-V7m3Nfru-vIXKrM46DsSHuwBlsml8XN7s0

7. Schulman, Coal and Empire, 175

8. ibid.

9. Lisagor, N., and F. Lipsius. 1988. A Law unto Itself: The Untold Story of the Law Firm of Sullivan & Cromwell. Morrow. https://books.google.com/books?id=7NfdB1augrgC. 32

10. Schulman 176

11. ibid. 177

12. Cited by Schulman, quoted direct from source here: https://archive.org/details/sim_annalist-a-magazine-of-finance-commerce-and-economic_1917-10-22_10_249/page/n5/mode/2up?view=theater

13. ibid

14. Schulman, Coal and Empire, 179

15. ibid. 178