A county paper told its readers: "We believe there is money enough in the county, here and there, to make at least a modest beginning so as to attract outside capital."[234]

Having sought to define the att.i.tude of the South toward Northern capital, and to indicate the nature of the appeals made to the outside capitalist, the last topic of this discussion is reached in an examination of the response of investors outside of the South to invitations, and the influx of capital when the opportunities for profit had become apparent.

It must be plain that as the sections drew together with each year that removed the "reminders of the Civil War, the South was more welcoming in her att.i.tude toward Northern capital, and the North more ready to invest in the South. This is recognized in an editorial of The News and Courier, headed The North and Europe Building Up the South": "It has been evident during the past two years that the distrust which had prevented capital from coming to the Southern States for investment has, in a large measure, been dissipated, and that the disposition to place money in the South in undertakings which promise a fair return is rapidly growing strong.

Indeed, the process has gone on much more swiftly than is supposed by those who have not watched the course of events...." Continuing, the editorial quotes an estimate appearing in the New York Herald, that in the eighteen months preceding Northern and European capitalists subscribed to Southern enterprises located in the section east of the Mississippi and South of the James, $100,000,000. Of this amount, more than $90,000,000 was invested in railroads, without the $20,000,000 in the Cincinnati Southern. "Besides the investments in railroads there are the investments in cotton manufactures. There is hardly a city in the South in which there is not a new factory building organizing, and in nearly every case a considerable part of the capital is raised at the North."[235]

The Baltimore American said the same thing: "The South is now the focal point of trade aspirations for the whole country. Capital and industrial activity are crowding upon it from every point of the compa.s.s. Every railroad system in the land is struggling to reach it...."[236]

Outside capital invested in Southern cotton mills took two forms--subscriptions to the stock of mills managed in whole or in part by Southern men, and the actual setting up of plants in the South owned throughout by Northern promoters. Of these two, the second was of much the rarer occurrence. Capital not domestic came from two main sources, the North and East, and from England. There is no reason to believe that the English subscriptions, in spite of frequent allusions to England as a possible investor, were large or many.

Pawtucket being the pioneer cotton manufacturing place in the North, Providence, which had come to virtually absorb the smaller city, took a great interest in the new mills of the South after the Civil War. A Providence mechanical engineer designed the mills and machinery for some of the most successful plants, and that its men were thinking of setting up mills of their own in the South is evidenced by the visit of Mr. Boyd to Georgia in 1881, when on behalf of New England capitalists he prospected the State for the best location for a large cotton factory.[237]

A little later it was given as common knowledge that several of the largest manufacturing firms of Manchester, England, had secured sites for mills in the Southern States.[238] A London correspondent of the New York World remarked a clear disposition of English capital to seek investment in Southern manufactures.[239]

The railroads, both the minor lines connecting individual points, and the great systems penetrating the South in this period, were influential in fostering and inaugurating manufactures. The little railroads helped the mills by affording transportation facilities and by making the inland water powers accessible, but the big ones could lend money and did of course make it their business to encourage manufacturing along their lines. President Baldwin, of the Louisville and Nashville, distinguished three ways in which the railroads a.s.sisted the sections by aiding mills in reach of their tracks, by uniting the parts of the country, and by affording a strong commercial backbone.[240] Hon. Gabriel Gannon urged the claims of railroads upon South Carolina as bringing capital to the Southern field; he attributed the erection of a mill with $500,000 capital largely to the railroad connections of Spartanburg.[241]

An article already referred to said of the railroads in their bearing upon manufactures: "The railroad syndicates are of necessity interested in the general growth of the country through which the lines run, and will spare no pains to bring in immigrants and to encourage the opening of mines and the establishment of factories."

In the majority of instances, Northern capitalists subscribed to the stock of Southern mills after a considerable proportion of the shares had been taken at the South. Similarly, a very usual juncture for the investment of Northern capital was a projected enlargement of a plant, machinery manufacturers taking stock in payment for equipment. Thus the Rock Hill Cotton Factory, the $100,000 capital stock of which was owned in Rock Hill and Charleston, South Carolina, in doubling the capital secured a large part of the additional $100,000 at the North.[242]

A vigorous solicitor of Northern funds for Southern mills was D. L. Love, the pioneer cotton manufacturer of Huntsville, Alabama. Before going on one of his trips to New England "for continuous exertion for the establishment of factories in the South," he made a statement of his successes and plans. His project of a cotton mill at Vicksburg, Mississippi, was "on the high-road to success;" he had secured the organization of a company with $40,000 then subscribed to manufacture the staple at Jackson, Tennessee; he had about consummated a contract with New England capitalists to revive manufacture in a building at Corinth, Mississippi; a Connecticut manufacturer was looking for an opening at the South, and would be induced to settle at Huntsville; in all, he expected to bring about the investment of $1,000,000 in factories in Huntsville in the three years to come.

Mr. Verdery, of Augusta, telegraphed from New York news of his success in seeking capital at the North. He "placed $85,000 of the new stock of the Enterprise Factory, and expects to book from $25,000 to $50,000 more in that city. He has had urgent requests from Boston, Philadelphia and other cities to go to those places, and has no doubt he will be able to obtain large subscriptions...."[243]

Much is to be learned from a close study of the founding of the Charleston Manufacturing Company, which was a representative Southern mill, a child of the cotton mill campaign and an expression of the patriotism, statesmanship and farsightedness of the South of the day. It embodied in its history nearly every element and feature to be noticed in this study.

In an advertis.e.m.e.nt calling for additional local subscriptions, the company made the statement: "Arrangements have been made with capitalists at the North to take such an amount of stock as may be necessary to ensure the success of this enterprise."[244] This statement is to be interpreted in connection with the announcement a fortnight later[245] of the complete organization of the company, with the exception of the election of a secretary and treasurer, two of the nine directors being W. H. Baldwin, Jr., and O. H. Sampson. "Maj. Smythe stated that a considerable amount of the stock was held in Baltimore and Boston, and for that reason Mr. W. H.

Baldwin, Jr., of Baltimore, and Mr. C. H. Sampson, of Boston, had been nominated." Woodward, Baldwin and Norris were dry goods commission merchants of Baltimore, and "agents for the goods of several Southern cotton mills," and C. H. Sampson was the senior partner in the firm of Sampson & Co., of Boston, "dealers in yarns and also agents for several Southern cotton mills." Two days earlier Messrs. Sampson and Baldwin visited the site for the company's mill and expressed themselves as pleased with it. On the same day a meeting was held at which it was decided that the mill should manufacture standard sheetings and 3-ply yarns.

In this instance the commission merchants in all probability were those who agreed "to take such an amount of stock as may be necessary to ensure the success of this enterprise," it being either agreed that in return for this they should get the brokerage of the mill, or even, perhaps, receiving their pay as agents in shares of stock, which meant taking dividends instead of commissions. The practise was a common one, and machinery manufacturers followed the same plan. It is not at all clear that it could have been avoided, and the net profits which were earned by the mills of the South in this period would seem to dispute the statement, that the commissions charged by firms which had thus gained control over the product were exorbitant, and left the mills barely enough earnings to continue to turn out the goods which was the instrument of their own exploitation.

A final instance of Northern pecuniary interest in the development of cotton manufactures at the South may be noticed in the fact that New York bankers were expected to exceed the subscription of $25,000 to the International Cotton Exposition at Atlanta, alloted to the city. Among the large subscribers were Inman, Swan & Co., $2,000; Drexel, Morgan & Co., $1,000; Brown Bros. & Co., $1,000.[246]

CHAPTER V

_FINANCING THE MILLS_

The preceding chapter dealt with the capital of the Southern cotton mills in the period of their establishment. It was first noticed that local capital was naturally drawn upon before any other, and the character of the appeals to local resources and the response to these appeals were brought out. The second division of the report dealt with the att.i.tude of the Southern mill promoters toward outside, usually Northern capital, the nature of the appeals made to Northern capital, and the extent of the response to these solicitations.

Altogether, the surface aspects of the securing of capital were dealt with in a large way; in denominating the present chapter and that following: "The Financing of the Mills", it is intended to bring out the minutiae of the process, and to set forth the mechanism of the problem in its detail.

In seeking to make clear the methods of securing capital in the South, it is convenient to consider first the soliciting of subscriptions to stock, and at the outset it will be well to give a notice that appeared in the financial advertising columns of the Charleston News and Courier at the beginning of the period of cotton mill growth. This notice is directed by "The Charleston Manufacturing Company to The Citizens of Charleston", and carries a contemporary flavor that is of service in an understanding of the problem. Given almost entire, it reads:

"The necessity of establishing manufactures in our city, not only as a profitable means of utilizing capital, but more especially for furnishing employment to many in our midst, has been long felt. To put this matter into practical operation, a few gentlemen applied to the last Legislature and obtained a most favorable charter for 'The Charleston Manufacturing Company'.

"The intention is to raise the capital necessary and to proceed forthwith with energy and activity to erect and put into operation a cotton factory and yarn mill which will be second to none in the South. The marked and rapid success of the Charleston Bagging Company shows what can be done here.

"The undersigned, therefore, being those named in the charter and their a.s.sociates, lay the matter before you, and respectfully urge your co-operation in carrying the work into effect.

"For this purpose Books of Subscription to the Capital Stock of 'The Charleston Manufacturing Company', under the charter granted by the last Legislature, will be opened on Thursday next, 27th instant, at 10 o'clock A.M., at Office of the Carolina Savings Bank, corner of East Bay and Broad Streets, and continue open from day to day until the entire Capital stock is subscribed. Shares One Hundred Dollars each. Ten per cent. of the amount subscribed will be called for when all the Capital is taken and the Company organized. Further instalments will be called for as needed."[247]

There follow the twenty names of those obtaining the charter.

The dignified yet homely character of this advertis.e.m.e.nt is made even more intimate by a dispatch from the capital, Columbia, to the same paper two months later, in which it is announced that over $90,000 had been subscribed in amounts of $2,500 and $5,000 to the project of "The Columbia and Lexington Water-Power Company" (a plan for a large development of cotton mills). The charter provided for a minimum capital of $500,000 and a maximum of $1,000,000. "The present object (in opening books of subscription before calling upon first subscribers for more) is to give everybody in the State an equal chance.... It is designed to visit each county of the State, with a view of making it as far as possible a State inst.i.tution. It is expected that the $500,000 necessary can be easily secured in the State, but as much in addition will be welcomed to complete the capital stock ... nearly every man who is able will contribute to its (the undertaking's) speedy fruition." There is added the significant circ.u.mstance that "Governor Hagood will accompany the committee when they go to Charleston (to open books there) and use his influence in behalf of the enterprise."[248]

The plant of the Pelzer Manufacturing Company is in the so-called up-country of South Carolina, but its projectors were Charlestonians, and Charleston was the financial center of the State and of the South, indeed, at that time. Consequently books of subscription were opened in Charleston,[249] rather than in Greenville or Spartanburg, the little cities they were then, near the water power which should drive the mill.

Ten per cent. of the amount subscribed would be required in cash.[250]

The time necessary to secure the needed subscriptions may be checked up by following the optimistic notices that appeared in the paper from day to day as the capital grew. In this instance books were opened on January 25th, and on the twenty-seventh it was published that "the subscriptions to the stock ... amounted yesterday to $30,000, leaving but $50,000 to be subscribed. The books remain open today...." Toward the Trough Shoals (South Carolina) mill project of Walker, Fleming & Co., $50,000 was subscribed in capital stock in one week.[251] Subscriptions to the Charleston Manufacturing Company, pursuant to the advertis.e.m.e.nt already quoted, were first received on January 27th; by February 4th, 189 subscribers had taken stock to the amount of $206,600.[252] Two days later the amount had reached $220,200 representing 195 shareholders.[253]

Mr. Converse, one of the proprietors of the Glendale Factory, which had proved itself successful, bought up the site of the Rolling Mill of Mr.

Boles, at Hurricane Shoals, seven miles from Spartanburg; the first $200,000 was quickly subscribed for, and books of subscription for $300,000 additional stock were opened January 1st; February 14th they were closed, the amount having been taken.[254]

This suggests a practise which was and still is frequent in the development of cotton mills in the South, namely, that of increasing the capital stock over the amount first proposed, as soon as the original sum had been subscribed, or when subscriptions somewhat in excess of the intended maximum had been received. In the case above, the additional stock was larger by $100,000 than the amount first offered. The Cannon Cotton Mill, Concord, North Carolina, was organized with a capital of $75,000. Before the building was completed, the capital stock was increased to $90,000 or so, most of the stockholders adding to the amount of their subscriptions.[255] The Seminole Mill, now erecting at Gastonia, was designed to have $175,000 capital. Mr. Armstrong, its projector, saw that more persons wanted stock, and he increased the capitalization to $225,000. The plant was intended first to have 10,000 spindles, later increased to 12,000 or 15,000 spindles.[256] Similarly, some others of the new mills under construction in Gastonia are capitalized above the amount named in their charters.[257]

A very usual occasion for increase in the capital stock of a mill company has been the enlargement of the plant. Thus the Enterprise Factory, Augusta, Georgia, declared a 10 per cent. dividend and decided to increase its capacity by 125 per cent. or more.[258] In this case the entire $350,000 extra capital stock was being negotiated for by M. J. Verdery & Co., brokers of Augusta; it was understood that one man and his friends would take stock to the amount of $140,000.[259] If the statement of a rather flambuoyant trade review of three years later may be trusted, the entire stock of this mill after enlargement was $500,000 which would make the increase in stock $200,000 greater than the original capital.[260] It is probable that the stock was doubled to bring it up to $500,000;[261]

three months after the decision to increase the stock, it appears, all but $50,000 had been secured, and this would be placed within the week. The directors of the Louisville and Nashville Railroad took $95,000 of the stock--"of course as individuals."[262] Evidently, the plan of the brokers did not carry through, and the mill corporation put its stock regularly up for subscription.

The mill projected by Walker, Fleming & Co., already mentioned, was intended to have $100,000 capital as a beginning, this later to be increased to $200,000.

At a meeting of the organizers of the Salisbury Cotton Mills, held in November of 1887, "The capital stock was upon motion fixed at not less than $50,000, and not exceeding $100,000."[263] A month later at a meeting of the subscribers, it appeared that $66,400 had been subscribed.[264]

Later the stock was increased; those soliciting subscriptions to the original stock experienced no difficulty in securing increase of these subscriptions. By March, 1893, the capital stock of the company had reached $250,000.[265]

This last instance accords with what was told me by a gentleman of wide experience in the business, that the plants now having a stock of $100,000, etc., got their large capitalization by selling additional stock to the original subscribers at a reduction--say at 75 or 80 when the par was 100. The ventures were profitable generally, and the stock was maintained at its par value.[266]

The character of the promoters of a venture always carries weight, but this was peculiarly true in the establishment of cotton mills in the South. Today, truly prominent men are known all over this State, and all over the section. Thirty-five years ago this was the fact even more than at present; the signatures to prospectuses were important through personal qualities as well as through business reputation. When it was said that those back of the scheme to build a factory in York County, South Carolina, were "among the most reliable and responsible men" in the county, the statement probably carried as much earnest of good faith as the accompanying notice that $25,000 toward $75,000 had already been taken.[267]

The size of the plant to be erected was given consideration in financing a mill, though this did not enter to the extent that one would think.

Opposite views were held as to the practicability of financing small mills. As far back as 1849 it seems natural to find a plan for financing a mill, by which fifteen planters would take each $4,000 worth of stock, select a site near their plantations, each detail three men, making a building force of forty-five, with teams and an overseer and general manager, the latter one of the stock-holders; these proceeding to put up a wooden building of three rooms.[268] A persistence of the economy which suggested this arrangement is reflected, perhaps, in an editorial of The Daily Const.i.tution, Atlanta, thirty years later, in which it is pointed out: "The people of the South who have money to put into manufacturing enterprises should build spinning mills. The South is not rich enough to do much weaving, but there is no reason why it should not convert a good part of the great crop into yarns.... There is plenty of surplus money in the South with which to establish spinning mills.... We do not refer now to mammoth mills, but to little neighborhood spinning mills."[269]

The mills about Greenville are nearly all of considerable size. This is due perhaps to the effect of the example of the failure of the Huguenot and Campderdown mills, small ventures, both located within the city limits, as contrasted with the success of Pelzer, built later, and in the depths of the country. It is said to be the impression around Greenville that the small mill is hard to finance; so far from considering the small project suitable to the financial strength of the community in which the plant is proposed to be located, the reason for the lack of favor for small concerns was given the writer in the opinion that they could not attract outside capital, and that consolidations had recently resulted in South Carolina from this fact.[270] For different reasons, princ.i.p.ally considerations of managements, there is now a well discerned tendency in the Carolinas, at least, back to the small mill.

Mention has been made of the power of reputation in the financing of a cotton mill. Not only was this stressed in suitable ways by those concerned in securing funds directly, but it was used in another way. This may be conveniently ill.u.s.trated by the history of the great mill at Albemarle, North Carolina. Some years ago this village was an isolated one of five or six hundred inhabitants. A family of planters near the place, the Efirds, wanted to see a cotton mill located at Albemarle. They were probably as little able to attract capital as the village was uninviting to the industrialist. In this situation, the Efirds approached J. W.

Cannon, of Concord, a town nearby, who had succeeded in the cotton manufacturing business and had extended his interests to mills in other places, and asked him to take the presidency of the mill proposed, and subscribe to $10,000 of stock. Mr. Cannon was not much inclined to go into the venture, but the Albemarle family showed determination. The plant today is a mile long, and represents an investment of some $3,000,000.[271] It is said that most of Mr. Cannon's mills outside of Concord had birth in the minds of people of the several communities; for instance, a merchant named Petterson interested him in a mill at China Grove.[272]

One of the most interesting cotton mills in the Southern States is that of the Gaffney, South Carolina, Manufacturing Company. The mill was conceived by a building contractor of the place while working upon churchs and cottages in a nearby mill village, that of Clifton. When he had planted his idea in the minds of the leading men of Gaffney, spurred them to local subscription and then to seeking money at the North, and because receiving small encouragement in New York and Philadelphia, their enthusiasm subsided, Mr. Baker, considering home enterprise and outside a.s.sistance unavailing, went to Mr. Converse, head of the successful Clifton Mill, and asked him to take over the Gaffney project at the point at which it had been dropped. Mr. Converse was aged, and felt himself overburdened with mill cares, but he encouraged the Gaffney man in his ambition, saying that mills in the South would pay better dividends than Northern mills, either large or small.

Meantime, however, Mr. Baker had come to know H. D. Wheat, the superintendent at Clifton. The indomitable promoter had hard work to persuade the practical-minded superintendent to leave his good position at Clifton for the uncertain fortune of a factory at a town which had failed to establish the mill itself, and could not interest Northern support; but finally, Mr. Wheat agreed to raise $20,000 besides his own subscription, to add to the subscriptions still in force at Gaffney, and to take charge of the mill as its active president. The $20,000 was invested by friends of Mr. Wheat at Clifton and at Kings Mountain, nearby. Directors were soon elected, and the imported president with his contributions to the venture, was installed.[273]

At the commencement of the great period of cotton mill building in the South, every town which could make any pretensions to ability to establish a mill was engaging the utmost resources of the moneyed men it had--capital was hardly seeking opportunities for investment. Sometimes, however, a place with almost no resources and with only a few enterprising citizens, perhaps, would advertise itself openly as an inviting chance. An advertis.e.m.e.nt in the winter of 1881 read: "We will give to a Cotton Manufacturing Company, that will organize and locate at Landsford, S.C., with a capital of $300,000 a site, 20 acres of land and 300 horse water power." Those interested were directed to apply for particulars to three gentlemen living respectively in Rock Hill, Landsford and Charleston.[274]

These were doubtless promoters who had settled on this particular town as worth effort, or who were burdened with real estate of no value unless the town could be built up.

But these instances were the exception at a time when everybody was too much concerned with the cotton mill in his own town, to think of the needs of another place. There is a notable instance of the bidding of one place against another for a proposed cotton mill, however, in recent years.

Captain Ellison A. Smythe announced that he would put up a fine goods mill as all of his interests in the Piedmont of South Carolina have prospered, there was keen rivalry between Greenville and Laurens for the plant. There were campaigns in both places, much enthusiasm being evidenced; Greenville was able to offer the best proposition, and got the Dunean Mill.[275]

In the methods of securing capital at home, two co-operative schemes are to be considered. The plan that comes first to mind as co-operative is said by Mr. Holland Thompson book to have been often employed in the building of cotton mills in North Carolina; shares would be of $100 par value, made payable in weekly instalments of one dollar, fifty or even twenty-five cents, thus attracting the very small investor--operatives took shares under such an arrangement. The last payment plan requires eight years for completion, as against four or two for the first plans; those wishing to do so might pay cash, less six per cent. for the aver payment-time, the discount bringing the share down to $89.60 plus.[276]