If someone might be justly famous for two things, and only one involves Abraham Lincoln, it’s a safe bet the other will go unappreciated. And so it has with Thomas A. Scott of Darby, president of the Pennsylvania Railroad. In 1861, when secessionists were plotting to assassinate Lincoln before he reached Washington, Scott shuffled trains around to help ensure that Abe reached his inauguration safely.
Less remembered is Scott’s role in inventing the modern corporation, with its legally purchased complement of hot- and cold-running politicians. “More than any other person, Scott is responsible for … the corporation in its modern incarnation,” wrote historian Ted Nace.
Scott’s top accomplishment: the holding company, which ensures that, whatever a company does, no one ever appears responsible for it. Thanks to his influence, Congress is now less a forum of the people than an arena in which various influential corporations compete.
Born near Fort Loudon in Franklin County, Scott was the seventh of 11 children. His father, who operated an inn at a stagecoach stop, died while Scott was a child. After that, things fell apart. His widowed mother passed him to an older sister, and the sister then handed him off to a brother.
An early job was clerking for the toll collector on the Lancaster Turnpike at Columbia, where he learned bookkeeping and moneymaking. Scott didn’t remain a clerk long. About 1840, he quit to open a sawmill, which was later a total loss when a flood washed the whole thing down the Susquehanna River.
Scott next tried running an icehouse, but that also failed. His rise didn’t begin until 1850, when a superintendent for the Pennsylvania Railroad—then only four years old—hired him as a station agent on the recommendation of friends. Scott remained with the Pennsy for his entire career. By 1858, he was general superintendent. Two years later, he was a vice president.
This was Scott’s pattern. Not skilled at actually making or doing things, he got ahead by knowing and influencing people. He also learned to favor anonymity. Though he did become president in 1874, most of his accomplishments occurred when he was vice president. “Early poverty and failure impressed on Scott the importance of having friends,” wrote historian Richard White. “His experience formed a kiln that so fired his mortal clay that corruption became part of his very makeup.”
In Scott’s youth, corporations didn’t amount to much. Adam Smith dismissed them in The Wealth of Nations as inefficient and prone to mismanagement. Karl Marx’s Communist Manifesto ignored corporations. America’s economic growth during the country’s first 60 years seemed to be well served by charters issued by state legislatures for specific purposes. They required periodic renewal, and records were open to public inspection. The Pennsy’s original charter forbade it to own land or conduct any business not specified.
The “fissure that cracked the containment vessel,” wrote Nace, came in the 1850s, as lobbyists worked politicians in the back rooms of the nation’s state capitols. In Pennsylvania, Scott managed to convince the legislature to relax a long-standing prohibition on one corporation owning stock in another.
“This inconspicuous change is something like the introduction of the zero by unknown Arab mathematicians—a minimalist place-holder but, nevertheless, a monumental invention,” Nace observed.
Scott used this new power to great effect, transforming the Pennsy into what, at its peak, was the largest publicly traded corporation in the world. West of Pittsburgh, the company launched what historian T. Lloyd Benson called “a complicated spree” of acquisitions that involved at least 14 separate companies—a corporate rat’s nest with national implications.
To defend its Chicago connections, Scott placed both John Sherman and Samuel Tilden on the board of the company’s Pittsburgh, Fort Wayne and Chicago Railway subsidiary. Sherman, an Illinois congressman, would be a general during the Civil War and a U.S. senator after. Tilden, a corporate lawyer with many railroad clients, would be the governor of New York and the Democratic presidential candidate in 1876. “This was a system that demanded the best and most powerful friends to protect it,” observed Benson.
Early on, Tom Scott became an ally of Simon Cameron, cofounder of the Northern Central Railway and a U.S. senator from Pennsylvania. During his first term, Cameron had come to appreciate the strategic value of the Northern Central, which ran from Baltimore to central Pennsylvania. To get to Washington, D.C., Cameron was forced to ride the Baltimore and Ohio Railroad through Philadelphia. From there, the B&O had the only north-south rail link to the capital. The Northern Central, Cameron realized, presented an opportunity to break this monopoly, if extended from Baltimore to Washington—and if control could be wrested from Maryland interests.
In 1859, Cameron bought enough Northern Central stock to get himself and several allies—including Scott—elected to the board of directors. The B&O resisted by also buying up stock, but Lincoln’s election in 1860 spooked the Marylanders into dumping their shares. That left Cameron’s forces in control, and the North Central became the Pennsy’s route to Washington. During the Civil War, it was a primary conduit for Union troops and supplies.
In 1860, Scott responded with free passes when the Cameron-controlled Pennsylvania delegation needed transportation to the Republican National Convention in Chicago. After Cameron’s presidential hopes collapsed, he threw his support to Lincoln in exchange for appointment as secretary of war. When rumors circulated of a plot to assassinate Lincoln in Baltimore, it was natural that Scott would be part of the response.
After leaving Springfield, Ill., on Feb. 11, 1861, Lincoln arrived Feb. 21 in Philadelphia, where he raised a flag in front of Independence Hall and spoke of universal liberty, a principle for which he “would rather be assassinated on this spot than surrender.” Lincoln was scheduled to speak in Harrisburg the next day, a Friday, then return to Philadelphia before heading to Baltimore and Washington.
The Harrisburg appearance went off as scheduled. But then Lincoln dropped out of sight and boarded a special train—one engine, one car—and left for Philadelphia. Lest it be delayed, Scott ordered all other trains onto sidings until Lincoln had passed. From Philadelphia, an unscheduled night train took him through Baltimore in the wee hours. Lincoln arrived in Wash-ington at 6 a.m. on Feb. 23.
Years later, Republican activist Alexander McClure described how, before 7 p.m. on Feb. 22, Scott and he had cut the Harrisburg telegraph—whose wires ran along the tracks—to keep word from spreading. They remained on the scene through the night. “Near dawn, Scott reconnected the lines and soon received an unsigned telegram from Washington, saying, ‘Plums delivered nuts safely,’” wrote McClure. “He whirled his hat high in the little telegraph office as he shouted, ‘Lincoln’s in Washington.’”
Understandably, Cameron wanted to keep Scott around. He made Scott assistant secretary, a job he kept for only a year. But Scott kept his hand in for the rest of the war. In September 1863, after Union Gen. William Rosecrans was defeated at the Battle of Chickamauga and trapped in Chattanooga, Tenn., Scott and other railroad men assembled enough cars and engines to move 25,000 troops, plus supplies. The generals thought reinforcing Rosecrans would take three months; it took the railroad men 11 days.
In 1862, though, Scott shifted his main focus back to building the Pennsylvania Railroad—with government help, of course. Two years later, the B&O, retaliating for Scott’s disruption of its monopoly, began planning a route to Pittsburgh. Extending the little Pittsburgh and Connellsville Railroad to Columbia, Md., where the B&O had a branch, would give B&O entry into a market that the Pennsy had once had mostly to itself.
Scott bribed Pennsylvania legislators to repeal the P&C’s charter and then turn it over to the Pennsy. Bills accomplishing this were passed in the wee hours of an April morning, at the end of which one senator expressed his disgust by asking, “Mr. Speaker, may we now go Scott free?”
After the Civil War, the great challenge was to reach the Pacific. In 1869, the Union Pacific was first, connecting its east and west segments at Promontory Summit, Utah, with a golden spike that might have represented all the federal subsidies that made it happen. However, the line took a northern route, leaving southern states unserved. Scott was determined that the Pennsy would build a Texas and Pacific line across the Southwest.
There was competition: the Southern Pacific. Originally, the it ran only from San Francisco to San Diego. But it was taken over in 1868 by a group of businessmen that included names like Leland Stanford and Charles Crocker.
Scott asked for a grant of 13 million acres and bond guarantees for 3,000 miles at $40,000 per mile. The Southern Pacific proposed to build without subsidies, but its president had links to the Union Pacific, causing worries of monopoly. In December 1875, Congress appointed a commission to decide.
Scott cranked up his politicians. The Pennsylvania legislature instructed its congressional delegation to support Scott’s Texas and Pacific proposal. A Pennsy superintendent was allowed a sabbatical to serve in Congress. The speaker of the house, a Scott ally, appointed supporters to the Pacific Railway Commission and allowed Scott to use his Capitol office to personally lobby Congress. Pennsy money persuaded southern newspaper editors to adopt the argument that subsidies for Scott’s Texas and Pacific proposal were a matter of regional justice. After all, the Union Pacific had received them for its northern route.
In the end, Scott lost. Rather than wait for a decision, the Southern Pacific simply started building across the Colorado River at Yuma, Ariz. When that line began carrying passengers and mail, Washington recognized the feat as a fait accompli.