Today's Reading

In the nineteenth century, the economic ambitions of the United States focused primarily on conquering the continent. But the conservative qualities that allowed Brown Brothers to thrive and survive in the first half of the century kept them largely on the sidelines of the investment craze of the second half of the nineteenth century: the railroads. Alexander Brown and his sons had helped create the first American railroad in the 1830s, but they largely eschewed the railroad boom in the decades after the 1860s. Fortunes were there to be made, but most of the railroads went bust, leaving their investors with worthless stocks. The innate caution of Brown Brothers prevented them from reaching the heights of J.P. Morgan, but it almost certainly protected them from being deluged by waves of bankruptcies and failures. Then the Great Depression hit.

The merger of Brown Brothers and Harriman blended two distinct cultures born of different paths to success. In the late nineteenth century, the lasting money was usually made by those who picked up the pieces after the initial railroad investors had lost everything, which was how E. H. Harriman built his empire. He was, in the 1890s, the nouveau riche, crass and aggressive, a rough and tough bundle of intensity. He courted attention where the partners of Brown Brothers avoided it. But while Edward Harriman and Alexander Brown could hardly have been more unalike, by the time Harriman's fortune merged with the House of Brown in the 1930s, the world of his sons and of the next generations of Browns was more similar than not, nurtured by a small set of boarding schools and colleges that distilled the values of their fathers into a coherent, rigid web of money, duty and service that became the backbone of "the Establishment."

The world this elite created after 1945 was not by design or intent. After the ravages of the Depression and a harrowing war, the United States found itself with immense relative power confronted by an adversary in the Soviet Union that was championing a system antithetical to its own. Whether the conflict of the Cold War was inevitable, Brown Brothers and the Establishment saw no other path. To meet the challenge, they distilled a formula to defend the world they knew and that they believed would serve everyone just as it had served them. The framework they erected unleashed the productive capital of the world, and established the foundation for the globalization of commerce and capital that so defined the rest of the twentieth century and the beginning of the twenty-first.

Having reached the apex of its influence in the years immediately following World War II, Brown Brothers, by the end of the twentieth century, had faded in relevance. Its competitors, the firms of Goldman Sachs, J.P. Morgan, Morgan Stanley, and so many others, elected to go public in the 1980s, turning what had been skin-in-the-game partnerships into publicly traded entities relying on shareholder capital instead of their own. Those firms used that money. They accumulated almost unprecedented wealth, and they courted attention. That allowed them to outstrip Brown Brothers in size and scope, and, perhaps most critically, in greed and ambition. And then, in 2008, they almost destroyed the system they had made and that had made them.

Brown Brothers Harriman stayed out of that fray. Today the firm remains a large global financial institution with more than five thousand employees across the world. Its business has changed radically. It now acts as a custodian for trillions of dollars of global assets, a large amount of money that earns the firm relatively small but steady fees. Its culture revolves around service. In cleaving to the idea of a partnership, the company didn't join the drunken capital party of the 1990s and 2000s and never rose so high that it could jeopardize the entire financial system. In that crucial sense, it stands as a reminder of what once was, and perhaps what all these banks should have remained. Mention the firm today, and many wonder if it still exists, if they wonder at all; others shake their heads and sigh as if to say, "How sad." It is not at all. Given how close the global financial system came to the abyss in 2008-9, and given that it was caused by the detachment of personal gain from public risk, the quiet continuance of Brown Brothers Harriman is a lesson for what capitalism can be. It provided the fuel, and it also set boundaries.

For sure, its particular ethos of service could mask a multitude of sins. Without question, it was self-serving and self-enriching, but more often than not it also served the needs of society at large. That was not without its own excesses. The firm was crucial to the cotton trade, and cotton depended on the labor of enslaved men and women. At the beginning of the twentieth century, Brown Brothers plunged into financing businesses and banks in Central America, indifferent to the disruptions that ensued, and then worked closely with the U.S. government to overthrow a government that threatened its investments. That was the darker side of how money made the world.

We live in a time when we have all become acutely aware of the role of capital as the glue binding our economy and as tinder that can cause it to implode. Spread widely, it can be a ballast; spread too unevenly, it can open fissures. Money can create a nation; it can energize technology revolutions, from the steamships and the railroads to the internet and the smartphone. But it can also unleash greed and deluge industries and countries, causing shocks that can shake society to its core. It can spread wealth but also concentrate it. It is indifferent to inequality. Nonetheless, the American formula, a capitalism distilled in the mid-twentieth century composed of rules and laws designed by Americans and cemented by the dollar, has been the formula for the world, from a China governed by the Communist Party whose economy is capitalist to the core, to a Nigeria whose government may be corrupt but whose society is market driven, from Scandinavian countries whose social contract flirts with socialism to authoritarian regimes in the Middle East that suppress expression but court investment.



1. Coming to America
2. The B&O
3. Everybody Is Speculating
4. Dreams of the 'Arctic'
5. A Very Civil War

6. A Nice Sense of Commercial Honor
7. Nothing Is Impossible
8. The Republic of Brown Brothers
9. Saving Money
10. The Tapped
11. The Business of America

12. From the Ashes
13. "We Were Very Hard Workers"
14. A Call to Service
15. The Wise Men
16. In The Valley
17. When Is Enough Enough?

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