Chapter One
“This is an impressive crowd—the haves and the have-mores. Some people call you the elites; I call you my base.”
--George W. Bush, campaign speech, October
2000
George Walker Bush and His
“Base”
There was no embarrassment evident in October of 2000 when
George Walker Bush flattered his campaign audience with the above quip. The “American Dream,” once defined as the
ability to achieve a better life through hard work and determination, has been redefined
through time by the political faction the Bush family represents (typically
investment bankers, who manage “other people’s money”). The new definition defines the dream within
the context of those who have already achieved (or inherited) success and are
only concerned with not going backward.
Thus both Bush presidents have worked to pass elimination of capital
gains taxes, lowering, if not eliminating, income taxes on the wealthiest
American taxpayers, eliminating the estate, inheritance and gift tax, as well
as giving investment banks the right to use the Social Security Trust fund in
their stock manipulations.
All of these schemes
have been designed to assist “the elites,” whom Bush called his base, in
preserving and increasing their wealth. This book is written in order to see
those “elite persons” more clearly. Who are
they? How do they create wealth?
The Bush family has never experienced poverty, at least in
recorded memory. Ann Richards perhaps
said it best in her speech before the Democratic Convention in 1988:
“Poor
George. He can’t help it. He was born with a silver foot in his mouth,”
thus
denigrating the elder George Bush, then seeking the Presidency, for his
inherited position in society as well as his tendency to misspeak. The same aspersion would also apply to
Governor Richards’ 1994 opponent in the race for Texas Governor, George Walker
Bush, who, like his father, had a mysterious access to capital that allowed him
to venture into any new business endeavor he desired.
The word “capital” can only be defined in terms of
surplus—having more than is necessary. In
an ongoing business, working capital is the amount of cash or liquidity
determined to exist when liabilities are subtracted from assets. When a person wants to create a new business,
he seeks “venture capital” from others who are looking for ways to make more
money than they could otherwise make by letting that capital sit idly in the
bank or in a fixed-rate account.
Much has been written about George Herbert Walker Bush’s decision
to create his own oil company in the 1950’s with his friends from Midland, Texas,
but less has been written about who put up the funds that bought equipment for
his operations and provided him a salary before he and his partners actually
struck oil. To whom did he report the
success or failure of his venture? The
same questions can be asked, twenty years later, as George Walker Bush entered
into his own business career—Arbusto, Harken, and the Texas Rangers Baseball
Club. Who put up the funds, and what do
we know about these capitalists? When
did the Bush family first become a part of the circle that gave them access to
this kind of capital?
The answers lie in history.
America’s
First Millionaire
The movement into politically influential circles was a
gradual one that occurred during the working life of Samuel W. Bush in Ohio, and, more
particularly, as a result of his marriage into the prominent and socially
conscious Sheldon family of Columbus,
Ohio. That marriage would give birth to the boy who
would grow up to become the role model for two U.S. presidents. But that’s a story
better saved for later. The most notable
of Samuel’s children was his eldest son, Prescott, father of the first Bush
president and grandfather of the second.
It is Prescott’s
entry into partnership in the newly created investment bank of Brown Brothers
Harriman (BBH), which best explains how his sons and grandsons attained their
access to capital. BBH began doing
business in 1931, as a result of a merger between the old, well-established
Brown Brothers & Co. and W.A. Harriman & Co., a deal put together by Prescott Bush's father-in-law on behalf of the sons of railroad tycoon E.H. Harriman, who had been Prescott's Skull and Bones brothers while they were all at Yale during the years just prior to WWI.
Capital Rooted in Opium
Both Thatcher M. Brown and his new partner, W. Averell Harriman, called 775 Park Avenue home—each having purchased apartments in the new upscale building constructed in 1927. Marketing and sales for the high-rise were contracted to the real estate firm started by Douglas Robinson, a cousin of William Waldorf Astor and a trustee in the Astor Trust Company. John Jacob Astor, progenitor of the Astor fortune and often called “America’s first millionaire,” was a mysterious magnet for money. His biographer, Axel Madsen, explained how German immigrant to America, John Jacob, accumulated the original capital he would later invest in money-making ventures:
Both Thatcher M. Brown and his new partner, W. Averell Harriman, called 775 Park Avenue home—each having purchased apartments in the new upscale building constructed in 1927. Marketing and sales for the high-rise were contracted to the real estate firm started by Douglas Robinson, a cousin of William Waldorf Astor and a trustee in the Astor Trust Company. John Jacob Astor, progenitor of the Astor fortune and often called “America’s first millionaire,” was a mysterious magnet for money. His biographer, Axel Madsen, explained how German immigrant to America, John Jacob, accumulated the original capital he would later invest in money-making ventures:
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| John Jacob Astor |
The upper end of the opium trade, however, belonged to a
British monopoly. The East India Company devoted thousands of hectares of
fertile land in Bengal to the cultivation of
opium. The harvest was auctioned at Calcutta,
while the yields of individual growers were sold in Bombay. Chinese dealers preferred chests that
bore the stamp of the East India Company because the crops of independent
growers were often adulterated with molasses or cow dung. Turkish opium was
inferior to Bengal imports. Still, one picul—a
Malay unit of weight used throughout Southeast Asia
and equal to 60 kilograms—of unrefined Turkish opium fetched $500 in Canton. Here, dealers
used it to adulterate the high-grade opium from India. Horrified at the harm done
to China's
health, Emperor Daoguang, a reformer who came to the throne in 1821, ordered
that all those convicted of opium smoking be given one hundred strokes. A
sentence also stipulated that for two months an addict should wear a heavy
wooden collar through which the hands were locked. A number of dealers were
executed. These measures, however, proved futile.
Astor dabbled in the opium trade because nearly
everybody else did. Olyphant & Company, one American firm that refused to
carry opium in its vessels, was nicknamed “Zion's Corner.” J. J. didn't hide behind the
pieties of those who claimed they sent narcotics to China to accelerate the conversion
of the heathen Chinese to Christianity. He was in it because it increased
profits. [1]
Corporate Models and Nominees
Astor had abandoned the opium trade by 1821, turning instead to the importation of liquor to use in trade with Indians. With his profits he bought Manhattan leases and land on the outskirts of the then-small city of New York, assets passed down to his family for many generations, mostly in trusts in a generation-skipping fashion. These trusts had to be managed by bankers, with income available for the beneficiaries, while any surplus capital could be reinvested by the managers or trustees, who, in the days before the rise of corporate entities, often held title in their own names pursuant to an underlying contract authorizing them to hold title as nominees for the trust beneficiaries. Over the years laws have been changed from one state to another to make it easier for the real owner of property to be kept secret behind corporations, limited partnerships, limited liability companies and other legal forms or models.
Astor had abandoned the opium trade by 1821, turning instead to the importation of liquor to use in trade with Indians. With his profits he bought Manhattan leases and land on the outskirts of the then-small city of New York, assets passed down to his family for many generations, mostly in trusts in a generation-skipping fashion. These trusts had to be managed by bankers, with income available for the beneficiaries, while any surplus capital could be reinvested by the managers or trustees, who, in the days before the rise of corporate entities, often held title in their own names pursuant to an underlying contract authorizing them to hold title as nominees for the trust beneficiaries. Over the years laws have been changed from one state to another to make it easier for the real owner of property to be kept secret behind corporations, limited partnerships, limited liability companies and other legal forms or models.
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| Reporters speculated that Robinson was bidding for Astor. |
The
trustees who managed the estate thus had the use of the funds at their own
discretion. Douglas Robinson attained his status as trustee because of his
relationship to the family circle—that “gold ring” that surrounded the Astor
family. Born in Scotland, Douglas in 1882 married Corinne Roosevelt, the sister of
Theodore Roosevelt, President of the United States from 1901-1909. The Robinsons’ daughter, also named Corinne,
would marry Joseph W. Alsop IV in 1909 and remain very close to her first cousin
Eleanor, who married another Roosevelt—fifth cousin, Franklin.
Was British Socialism Extracted from Poppies?
Both Corinne Robinson and Eleanor Roosevelt were sent to Allenswood, a school near London, where they were taught by Marie Souvestre, a feminist educator who “sought to develop independent minds in young women.” Souvestre continued a correspondence with Eleanor long after her departure from the school.[2] One of Eleanor’s teachers at Allenswood was Dorothy Strachey, sister to Lytton Strachey, who helped organize the “Bloomsbury Group,” in London in 1905.
The
Stracheys were children of an upper-middle-class family headed
by their father, Sir Richard Strachey, a colonial Indian civil servant and
civil engineer and British army general during Lord Robert Cecil Salisbury’s tenure in the India Office when Britain faced
the problem of maintaining a complex empire in South Asia.[3] Lytton Strachey’s father and
one of his half a dozen uncles servicing in India civil service, Sir John
Strachey, were colleagues of Lord Cromer (of Barings Bank) on the Indian
Council, while Sir John was also Viceroy of India for a time.[4] During
the years when Sir Stafford Northcote was Secretary of State for India, Sir John
and General Richard Strachey wrote Finances
and Public Works of India, which stated at page 136:
Both Corinne Robinson and Eleanor Roosevelt were sent to Allenswood, a school near London, where they were taught by Marie Souvestre, a feminist educator who “sought to develop independent minds in young women.” Souvestre continued a correspondence with Eleanor long after her departure from the school.[2] One of Eleanor’s teachers at Allenswood was Dorothy Strachey, sister to Lytton Strachey, who helped organize the “Bloomsbury Group,” in London in 1905.
For many years the ordinary financial condition of India had been
one of chronic deficit; and the main cause of this state of affairs was the
impossibility of resisting the constantly increasing demands of the local
governments for the means of providing every kind of improvement in the
administrations of their respective provinces. Their demands were practically
unlimited, because there was almost no limit to their legitimate wants, and the
local governments had no means of knowing the measure by which their annual
demands upon the Government of India ought to be regulated. They had a purse to
draw upon of unlimited, because of unknown, depth. . . . They found by
experience that the less economy they practised, and the more important their
demands, the more likely they were to persuade the Government of India of the
urgency of their requirements.[5]
This
same concern was also expressed by the utilitarian writer, John Stuart Mill, an
employee of the British East India Company for more than three decades, who
“drafted his Logic and Principles of Political Economy on the
Company's stationery while so employed. In spelling out his necessary
conditions of development for Indians, Mill stood amidst a long line of British
writers who addressed the question of India as a codicil of the European
invention of development.”[6] As early as 1804 when Thomas Malthus became a
charter member of the faculty of the newly established staff training college
of the East India Company at Haileybury, John S. Mill’s father, James Mill, was
hired as a Company administrator with help from Jeremy Bentham, with whom he
became associated in 1806, and John Stuart started his own 35-year career there
in 1823.
It was during the aftermath of the 1857 mutiny and revolt J.S.
Mill wrote Memorandum of the Improvements in the Administration of India—a
defense of the East India Company against the revocation of its governmental
privileges. The Strachey family had a
connection to the Indian civil service that was well over a century old by the
time Mill wrote his treatise.
, writes:“By the mid-nineteenth century, two scions of this family, John and Richard Strachey, had risen to high office in India. In 1882 the Stracheys co-authored the retrospective of their lives' work, The Finances and Public Works of India from 1869 to 1881, and dedicated the book to ‘the public servants of all classes the results of whose labours for the people of India [were] herein recorded…by their fellow workers’. In their final chapter, the Stracheys addressed the question of the ‘future requirements of public works and finance in India’. Here, they reflected that ‘the recent remarkable progress of India, which has been placed beyond every reasonable doubt, may be traced up to the natural productive powers of the country, for the development of which greatly increased facilities have been given by the extension of railways and cheap transport’. Yet, there was no time to cry, ‘Rest and be thankful.’ The Stracheys argued that, as the famines of the 1870s had shown, much more needed to be done. How was this work to be accomplished? Their answer was that ‘experience’ had ‘established beyond dispute that it is within our power both to construct and work railways economically through state agency’. Moreover, the Stracheys continued, it was in the financial interests of the Government of India to do so:
for, it may without hesitation be said that in the case of lines yielding a profit…the amount which would be carried out of the country by a company of foreign capitalists…must be greater than the charge incurred under Government management…since the profits, even if smaller, would all remain in India.[7]
How Bankers and Accountants Hide the Source
At the same time Sir Stafford Northcote was contending with Indian provincials’ demands for more from the British government, similar pleas for money were coming from Canadian colonials. Sir Stafford, who began heading Hudson’s Bay Company in 1869, traveled to North America to discuss a way to resolve the situation, using the International Financial Society, set up in the early 1860’s, as one possible means to raise funds outside the Government’s taxing mechanism. By 1868 another new financing mechanism had been created—the investment trust—the first of which was the Foreign and Colonial Government Trust, which:
At the same time Sir Stafford Northcote was contending with Indian provincials’ demands for more from the British government, similar pleas for money were coming from Canadian colonials. Sir Stafford, who began heading Hudson’s Bay Company in 1869, traveled to North America to discuss a way to resolve the situation, using the International Financial Society, set up in the early 1860’s, as one possible means to raise funds outside the Government’s taxing mechanism. By 1868 another new financing mechanism had been created—the investment trust—the first of which was the Foreign and Colonial Government Trust, which:
was very successful and soon had a number of imitators.
In 1873 the five trustees of the Foreign and Colonial Government Trust set up
the first trust company specifically devoted to investment in American railway
securities, the American Investment Trust.[8]... In
April the most famous of all these companies, the Scottish American Investment
Trust, was inaugurated.[9]... Most
of these companies also engaged in various other financial operations. They not
only undertook the flotation of American railway shares but also bought and
sold on such short terms that their operations came perilously close to the
borderline of speculation. Nevertheless, the investors were highly satisfied
with the returns. The trustees also profited, especially from the founders’
shares. Moreover, there were also intangible profits. The group of men who made
up the trustees of these various companies became a power in the City.[10]
It
is the Scottish American Trust that is most useful in understanding the connection
between Scottish capital and American enterprise in the decades following America’s civil
war, when another sort of war was going on within the British establishment
concerning the maintenance of the colonial empire:
Theories and attitudes to colonial development unfolded
only very slowly and uncertainly in this period, which is not surprising,
considering that it was a time when British attitudes to the empire as a whole,
and to the tropical colonies in particular, were still confused and incoherent.
On the one hand, there was what might be called the ‘unofficial orthodoxy’ of
the Manchester school of laissez-faire dogmatism, based on the worship of free
trade, which believed that, provided Britain was powerful enough to enforce
free trade (or something approaching it) on tropical regions, formal colonial
rule was unnecessary: and on the other hand there was the whole tribe of
traders, merchants, missionaries and colonial administrators who had a vested
interest in maintaining the tropical colonies, and in some cases in expanding
them. Since possession is said to be nine-tenths of the law it is perhaps not
surprising in retrospect that those who represented the vested interests were
ultimately successful; and that the advocates of abandoning the colonies (the
settlement colonies as well as the tropical ones) were eventually defeated—as
much by the course of events—as by any determined new policy of expansion.[11]
This
“Manchester
school” centered in the Lancashire
district—the heart of the textile industry—was also the location of many of the
investors of the International Financial Society formed by Sir Edwin Watkin,
promoter of the Grand Trunk Railroad from the east to west coasts of Canada. This financing mechanism was a separate
entity,
capitalized at three million pounds—divided into 150,000
shares—all of which were bought by the important London banking firms. The sale of stock was closed in June 1863,
and the new shareholders (the London
banks) elected Sir Edmund [Walker] Head as governor of the Company, with other board
members being Richard Potter, Daniel Meinertzhagen, James S. Hodgson and J.H.W.
Schroeder from the banks. Shares in the
new company were then placed for sale on the open market. However, almost a year later, the society
still owned a large block of stock. The
Society's minutes reflect that by 1867 it owned a mere 3,000 shares.
The
Daniel Meinertzhagen named above headed the banking house owned by his
father-in-law, Frederick Huth. In 1873
his son, also named Daniel, married one of the daughters of another board
member of the International Financial Society—Richard Potter—the wealthy father
of soon-to-be-famous Beatrice Potter Webb, one of the founders of the Fabian
Socialists. Potter was building the
Grand Trunk Railroad in Canada. Daniel was also
the father-in-law of Alexander Frederick Richmond (“Sandy”) Wollaston, the second son of George
Hyde Wollaston, who was related by the marriage of Ann (daughter of Frederick Eustace Arbuthnot Wollaston) into the family of Alexander
Brown of Baltimore.
Alexander Brown's son James had gone to New York after the Erie Canal opened in order to take advantage of the trade that was opened up by that scientific wonder in 1825. James was the senior partner in the Brown Brothers investment bank which after the 1929 crash was in dire need of new capital. That was when the Harriman boys came along and through Prescott Bush's father-in-law George Herbert Walker, negotiated to take over the bank's investment portfolio, as mentioned previously. We can only wonder at this point in time how much of those investments still derived income from opium.
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| Click to enlarge file. |
Alexander Brown's son James had gone to New York after the Erie Canal opened in order to take advantage of the trade that was opened up by that scientific wonder in 1825. James was the senior partner in the Brown Brothers investment bank which after the 1929 crash was in dire need of new capital. That was when the Harriman boys came along and through Prescott Bush's father-in-law George Herbert Walker, negotiated to take over the bank's investment portfolio, as mentioned previously. We can only wonder at this point in time how much of those investments still derived income from opium.
[1] Axel
Madsen, John Jacob Astor: America's First Multimillionaire
(New York: John Wiley & Sons, Inc., 2001), pp.
166-167.
(New York: John Wiley & Sons, Inc., 2001), pp.
166-167.
[2] Betty
Boyd Caroli, The Roosevelt Women: A Portrait In Five Generations
(New York: Basic Books,
1998).
(New York: Basic Books,
1998).
[3] “Giles
Lytton Strachey (1880-1932),” Encyclopedia of World
Biography, 2nd ed. 17 Vols. Gale Research, 1998. According to statistics reflected by
the “Statistical Abstract of British India,” presented annually to Parliament,
Sir John Strachey’s Financial Statement of 1877, (V/16/344), OIOC, and Judith M. Brown
, Modern India: The Origins of an Asian Democracy (Oxford, 1985),
p. 125:
, Modern India: The Origins of an Asian Democracy (Oxford, 1985),
p. 125:Salisbury’s 1866 budget speech, for all the confidence with which it was imbued, could not disguise the fact that Indian revenues could not be counted upon for any extensive program of public works. The government drew its revenue from six main sources: land, opium, stamps, salt, excise, and customs. Of these the revenue from land was by far the largest, accounting for some 40 percent of a total net revenue in the 1870s of around £38,000,000 per annum. Since this revenue was either permanently fixed or subject to only thirty-year reassessments, it could not be raised to meet extraordinary costs or provide for public works investment. Neither was the second largest source of revenue, that from opium sales to China, which accounted for around 15 to 17 percent of total revenue, a reliable or expandable source. Unlike the Chancellor of the Exchequer who could rely on gin sales in Britain, Salisbury noted, opium sales faced the risk that the Chinese government would look elsewhere for its opium. Furthermore, although currently producing a high return, it was subject to fluctuations in price. That made him look ‘with some anxiety on the statement that the Indian budget depends on the yield of opium not falling far short of the highest rate it has ever yet attained.’ (quoting Paul R. Brumpton, Security and Progress: Lord Salisbury at the India Office (Westport, CT: Greenwood Press. 2002), 127.)
[4] John Loe Strachey
, The Adventure of Living: A
Subjective Autobiography—1860-1922 (New York: G.P. Putnam’s Sons, 1922),
367. Lytton’s father started his career as
a subaltern in the Honourable East India Company’s Corps of Sappers and Miners.
, The Adventure of Living: A
Subjective Autobiography—1860-1922 (New York: G.P. Putnam’s Sons, 1922),
367. Lytton’s father started his career as
a subaltern in the Honourable East India Company’s Corps of Sappers and Miners.
[5] Quoted
in Andrew Lang
, Life, Letters and Diaries
of Sir Stafford Northcote, First Earl of Iddesleigh. Volume: 1 (Edinburgh
and London: W. Blackwood and Sons,
1890), 276-277. Strachey
, The Finances and Public Works of India from 1869 to 1881 (London, 1882), 401-402.
, Life, Letters and Diaries
of Sir Stafford Northcote, First Earl of Iddesleigh. Volume: 1 (Edinburgh
and London: W. Blackwood and Sons,
1890), 276-277. Strachey, The Finances and Public Works of India from 1869 to 1881 (London, 1882), 401-402.
[6] M. P.
Cowen and R. W. Shenton, Doctrines of
Development (London: Routledge,
1996), 42.
[7] Cowen
and Shenton, 54. Passages quoted therein
from Strachey and Strachey (1882), pp. 401-2.
[8] The five
trustees were: Lord Westbury, Lord Eustace
Cecil, G.M.W. Sandford, G.W. Currie, and Philip Rose. Philip Rose, it should be noted, was not a
member of the firm of Morton, Rose and Co. but of a firm of lawyers.
[9] According
to a footnote to the quoted text, the trustees were: James S. Fleming, cashier
of the Royal Bank of Scotland; James Syne, manager, British Linen Co.; W.J.
Duncan, manager, National Bank of Scotland; and William Thomas Thomson,
manager, Standard Life Assurance Co. An
additional reference recommends W. Turrentine Jackson, The Enterprising Scot: Investors
in the American West after 1873 (Edinburgh:
Edinburgh University Press, 1968) at 13 ff.
[10] Dorothy
R. Adler, British Investment in American Railways 1834-1898
(Charlottesville, Va.: The University Press of Virginia,
1970), p. 92. Adler cites The London
Times (March 20, 1868), as the first appearance of any mention of The
International Financial Society.
(Charlottesville, Va.: The University Press of Virginia,
1970), p. 92. Adler cites The London
Times (March 20, 1868), as the first appearance of any mention of The
International Financial Society.
[11] Michael
Havinden and David Meredith, Colonialism and Development: Britain and its Tropical Colonies, 1850-1960
(New York: Routledge, 1993), 45.
Chapter One of Linda Minor's unpublished book about the history of Brown Brothers bank and the genealogy of Brown family descendants.
(New York: Routledge, 1993), 45.Chapter One of Linda Minor's unpublished book about the history of Brown Brothers bank and the genealogy of Brown family descendants.
