Saturday, December 29, 2012

Whaling Voyages as a Team-Building Exercise

Painting of the Northern Whale Fishery by John Ward of Hull from the National Gallery of Art
This post, like the previous one, comes from my recent Ahab-lite obsession with whaling, as well as the recent general interest in Hermann Melville’s monumental Moby Dick – which celebrated its 161st anniversary in 2012 (including my slow plod through it over many months, the Google doodle of October 18, the San Francisco Opera’s staging of an opera based on the novel, and the Moby Dick Big Read project) – and the various articles I read that cover economic and business topics (namely, how workers and executives are paid).

The brave, industrious, desperate, ignorant and/or foolhardy men (and the rare woman)* who traversed vast expanses of often uncharted ocean in the 19th century didn't work for fixed wages – they didn’t get a paycheck every week or month – but instead worked for a share of the profit that resulted from the voyage, plus room and board on the ship** .  In essence, it was a full-scale profit sharing arrangement, but unlike today’s profit sharing at GM or a worker-owned company, a movie star’s contract that guarantees a percentage of the movie earnings, or the stock grants to a big-time corporate executive, there were no regular wages to provide an earnings safety net.

“They were one man, not thirty”
One theory is that the system was intended to increase solidarity and improve teamwork among the crew, something quite important on a whaling ship, where it took a coordinated effort by many men to capture a whale and process it into oil. A few slackers could lead to escaped whales and even injury or death for the crew. In essence, the profit-sharing arrangement was a long-term team-building exercise.  Hermann Melville, in Chapter 134 of Moby Dick, puts it this way, as the crew of the Pequod bear down on the white whale:
They were one man, not thirty. For as the one ship that held them all; though it was put together of all contrasting things—oak, and maple, and pine wood; iron, and pitch, and hemp—yet all these ran into each other in the one concrete hull, which shot on its way, both balanced and directed by the long central keel; even so, all the individualities of the crew, this man's valor, that man's fear; guilt and guiltiness, all varieties were welded into oneness, and were all directed to that fatal goal which Ahab their one lord and keel did point to.
Whalemen were generally given an advance at the time of sailing – money that could be left at home for a wife and children, or brought aboard to gamble with, to hire women during port visits, or to buy tobacco, clothing, medicine and etcetera from the captain’s “slop chest.” This advance, of course, was logged in the tally book at the docks and subtracted from that crew member’s proceeds at the end of the voyage (with interest).

After the ship returned home and the products were sold (a process that could be manipulated in favor of the crew or ship owners), various expenses were subtracted, including loading and unloading fees, any loans taken from the captain, various charges for replacement clothing or medical treatment, and a recruitment fee for the shipping agent. Occasionally, a crew member could get his payment as whale oil, and other physical proceeds from the voyage, and then go and sell it himself, hoping that he could get a better price.

Shifting Incentives and Variability
If a crewman was lost at sea or died during the voyage, his estate was given a prorated share. Until the 1860s, ship owners were not legally required to make post-voyage payments to deserters.  This, plus the advance given to crew before the ship sailed, set up an interesting dynamic.  Many voyages involved three distinct phases: 1) a several month voyage from New England around The Horn to the vast Pacific Ocean, 2) many months hunting and processing whales, and finally 3) another long voyage back to New England, ideally with the hold full of barrels of oil, stacks of baleen, and maybe a few pieces of ambergris.  With the advance in his pocket, a crewman might consider deserting during a supply stop on the outbound voyage (or even before the ship sailed from New England!).  But on the way back, the tables turned, and the captain (or his distant superiors) had a financial incentive to force sailors to desert, perhaps by restricting their rations or imposing unusually strict discipline, or intentionally leaving a crewman behind during a supply stop.

The overall wages were highly variable, as Davis et al. write in In Pursuit of Leviathan,
The effect of business and physical risks on earnings is illustrated by the experience of 1,082 captains of whaling vessels that sailed from New Bedford in the years 1840-58. Their monthly earnings averaged $98.31, but ranged from a low of $0.66 to a high of $345.34.
It turns out, as illustrated by painstaking analysis by Davis et al, that these highly variable wages were significantly less than on-shore jobs paid, even compared with unskilled factory work (see chapter 7 of Davis et al.).  So why would anyone join a dangerous, dirty, and boring whaling voyage when on-shore work paid so much more? For some, it was pure ignorance about what they were in for. Others undoubtedly loved the sea***. Some were running away from something or someone.  And some were hoping for great luck:  the highly variable payments mentioned above offered the possibility that you could strike it rich, returning to home port with a full hold when whale oil prices are at record highs.

* In the mid-19th century, it was not uncommon for the captain to bring his wife and children along.  As for women in the crew, that was much less frequent:  in Leviathan, Dolin cites an estimate that a woman (disguised as a man) was member of the crew in at least one out of every thousand whaling voyages. (Return to text)

** The room and board were typically quite terrible – with most of the crew sharing a cramped, mostly dark and airless compartment – and primarily eating food that could survive the long voyages (think hard tack and salted meat).  (Return to text)

*** People like Melville's Ishmael, as he explains in the first paragraph of Chapter 1 of Moby Dick:
Call me Ishmael. Some years ago--never mind how long precisely--having little or no money in my purse, and nothing particular to interest me on shore, I thought I would sail about a little and see the watery part of the world. It is a way I have of driving off the spleen and regulating the circulation. Whenever I find myself growing grim about the mouth; whenever it is a damp, drizzly November in my soul; whenever I find myself involuntarily pausing before coffin warehouses, and bringing up the rear of every funeral I meet; and especially whenever my hypos get such an upper hand of me, that it requires a strong moral principle to prevent me from deliberately stepping into the street, and methodically knocking people's hats off--then, I account it high time to get to sea as soon as I can. This is my substitute for pistol and ball. With a philosophical flourish Cato throws himself upon his sword; I quietly take to the ship. There is nothing surprising in this. If they but knew it, almost all men in their degree, some time or other, cherish very nearly the same feelings towards the ocean with me.
Somewhere in the archive of To the Best of Our Knowledge, there’s a wonderful reading of this passage, but I can’t seem to find it.  If you know where it is, please let me know in the comments.  (Return to text)

Image credit: The Northern Whale Fishery: The "Swan" and "Isabella", by John Ward of Hull, c. 1840, from the National Gallery of Art    

Random link from the archive: The Idli

Saturday, December 15, 2012

The Golden Age of Whaling

The mid-18th century was the “golden age” of whaling in America, with hundreds of ships making long voyages – often into uncharted parts of the oceans – to kill whales and process them into key ingredients of the Industrial Revolution: oil to illuminate homes, offices, streets and factories at night; and lubrication for machines. Candles made from the rich oil contained in the massive heads of sperm whales – spermaceti – were the premier indoor lighting technology of the late 1700s and beyond.  Benjamin Franklin wrote to a friend that these candles “…afford a clear white Light; may be held in the Hand, even in hot Weather, without softining; that their Drops do not make Grease Spots like those from common Candles; that they last much longer, and need little or no Snuffing.”  But like one of those premium spermaceti candles, the industry burned bright and quickly went dark, as the figure below indicates. Although the common story is that the whalers wiped out the whales, the reality is different* :  replacement of whale oil by fossil fuels (especially oil), the rise of non-American whaling nations (especially Norway), and the massive disruption caused by the American Civil War.

Eric Jay Dolin, author of Leviathan: The History of Whaling In America, says that at its peak, 70,000 people were employed in the industry, directly or indirectly** . It was the third largest industry in Massachusetts in the middle of the 19th century, after shoes and cotton, and the fifth largest in the U.S. The most profitable year was 1853, when sales of whale oil, spermaceti, and baleen amounted to $11 million.*** The leading whaling port, New Bedford, Massachusetts, was said to be the richest city in the United States, and possibly even the world.****

Seventy thousand doesn’t sound like a very big industry in modern America, but back in 1853 the nation was much smaller and concentrated, so perhaps some scaling can bring it into perspective.

First, let’s start with people.  The U.S. population in 1850 was 23 million, including 3.2 million slaves (source: Census Bureau,PDF).  A recent estimate of the current population is 312 million (Census Bureau).  If we simply scale for population growth, the 70,000 active in the whaling business would be around 950,000 today, about 1 in every 350 people, or about 1 in every 200 adults.

The automobile industry is an easily accessible comparison. We have motor vehicle manufacturing with around 160,000 workers, motor vehicle parts manufacturing with 443,000 workers, dealers with 1,050,000 workers, and repair with 815,000 workers, for a total of about 2.4 million, about 1 in every 140 people, about 1 in every 80 adults (Bureau of Labor Statistics, non-seasonally adjusted figures).  So, in person-terms, about two and a half times bigger than than the scaled whaling business. Of course, the auto industry has a massive physical and commercial footprint in the United States, with multiple dealerships in just about every city and advertisements blanketing the airwaves and print media. If whaling materials were brought into the modern era, I doubt that the industry would have such a noisy position in the commercial marketplace as autos – a candle or whalebone girdle-stay isn’t quite as exciting as a shiny car – but would probably be a bit more like the commercial presence of light bulbs and motor oil.

Next, we'll take a look at the money. The simplest way to adjust for the times is with the consumer price index, a measure of the average prices of a basket of goods and services. Although my favorite inflation calculator from the BLS only goes back to 1913, I found some CPI estimates at the Federal Reserve Bank of Minneapolis that go to 1800. Between 1853 and 2012, the purchasing power of a dollar decreased by a factor 27.92, so an $11 million industry in 1853 would be roughly equivalent to a $307 million industry in 2012 (of course, there might be better ways to handle this than CPI).  A few hundred million is pretty big, but almost nothing compared to today’s automotive industry, which sold over 13 million new cars and trucks in 2011 (WardsAuto) – using a wild guess of $30,000 per vehicle, that’s about $390 billion – and paid $500 billion in salaries in 2010 (Center for Automotive Research, PDF).  And that’s not even considering the used car, service and parts markets.  What's behind this thousand-fold difference between the big industries of the mid-19th century and today's auto industry,  despite only a 28-fold increase in the CPI? The answer is well beyond my knowledge of economics.

An economic historian or business analyst might have something more to say about these things in terms of productivity, the industrial revolution, multiplier effects, innovation and more.  But I think I’ll leave it here with two links: 
  • At the Atlantic, Derek Thompson has an interesting take on whaling, innovation and 19th century global trade
  • James Murray at Business Green recalls that the American whaling industry was the center point of the greatest green economy speech that he ever saw.

* Stocks of sperm whales and humpback whales were not significantly decreased by the sail-powered whalers of the mid-19th century for a number or reasons, which are detailed in In Pursuit of Leviathan: Technology, Institutions, Productivity, and Profits in American Whaling, 1816-1906, by Lance E. Davis, Robert E. Gallman, Karin Gleiter, University of Chicago Press, 1997 (Full text available from the National Bureau of Economic Research). But once the whaling ships became motorized and harpooning technology advanced in the late 19th century and 20th century, the stocks were seriously threatened. Davis et al. write on page 508, “In that one year [1931] the modem industry killed more than 10 percent as many whales as the American industry had destroyed in the entire nineteenth century. Well over 1,000,000 whales were captured between 1904 and 1978, compared with something over 350,000 during the nineteenth century.” (my emphasis) (Return to text)

** Dolin says this during one of his interview segments in Into the Deep, a presentation of PBS’s American Experience, but I can’t find its source in his book.  The program was directed by Ric Burns and narrated by Willem Dafoe. It uses the story of the whaleship Essex as the dramatic narrative that underpins a thorough look at American'’s whaling industry.  The full video should be available for viewing on PBS's website and on the Netflix instant service.  Highly recommended. (Return to text)

*** These figures are in Dolin’s Leviathan, p. 206 in the paperback edition. (Return to text)

**** The tidbit about New Bedford is from In Pursuit of Leviathan. (Return to text)

Image Credit
Fitz Henry Lane, Boston Harbor, Sunset, 1850-1855. Downloaded from the Los Angeles County Museum of Art (LACMA) Image Library, part of the public domain collection (higher resolution is available at LACMA).  I don’t know what kinds of ships these are, but whatever the case, the painting is beautiful, a great example of luminism.

Random link from the archive: Looping back to the 18th century by concentrating on your ingredients