Claus Spreckels: Robber Baron and Sugar King

Introduction

Claus Spreckels (born July 9, 1828 in Lamstedt, Kingdom of Hanover; died: December 26, 1908 in San Francisco, California) was perhaps the most successful German-American immigrant entrepreneur of the late-nineteenth century.[1] When he unofficially retired in 1905, his estate was valued at approximately $50 million dollars (approximately $1.3 billion dollars in 2010$).[2] The “sugar king” of Hawaii and the West was one of the ten richest Americans of his time. When adjusted for inflation, his personal fortune ranked him fortieth on a list of the wealthiest Americans of all time.[3] The career of the “money-making genius”[4] consisted of building and breaking monopolies in sugar, transport, gas and electricity, real estate, newspapers, banks, and breweries. Ruthless and jovial, progressive and exploitative, he represented fundamental American virtues: independence and liberty, courage and risk-taking – yet continued to return to Germany year after year to recover from his taxing life in the West.

Family and Ethnic Background

Claus Spreckels was born on July 9, 1828, the first of six children, in the small village of Lamstedt in the Kingdom of Hannover (today located in the district of Cuxhaven in Lower Saxony). His parents, John Diederich Spreckels (1802-1873) and Gesche Baak (1804-1875), were farmers who occupied a homestead that had been in the family for generations.[5] Spreckels grew up in modest financial circumstances and received a primary school education. Beginning in 1843, he found employment as a farmhand but was unable to secure a comfortable living during the “Hungry Forties,” an era of crop failure and political upheaval in Northern Europe. With borrowed money, he followed the example of many of his countrymen on the North German coast and boarded a ship to the United States in 1848.

Spreckels arrived in Charleston, South Carolina, at the age of nineteen. He was not able to speak English and had only one German Thaler in his pocket (75 cents in American currency after the sum was exchanged). However, he was able to acquire a job as a junior clerk at a German-owned grocery store by taking advantage of German ethnic networks in the community. In the first six months, he received only room and board but later earned four dollars per month. After one-and-a-half years, the shop-owner retired, allowing Spreckels to buy the grocery trade on credit. He paid off the purchase price in one year’s time and managed the business until 1855.

The next steps of his career were based on his family network. On July 11, 1852, he married his childhood sweetheart, Anna Christina Mangels (September 4, 1830-February 15, 1910), who was working as a housemaid in New York City. With the help of his brother-in-law, Claus Mangels, Spreckels was able to purchase a wholesale and retail trade business at West Broadway and Anthony Street in 1855. He managed the enterprise with great success and soon expanded it. He purchased another grocery business in San Francisco from his brother, Bernhard Spreckels, sold his New York business to his brother-in-law, and headed for California in June of 1856. There he became “one of the many successful industrial leaders that the Fatherland of Germany has given to the United States.”[6] His industrial career was based, as in so many other cases, on capital made in the retail and wholesale businesses.

Business Development

The first industry Spreckels succeeded in was one quite typical for German immigrants: beer brewing. In the spring of 1857, together with his brother, Peter Spreckels, and Claus Mangels, among others, he founded the Albany Brewery – the first large-scale producer of beer in San Francisco. Spreckels sold his grocery business for $50,000 to focus on brewing and introduced some technological improvements that gave the brewery the lead in the regional market for several years.[7] Adapting to the moderate climate, the Albany Brewery introduced steam beer, a lager yeast beverage with lively carbonation. Though profitable, beer brewing was not a rapid moneymaker, which prompted Spreckels to sell his shares in 1863 for $75,000. Already a wealthy man, he switched to a new field that would make him rich: sugar.

In contrast to beer, sugar was consumed in the United States in a much higher volume than in Europe. In the early 1880s, consumption exceeded 50 pounds per capita per annum, and after 1900, 70 pounds. In 1863, Spreckels returned to New York to study the business of sugar manufacturing by working in a large refinery. He bought the machinery of the bankrupt United States Refinery and took it to San Francisco. At the same time, he organized the Bay Sugar Refining Company in cooperation with several partners beginning in 1863 and incorporated the business in 1864. Spreckels directed company operations until 1865 and then sold the enterprise, again at a considerable profit.[8]

He was still not satisfied, however. Again, he went east and visited Germany to investigate beet-sugar production. He obtained employment in a Magdeburg factory, most-likely Jacob Hennige & Co., and improved his knowledge of sugar refinement. He learned about agricultural science, farming, refining, and waste utilization, and mastered the complex calculus of labor, transport, wholesale trading, and export costs that underlay sugar production. He decided to continue refining cane sugar, most of which came from the Philippines at the time. Returning to San Francisco, he erected the California Sugar Refinery in 1867. It initially had a capacity of 9,000tons per year, but Spreckels accelerated the production process with new machines patented on his own name and with efficient organization. Again, he invented several new products. At that time, grocery stores dominantly sold sugar loaves, but Spreckels introduced granulated and cube sugar, both already well known in Europe, which allowed consumers to more easily divide proportions. His sugar had a clean appearance, good quality, and was “sold at a low price.”[9] Spreckels benefited, as well, from the economies of scale – enlarging his buildings on four occasions. Most of his competitors were blown out of the western market, and only one larger firm survived the attack of the newcomer when he constructed a new refinery in 1881 – the most modern American facility of the time. Spreckels had become the “sugar king” of California – and a millionaire.

The growing sugar business widened Spreckels’ prospects. The western market was shielded by protective tariffs, bounties, and freight costs, and further expansion was dependent on the import of a growing volume of cane sugar. Initially, Spreckels opposed the new reciprocity treaty with the independent Kingdom of Hawaii in 1876 because he was afraid of ruinous competition. From the beginning, however, he took advantage of the opportunity to plant cane sugar in the Sandwich Islands and earn a bounty of two cents per pound. He purchased 40,000 acres on the Island of Maui, erected an impressive system of irrigation, infiltrated the king’s inner circle – corrupting him and his government, and extended his economic power year by year. In 1883, Spreckels purchased the entire Hawaiian crop of sugar to refine at his San Francisco plant.[10] When he incorporated the Hawaiian Commercial and Sugar Company with $10 million capital in 1884, it included four sugar mills, some 35 miles of railroad with equipment, a water reservoir, and the most advanced canal system in the Pacific region – constructed by a German-American engineer.[11] With this addition to his holdings, Spreckels had assembled a veritable “sugar empire,” which his two eldest sons helped him run, that produced much cheaper sugar than competitors. However, his market power allowed Spreckels to sell his sugar at prices higher than in the East. The last rival firm, the American Refinery, had comparable capacities but found it difficult to obtain enough raw sugar. It was compelled to enter a pool with Spreckels and to accept an arrangement to produce only a small portion of its potential capacity.[12] However, the price of raw sugar began to decline, leading to the first in a series of financial difficulties. These deepened in 1885, when Hawaiian planters began to plan a new refinery in San Francisco to be erected in 1886.[13] Although there was no “collapse of the Hawaiian monopoly,” Spreckels lost ground, especially after a display of lèse-majesté with King Kalakaua in 1886. During a friendly game of cards with a number of guests including King Kalakaua, Spreckels held three kings while his opponents had three aces. Spreckels claimed that his four kings still gave him the winning hand.[14] “‘Where is the fourth king?’ asked Kalakaua. ‘I am the fourth king,’” answered Spreckels – and King Kalakaua was not amused.[15] However, the Hawaiian sugar king still maintained a leading economic position until 1893.[16] This Hawaiian enterprise made Spreckels a multi-millionaire with a fortune estimated at $12 to 25 million in the late 1880s.[17] He believed that he had “done more for that country than any living man,”[18] a position the U.S. government and many contemporaries supported. Nevertheless, to make a fortune quickly, Spreckels had bolstered corruption and often bent the law, undermining his long-term economic prospects.

Yet Spreckels had new ambitions. From May to October of 1887, he visited Austria, France, Belgium, and Germany “for the purpose of studying the methods of cultivation of the sugar beet.”[19] He then made the transition from cane sugar to beet sugar. This was highly risky because the beet sugar business had been “a series of disasters” up to that time.[20] Spreckels’ Western Beet Sugar Company, incorporated in 1887 at Watsonville in the Pajaro Valley, south of San Francisco, was the first U.S. beet-sugar factory that was consistently successful from its onset.[21] Spreckels’ coup was carefully prepared. During the 1880s, Spreckels had worked with beet seeds, financed agricultural experiments, propagated his idea to Californian farmers, and lobbied for a federal policy that offered a bounty on beet sugar and provided protective tariffs for domestic beat sugar manufacturers. He invested nearly $500,000and imported machinery and beet seeds from Germany. The Watsonville plant began processing beet sugar in 1888. Spreckels educated American farmers and his own workmen – most of them immigrants as well – about beet farming and sugar production but did not import laborers from Europe to staff his operation.[22] The raw sugar was shipped to his San Francisco refinery with the help of a new railroad company and his steamship company. Watsonville was highly successful and ran until 1898, when farmers switched to more profitable cash crops.

Spreckels’ success was overshadowed by the formation of the so-called Sugar Trust in 1887, headed by the American Sugar Refining Company of the East Coast, which third generation German-American entrepreneur, Henry O. Havemeyer, dominated. The trust desired Spreckels’ involvement: “They wanted me to become one of the trust, and I refused, and said no.”[23] Although Spreckels was attracted to money, being his own master was more important: “I am my own and only trust.”[24] Soon after, the “sugar war” began, an amazing chapter of American business history. The Sugar Trust purchased Spreckels’ former competitor in San Francisco and cut sugar prices, but instead of surrendering, Spreckels attacked: “This trust has trampled on my toes and I won’t stand it.”[25] The immigrant refused to accept, that he “had worked for years to accumulate to a Wall-street crowd, and no longer [had] control of it.”[26] He went east to “show his power by smashing the Eastern trust,”[27] and after negotiating with the local authorities of Baltimore, New York, and Philadelphia, he invested approximately four million dollars to establish the world’s largest refinery in Philadelphia, which had access to cheap coal, an abundant water supply, and first-class transport facilities. Although affected by the Sugar Trust, Spreckels’ idea of establishing a plant in the East was not new, but it was now supported by public opinion.[28] By the time the refinery started production in 1889, with a capacity of two million pounds per year (which was doubled in 1889), Spreckels had become a prominent public figure in his fight for cheap sugar and private entrepreneurship. Sugar prices dropped dramatically, while Spreckels spread rumors of establishing another refinery in New Orleans.[29] Both parties cut and raised the prices, while the McKinley tariff in 1890 raised tariffs to protect American sugar producers. Agents of the Sugar Trust destroyed parts of Spreckels’ machinery, the most significant being the modern vacuum pans. Sugar was spoiled overnight. Even a chief accountant was bribed to inform the Sugar Trust of orders and finances.[30] At the same time, the Sugar Trust tried to reach an agreement with Spreckels, but he was more interested in his public status and the success of his Philadelphia plant: “I came here to fight the trust, and I have fought it, and I intend to keep on fighting it.”[31] However, in March of 1891, the “sugar war” ended[32] – although both parties remained silent on the issue. The Sugar Trust’s California plant was closed, and Spreckels was the confirmed sugar king of the West. The Sugar Trust bought the Philadelphia refinery for nearly $7 million dollars and ran it from 1892 onward.[33] Thereafter, both sides cooperated. Spreckels had supposedly won the “war” because he kept his independence, but critics judged differently: “This is the man by whose action the Sugar Trust was enabled to complete and perfect its monopoly. His surrender to the Trust for a price 100 percent greater than his investment, gave the Trust power to add three-eighths or one-half of a cent to the price of every pound of refined sugar consumed in this country, and the power was exercised without delay.”[34]

Spreckels, however, made new plans. In 1896, he announced his intention to erect the world’s largest beet sugar refinery in Salinas Valley in California. This not only entailed building a huge factory but also changing and developing a whole region: “My scheme will be the salvation of the country.”[35] Spreckels invested $2.5 million in the factory and began to buy farmland. Starting with 6,000 acres in 1897, the company owned, leased, or operated 66,000 acres by 1919. An intertwining network of roads, railways, dump stations, irrigation canals, wells and pumps, and pipelines formed the infrastructure – and the new company town of Spreckels was also established. Upon completion in 1899, the Spreckels Sugar Factory was 582 feet long, 102 feet wide, and 5 stories high. The daily water supply required for processing was equal to the total water consumption of San Francisco at this time. To finance this, the Sugar Trust purchased a 5 percent, or $8 million, interest in Spreckels’ Californian refineries without any real control, while Spreckels owned a sizable portion of shares of the Sugar Trust.[36] Spreckels then incorporated the newly formed Spreckels Sugar Company and became president of the group.[37]

Spreckels was more than a sugar king; he was interested in several other industries as well – mainly those necessary to bolster vertical integration. Starting with his Hawaiian sugar business, he financed the shipping line J.D. Spreckels & Bros. in 1879, which was incorporated as the Oceanic Steamship Company in 1881. It was the first line to offer regular service between Honolulu and San Francisco, and his sons managed to reduce travel time immensely. The sailing ship “Claus Spreckels,” made the trip in less than ten days in 1879, but the new steam vessel “Mariposa” required fewer than six days to make the run in 1883.[38] The family enterprise controlled the sugar trade and, from 1884, the mail service on the San Francisco-Honolulu stretch as well. In 1885, steamer service was extended to New Zealand and Australia, and the Oceanic Steamship Company remained an important factor for the Spreckels’ raw sugar supply until it was sold in 1926.

To transport bulk cargo, Claus Spreckels was additionally engaged in several railroad ventures. Maui was developed with the help of a narrow gauge railroad network, now merely a tourist attraction. From 1890, the Pajaro Valley Railroad Company connected Watsonville and the Pacific Ocean, providing a convenient transportation option for beets, farm products, and passengers. With the San Francisco and San Joaquin Valley Railroad Co., incorporated in 1895, Spreckels broke the monopoly of the Southern Pacific Railway.[39] In 1897, the Pajaro Valley Consolidated Railroad linked the Watsonville and Spreckels plants, while the Bakersfield and Los Angeles Railway Company closed the gap with the San Francisco and San Joaquin Valley Railroad, helping to develop middle and southern California.[40] Spreckels’ last investment was the purchase of the National City & Otay Railroad for $700,000 two years before his death.[41] Driven by his sugar interests, Spreckels’ investments in these other industries improved the infrastructure of his home state, where he was able to benefit from the economic rise of California agriculture.

Spreckels also made investments in real estate. During the 1880s and early 1890s, he bought and built up several blocks of office buildings in San Francisco; between 1895 and 1897, he invested one million dollars to erect “the tallest building west of Chicago.”[42] The Claus Spreckels Building was San Francisco’s first skyscraper and was celebrated as “the most symmetrical and monumental office building in the world.”[43] A 19-story, baroque style, steel frame building on a base of only 70 by 75 feet, it boasted independent electric power, heat, and water systems. The 272-office building was constructed for the San Francisco Call, a newspaper that Spreckels owned, but it primarily served as commercial office space. Only the Call’s press and mailing rooms were located within, and in the basement no less, while the working machinery of the newspaper was placed in a newly erected four story building connected with the main building via underground tunnel. All in all, Claus Spreckels’ real estate investments were valued at more than $10 million in San Francisco and $8 million in San Diego, a town dominated by his son John D. Spreckels.[44] Claus Spreckels suffered severe losses, though, in the San Francisco earthquake and fire of April 1906, but he invested heavily in reconstruction: Although the Claus Spreckels Building was internally burned out, it was one of the few larger buildings in San Francisco to escape structural damage.

Additionally, Spreckels invested in other sectors that, in some way, affected him. A good example can be found in the so-called gas war of 1899-1901. Two small gas works were blowing smoke into the Claus Spreckels Building, causing many tenants to protest. Spreckels met Joe Crockett, the president of the San Francisco Gas and Electricity Company at the Pacific Union Club and urged him to take action. Crockett replied that a club was not a place to discuss business and walked off. In retaliation, Spreckels organized two companies, first the Independent Light and Power Company, touted to be “an electric plant that will be without a rival in the world,”[45] and then the Independent Gas and Power Company. Although the offending gas works were closed, Spreckels started a fierce price war based on efficient machinery and organization. In 1901, the former top dog was forced to merge with his competitor. Spreckels, who had invested $2 million, sold his stocks and made a profit of $4 million, while his son, Rudolph Spreckels, served as director. He also became involved in public utilities after investing in a street railway company in Sacramento.[46]

Although Spreckels had a successful business career, he experienced failures as well. In 1889, for instance, he applied for a patent on a process for creating artificial stone masonry using sugar. Sugar would be hardened, creating a new material that would be cheaper than any building stone, “harder than granite, impervious to moisture and unaffected by heat, whiter and more beautiful than marble.”[47] The German-American immigrant even suggested constructing the proposed new wings of the White House out of such sugar blocks. The public was intrigued, while comments ranged from those like “How sweet!” to those of sarcastic irony,[48] but neither the White House nor any other building was built with hardened sugar.

Personality and Social Status

Claus Spreckels was a controversial figure. A stubby man of medium height with blue eyes and white hair, he was active, energetic, sociable, and nearly always accompanied by others. In the 1880s, he started enjoying his wealth, favoring haute cuisine and one dollar cigars.[49] Breeding thoroughbred horses was another passion, which he cultivated at his Aptos Ranch in Santa Cruz County. It was a pleasure for Spreckels to purchase his horse, “Speculation,” for no less than $8,500.[50] For friends, he was a man “with a fine presence, an open, pleasant countenance and a cheerful word for everybody.”[51] Others, however, characterized him as impatient, implacable, and ruthless, driven by “Dutch obstinacy.”[52] He was notorious for his “thirst for lucre.”[53] “He had carved out a throne of golden dollars, and he recognized no other signet of authority.”[54] It was said that Spreckels never turned his back on a friend or to an enemy[55] because he was fundamentally mistrustful. Although described as healthy and physically strong, he suffered severe health problems beginning in his 40s and sought treatment for his condition nearly every year thereafter. As to his character, he acted as a lone operator, although he established several long-lasting business relations. He was a public figure, a respected person, autocratic, but perhaps without any real friends. He was hard on himself and others and lived by a Lutheran motto: “What is worth doing is worth doing well.”[56] Spreckels was harsh in his reactions and judgments, both choleric and sentimental. During a farewell gathering organized by his San Francisco workers in 1888, he was truly touched and “completely broke down and wept like a child.”[57] He fought the sugar war not only for his independence but because he refused to throw out men who had served him for more than 20 years. It is highly implausible that San Francisco was hit by “a gloom of sorrow”[58] when Spreckels died on December 26, 1908, of pneumonia, but he appears to have been widely admired within the community. Even competitors like Robert Oxnard were among his pallbearers, which likely signified something more than mere respect for Spreckels.[59]

Although a public figure, Spreckels was, first of all, a family man. Together with his spouse Anna, he had thirteen children, eight of whom died in childhood. The surviving five (John Dietrich (1853-1926), Adolph Bernhard (1857-1924), Claus August (1858-1946), Emma (1869-1924) and Rudolph (1872-1958)) formed an important family network that expanded the family’s influence and wealth, first for their father and then for themselves.

But the family idyll was shattered again and again. In 1884, his son Adolph attempted to kill the proprietor of the San Francisco Chronicle, Michel de Young, because of a press campaign he began in 1881 that criticized and denounced Claus Spreckels’ Hawaiian affairs.[60] Injured during the shooting, Adolph was arrested and later acquitted on account of “neuralgic headache.”[61]

More severe was the rebellion of three of Spreckels’ sons against his economic dominance. In 1893, Claus A. Spreckels filed a lawsuit against his brother John D. Spreckels and their father related to their purchase of Claus A.’s interest in J.D. Spreckels & Bros. He received a $2.25 million judgment, but that was not enough for Claus A. The father and “good son” John D. paid additional money, but their relationship with Claus A. “Gus” Spreckels ended.[62] Together with his brother Rudolph, Claus A. initiated another suit against his father, this time related to Spreckels’ Hawaiian sugar plantation. The senior Spreckels lost his financial stake in the business, but, in 1898, the Spreckels brothers lost their business.[63] Not long before, in 1895, first Claus A. Spreckels, and then his brother Rudolph, sued their father for “defamation and libel for statements made while he was a manager of the Spreckels’ Philadelphia refinery,”[64] and for additional money related to their involvement with the Philadelphia venture.[65] This time, Claus Spreckels prevailed, but his family business was hit again. These lawsuits were bitter for Spreckels, although in some way, he was proud of the toughness of his boys: “I was never beaten but once in my life, … and it was by my own boy.”[66]

Finally, the relation to his daughter Emma, who had “always been the favorite child,”[67] broke apart. Instead of living with her parents in the San Francisco mansion, she secretly married Thomas Watson, a fifty-five-year-old English grain merchant, in 1897. Moreover, she returned $1.5 million dollars to her father – money he had previously given her. “Her action was caused by the taunts of her father and his accusations of ingratitude.”[68] However, beginning in 1898, she tried to retrieve this money with the help of the Hawaiian courts arguing that her deed “was not signed by her husband.”[69] Claus Spreckels and his friends cut the couple off, and they were practically forced to leave San Francisco and to settle in England. After Watson’s death in January 1904, she returned to San Francisco and reconciled with her father. In 1906, she married again, this time with her father’s blessings.[70]

The public was intrigued by the litigious, quarrelsome Spreckels family, the richest in California at the time, but public reaction to the family’s behavior was far from laudatory. “The Spreckels family is an institution in California and, generally regarded as a unit, is not popular. The Spreckelses fight. They fight hard. But they don’t fight together. They are not a unit. The family fights inside as well as out, and not all the members speak to one another. They differ among themselves in character, tastes, methods, purposes and, apparently, in morals. All they seem to have in common is a certain aggressive independence.”[71]

From 1896, Claus Spreckels attempted to heal the deep wounds of these family settlements and to reconcile the family. With the exception of Claus A. Spreckels, he was successful. Spreckels invested the bulk of his fortune to please his sons and to buy support, respect, and love. Between 1896 and 1905, he presented gifts worth at least $25 million to his sons John D. and Adolph Bernhard.[72] However, after Claus’ and then Anna’s deaths, their children – all of them multimillionaires – sued each other to receive larger shares of their parents’ fortune.[73]

As early as the 1880s, Claus Spreckels had become part of American, and then international, high society. However, with the exception of his interest in horses, in contrast to his children, he was never attracted by fancy or splendid passions. Instead, he was member in, and a supporter of, the Lutheran Church. In 1862, he offered a loan to St. Markus's Evangelical Lutheran Church for purchasing land for its new church building. He donated regularly and whenever it was needed. For instance, the Schoenstein & Co. organ and chandelier from Germany, seen when the new St. Markus Church opened its doors in 1895, were financed by Spreckels.

He was also a member of the most prestigious associations in San Francisco, notably the Pacific Union Club, the Union League Club, the Merchant’s Club, and the San Francisco Art Association.[74] Additionally, he joined and supported the San Francisco Verein, organized by prominent German citizens in 1853, and the Verein Arion, “the foremost German-American Club at the Pacific Coast.”[75]

Spreckels donated great sums to many public and charitable organizations of California – particularly in San Francisco. One donation of $100,000 funded the erection of the great stone band shell, the Spreckels Temple of Music, at the head of Golden Gate Park’s music stadium. During the 1898 drought, he also gave generously to the farmers of Monterey County, and he contributed greatly to the San Francisco Relief Fund after the earthquake in 1906. At the University of California, Berkeley, the bulk of post-1900 books in history, political science, economics, and finance were financed by the Claus Spreckels Fund.[76] Again, friends stressed that Spreckels “spent his wealth in the betterment of his adopted city, San Francisco, with the same largeness of mind that characterized his money-making enterprises,”[77] while critics claimed that San Francisco was not “indebted to him for much more than mere money may give.”[78]

Immigrant Entrepreneurship

Claus Spreckels was often perceived as a German immigrant. German journals portrayed him as the “German” sugar king, and even at his funeral, he was characterized as a German oak.[79] In the melting pot of the United States, national origins were highly important, and his image seemed to represent his fatherland: “He has the light hair and complexion, and the eyes and features of the ordinary German.”[80] Spreckels was celebrated as an “amiable German” and attacked as a “greedy Prussian,”[81] driven by “German thrift and caution.”[82]

He, however, defined himself as an American. He learned English quickly and spoke it “with scarcely a trace of accent.”[83] For him, fighting at business was fighting for American values: “I came to this country from Germany for liberty, and liberty I shall maintain.”[84] He was grateful to the American democracy, which gave him the opportunity to become a king. From the 1890s onward, he often criticized American politics as contrary to “American” values. He fought against the U.S. annexation of Hawaii, arguing, “the people of Hawaii want to be free to manage their own affairs in their own way.”[85] American imperialism was contrary to his understanding of “the spirit of fair play,”[86] and during the 1890s, he became a progressive Republican, fighting unethical trusts, corruption and graft, and supporting his son Rudolph’s crusade against the San Francisco political establishment.

Being an American did not, however, mean forgetting the virtues of his country of origin. Without access to a German ethnic network, Spreckels would not have had the chance to become a wealthy businessman. Without German-American engineers and architects, neither the establishment of his Hawaiian plantation nor his Philadelphia plant would have been possible. Additionally, a high percentage of his skilled workers originated in Germany and Denmark, and as he admired German science, he sent his two eldest sons, John D. (1867-1869) and Adolph B. (1869-1871) to the Polytechnic School of Hannover.[87] He also would not have been able to build his sugar empire so quickly without knowledge and technology transfers from Germany to the United States.

From the mid-1860s on, Spreckels travelled to Germany in order to learn more about sugar production, to buy new technology, and starting in 1867, to buy beet seeds.[88] His beet sugar plants in Watsonville and Spreckels, California, were run predominantly by German machines, most of which were produced by the Maschinenfabrik Grevenboich. He bought, however, not only materials, but also technological knowhow: “Germany is away ahead of us, and I have been all over the country to find out whatever there is to learn. I have secured a number of patents which are indispensable for making the production of beet-sugar a success.”[89] Spreckels, though, was interested in the best technology, not necessarily in German nationality. When Danish or French breeders offered better quality, he bought their products. The sugar king was well informed about German beet sugar production, but he was able to adapt his information to American conditions: “Experience has shown that the rules of cultivation adopted in Germany are unsuitable for California.”[90]

Throughout his entire life, Spreckels had close familiar ties to his home region. Bremen being his most frequented destination, he travelled to Germany more than two dozen times for periods of two or three months, visiting for the last time in May of 1908. From 1869 until 1871, he stayed even eighteen months in Germany in order to restore his health. After becoming a member of the international high society, though, his destinations changed. Starting in the 1890s, he regularly visited famous spas like Baden-Baden, Karlsbad, and Marienbad and Western European capitals, most frequently Paris.

Conclusion

Claus Spreckels was a financial and an industrial capitalist. Obtaining, investing, and multiplying money was his main business, and his role as a pioneer of Hawaiian sugar planting and Californian beet sugar production was merely an outgrowth of his desire to increase his fortune. His entrepreneurial success was closely connected with family and ethnic networks. These were important to his procurement of wealth, but a great deal more was necessary to become a king.

First, Claus Spreckels was a master of vertical integration – combining cane and beet sugar production, transportation, refining, and financing. Praised as a “genius for executive management and commercial control,”[91] his enterprises had multi-divisional forms controlled either by himself or his sons. Spreckels tried to act as the ultimate decision-maker and procured information and resources for himself. It “is my intention to engage in business entirely upon my own account and without the interference or co-operation of any other individuals. I do not need, and never have needed, assistance from others.”[92] This position allowed him to use economies of scale, scope, and speed.

Second, Spreckels’ success was based on technological innovation. As a brewer and a sugar refiner, he developed new processes, machines, and products in order to produce more quickly and cheaply than his competitors. At the beginning of his career, he undertook costly experiments and invented new technology. From the late 1880s, he bought patents and ideas to increase productivity and reduce costs, this being crucial in a market dominated by tariffs and subsidies because he could withstand political changes longer than others. Spreckels established his own agricultural experiment station and was one of the first to hire chemists to standardize and control production. Many commentators conceded that Spreckels’ “methods are more scientific”[93] than those of his competitors.

Third, Spreckels managed to win political support and influence to enforce his economic interests. His Hawaiian sugar empire was based on his close relation to the crown and corruption of the political elite. In the United States, he was a regular supporter of the protective Republican Party. Spreckels was first proposed as a presidential elector in 1880 and became one in 1896.[94] Beginning in 1887, he maintained private contacts with U.S. presidents, first because of his position in Hawaii and then as a lobbyist in tariff debates. Spreckels was also a regular guest in the halls of Congress, where he attempted to influence politics both directly and indirectly. Additionally, he supported the political ambitions of his son, John D., who attempted to become a senator in 1893, while his son, Rudolph, was “frequently coupled with the ambassadorship to Berlin.”[95] Claus Spreckels was discussed as a candidate for the Californian state senate in 1896, but he opposed such ambitions.[96] His excellent connections to politics and politicians aided the establishment the highly subsided beet sugar industry in California: “If I go into a beet factory, where we have to pay more for labor and fuel, there must be some protection.”[97] He not only benefited from federal bounties and subsidies, but he also received support from the local governments to establish and run his factories. These close relations to the political class were supported by strategic marriages of his grandchildren, one example being the wedding of one granddaughter to Spencer Eddy, the first secretary of the German embassy.[98]

Fourth, Spreckels benefited from the relative isolation of both Hawaii and California. His dominance in the West was based on high transport and freight costs. Until the completion of the transcontinental railroad in 1869, California was relatively cut off from the economic centers of the U.S. Spreckels not only ruled the waves, but he also negotiated with railway companies to maintain prohibitive freight rates for sugar. On the other hand, Spreckels profited from the switch of California’s economy from mining to the production of exquisite wines, fruits, and vegetables, which needed sugar to be manufactured or canned. Furthermore, Spreckels could use cheap immigrant workers for his labor-intensive sugar plantations. His plantations and factories were characterized by racial segmentation. While factory work was reserved for white workers, seasonal and farm work was done by casual workers, originating mostly from China, Japan, or Mexico. In contrast, the company town of Spreckels or the Spreckels’ financed Salvation Army colony, Fort Romie, were examples of paternalism in favor of his white employees and farmers.[99]

Claus Spreckels was perhaps the most successful German-born entrepreneur of the late-nineteenth century, richer than all native-born capitalists. Although none of his firms survived, his name today is still mentioned in San Francisco and Hawaiian travel guides as an example of an exceptional self-made man: “The life of Claus Spreckels is one of the interesting and absorbing personal histories of which America is so proud.”[100] In contrast, Spreckels’ name is unknown in contemporary Germany.

Notes