The Alaska Grab
The Making of a Monopoly
William Ralston thought in titanic terms, and he attempted to control as much western commerce as possible; to that end he financed railroads, shipping and, most famously, Nevada silver mines, his hand always in the background pulling strings. Aside from concocting his own grand plots, Ralston extended his reach enormously by allying himself with others possessed of commercial imagination, buying into promising schemes and then taking over as often as not. Such was the case with Louis Goldstone's designs on Russian Alaska. Soon enough, it became Ralston's design, too.
Goldstone already had a history of dabbling in the Alaska fur trade as a smuggler when he decided to just buy the territory outright in 1859. Through the intercession of California's Senator William Gwin, he offered $5 million to the Russians, who seem to have declined. He tried again in the mid-1860s, after hearing that England's Hudson's Bay Company would not be renewing its lease on the fur franchise. Goldstone planned to take it over, and after outfitting a couple of ships to perform a survey of the region's myriad potential riches, he searched for investors in San Francisco, landing the most flush.
The California Russian Fur Company came to life in June 1865, featuring, predictably, William Ralston and his influential friends: Darius Mills, his partner in the Bank of California; Sam Brannan, California's first millionaire; Louis Sloss, a principal in the West Coast fur business; and John Miller, Collector of the Port of San Francisco and a former Civil War general.
The survey ships returned just as the capitalists learned the Hudson's Bay Company had renewed the lease after all, contrary to rumors that had given birth to their organization. Undeterred, Ralston resolved to outbid the English firm, but he was foiled again; the United States bought Alaska for itself, invalidating the lease arrangments. The deal concluded in mid-1867 for a price of $7.2 million, and fast became known as "Seward's Folly," in dubious recognition of the Secretary of State who
The company dissolved, but Ralston tried again; he'd buy all the Alaska infrastructure of the fur industry--ships, docks, warehouses--and then make a play for the rights to go sealing. But erstwhile partner Louis Sloss joined his fellow German-Jewish fur merchants--they controlled much of the West Coast trade--in their own play for the industry, and Hutchinson, Kohl & Company bought the lot of it from the Russians for $350,000.
Such was the situation when Russian flag gave way to American over Alaska.
Enter Gustav Nybom, from Helsinki, Finland. The Russian American Company had managed the Alaskan seal fisheries under charter from the Russian Government, and the Finn apprenticed for the firm from the age of 16, becoming a full-fledged ship captain by 26, when the transfer to the United States became final in a ceremony at company headquarters in Sitka. It was mid-October 1867.
Nybom formed a business with four others--it was called Hansen, Nybom & Company--acquired a small brig for $4,000, and in late November sailed to the Pribilof Islands. Site of vast seal rookeries, the islands had been off-limits during the Russian era, and no restrictions had yet evolved under the Americans. He bought 11,000 pelts from the Aleut residents--they easily clubbed the fearless seals to death--and sailed to San Francisco with a cargo which earned perhaps $60,000 when sold to Hutchinson, Kohl & Company in early 1868. They offered a proposition; sell-out to them, and join forces under their flag. Though his partners simply cashed-in and declined involvement in the larger enterprise, the intrepid young captain jumped at the chance, and at some point changed the spelling of his name to "Niebaum," perhaps to closer identify himself with his new German-Jewish cohorts. He promptly departed for Alaska in command of a Hutchinson & Kohl steamship, arriving at the Pribilofs in March or April. Niebaum accumulated pelts throughout the summer, eventually totalling some 132,000 out of an estimated kill that year of 200,000.
Niebaum's expeditions hadn't been the only ones, however, just the first and most successful. Rivalry with other groups had started to get nasty, and it became obvious that the seals would be exterminated in a few years if the slaughters continued unabated.
Niebaum must have returned by that fall, because his partners in Hutchinson, Kohl & Company reconfigured themselves as the Alaska Commercial Company in October 1868, including him in the deal, as well as several others who'd attempted to enter the fur trade with Ralston, most notably John Miller. The stock of the latter, by then, had risen enormously; his old comrade in arms--General Ulysses Grant--appeared destined for the presidency within months.
No sooner had Grant taken office than Miller was elected president of the Alaska Commercial Company, succeeding Louis Sloss; he then moved to Washington to promote the idea of a government-regulated monopoly of the Alaska seal fisheries. Members of Congress had already expressed concern over the wanton carnage, and he found receptive audiences. He supplemented his lobbying effort by recruiting Ralston, the most influential businessman on the Coast; after they encouraged the government to adopt the idea, they could vie over who got the right to exercise the monopoly. The relevant laws passed in 1870, and the bidding commenced.
Thirteen firms entered the fray, including one formed by Ralston. The Alaska Commercial Company, of course, submitted a bid, but it wasn't the highest. However, the new laws stipulated that whomever acquired the monopoly would have to demonstrate an ability to efficiently manage the trade and meet the other obligations demanded. Only one of the bidders could meet those requirements: the ACC. Despite some controversy, the company was allowed to match the highest bid, and the rights to the trade became theirs for 20 years.
The Pribilof Islands were the most relevant aspect of the deal, since it was there that seals bred and birthed in massive numbers, the fur of the highest quality. The company had the right to harvest 1,000,000 seals over the life of the monopoly, and in return, it was compelled to pay the government $55,000 per annum and $2.63 a pelt; additionally, a 55 cent a gallon tax was levied on seal oil produced. The obligations didn't end there; the company also had to supply the native Aleuts with seal meat, dried codfish, schools for the children, health care, trading posts and postal service.
But the opportunities didn't end with the seals; with their foothold in the region, the company exploited the inland fur trade as well, becoming the major outlet for virtually everything produced, such as bear, fox, ermine, lynx, beaver and otter skins. After shipment to San Francisco and scrutiny by the Treasury Department, the consignments passed on to London, for auction by the Lampson Company. The ACC quickly became the largest fur producing organization in the world.
Establishing trading posts in all of Alaska's major-but-meager population enters, the company essentially built the territory's social and commercial infrastructure, Gustave Niebaum providing the supervising hand. The ACC eventually established 91 settlements, six salmon canneries with attendant fishing fleets, and provided the dominant means of transport to the region. In addition to coastal ships plying between San Francisco and Alaska, the ACC initiated river routes with inland steamers.
When the monopoly came up for renewal in 1889, though, the ACC lost its rights, perhaps because of the broad scope of its success and the resentment engendered in other commercial and political circles. The government had made almost $10 million in fees, and the ACC reaped $18 million in profit, enriching its owners who would survive despite the loss. By then, the ACC had diversified beyond the seal trade, controlling the business life of the region with its trade and travel infrastructure. When the gold rushes of the '90s commenced, the ACC supplied the ships and provisions that got the miners to the fields and fed them once arrived. But by the turn of the century, intense competition had finally come with the flood of new arrivals, making profit impossible. A series of mergers with various shipping companies resulted, and in 1902, the ACC sold off most of its remaining assets, becoming little more than a paper holding company providing a corporate umbrella for other endeavors. Niebaum finally acceded to the presidency of his once proud creation in 1908; he died the same year. The company followed a decade later, passing from existence in 1918.
The seal fisheries faced extinction much earlier. The ACC's successor--the North Amercian Commercial
Company--abandoned the tradition of stewardship and renewability, plundering the breeding grounds as thoroughly as possible, and even hunting pregnant migrating females, only one in 10 of which was recovered from the sea. By 1910, seals and otters were almost extinct, the trade in their furs dead.
In later years, Niebaum and the Alaska Commercial Company were condemned by various academics and authors for the catastrophe; the claim is spurious. They managed the trade well, they built a territory, and the modern state of Alaska is the ultimate result.
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