Tuesday, February 1, 2011

The Downfall of Alfred Dolge


For over a century leading American capitalists have recognized a responsibility to give back to the public a portion of the vast wealth they have accrued. Andrew Carnegie made his fortune in steel and set the tone for subsequent philanthropists by endowing libraries and universities. His foundations, like those of the Fords and Rockefellers, have continued to be a source of good works down to the present day. In this same spirit Bill Gates and Warren Buffett launched a campaign last summer to persuade their fellow billionaires to donate half their wealth to charitable causes.

Alfred Dolge was in some ways a very early example of this philanthropic spirit, but there was a singular difference, and I suspect that this difference is what eventually set in motion the plot that destroyed his dreams for Dolgeville. His goal was never just to make money, and he did not see the distribution of his personal wealth as an act of charity, something to be reserved as a worthy retirement project. Throughout his life he was an intellectual, fascinated by political and economic ideas. He read very widely and wrote continuously and was always eager to put in place economic systems that he believed could be a model for the entire country.

 Wilhelm Liebknecht, Dolge's "preceptor" 
and founder of the German Socialist Party

He was very much his father’s son. Christian Dolge was a close friend of Wilhelm Liebknecht, the founder of the German Socialist Party, and was imprisoned for five years for his role in the uprisings of 1848. Alfred Dolge wrote of Liebknecht as his “preceptor” from whom he learned the teachings of Karl Marx.  He also refers to his youthful reading of David Ricardo, John Stuart Mill and Adam Smith, the great apostle of the free market.  From such apparently contradictory ideas, he wove the theories of a just and equitable economic system which he put in place in Dolgeville.

Eleanor Franz, in the only biography of this remarkable man,  describes Dolge’s vision very succinctly:

What Dolge built grew out of his determination that children should no longer scavenge coal, or old men end up in paupers’ graves. It was his belief that a workman should be able to retire at sixty with a pension paid for by his employer as part of the cost of production. The security of such a plan, he wrote, “would allow the laborer to live better and be more healthy, keep his wife at home and his children in school. He could live up to his income and thus develop a higher manhood and superior citizenship.” Dolge saw employees eventually becoming partners in a business, so that a capitalist would no longer be enriched at the expense of his laborers. Even though he believed in hard work as a way out of poverty, it was never his belief that the poor remained poor because of laziness. What he aimed for was, in effect, a leveling of the economy to benefit everyone rather than solely the man at the top. (Franz, p. 23)
 
This was this vision that Dolge brought with him when he first saw the hamlet of Brocketts Bridge in April, 1874.  It is true that the East Canada Creek provided both the water quality and the power that he sought for his felt-making industry, but I am sure that he also was struck by its relative emptiness. This was a place where he could bring the skilled, mostly German, workers he needed to form a new village of his own design. He may also have been influenced by the nearby area’s large German-American population, descendants of 18th century refugees from the Palatinate, a fact to which he referred in later speeches.

 Alfred and Anna Dolge, c. 1868, from Dolge by Eleanor Franz

For 24 years Alfred Dolge pursued numerous business ventures with great success, never losing sight of his guiding vision. He bought the abandoned tannery where his great limestone factory soon rose, and began to produce high quality felt, piano hammers and sounding boards.  By 1879, he had installed Edison’s second electric turbine, the first to run on water power, and equipped the factory with automatic sprinklers and electric lighting. By 1881 he was manufacturing the first felt shoes and slippers.

 Thomas Edison, inventor of the world's first hydroelectric
turbine, installed at Dolgeville in 1879


As the need for lumber expanded, he built two sawmills and acquired 18,000 acres of the Adirondack forest. Complete pianos were being built by 1890 and a woolen factory was opened. A unique musical instrument, the autoharp, was another industry in the growing village now known as Dolgeville.

The 500 ft. Ransom Creek trestle on the Dolgeville & LF railroad 


And in 1892 a railroad, largely financed by Dolge, linked the village with the main line at Little Falls, replacing the 50 teams of horses that had previously been the only means to move raw materials and finished products. 

Each business success led him to introduce another step in his social and economic plan. Within two years of arrival in Brocketts Bridge, Dolge had set up a pension plan, the first of its kind, for his employees. Benefits ranged from 50% of wages for disability after ten years to 100% after ten years. If disability was work-related, fifty percent would be paid even without ten years of service. He provided life insurance, also unknown for working people at that time, on a prorated scale based on years of service. Sick pay and death benefits were part of the plan. In 1890 he introduced his “Earning-Sharing” Plan under which employees received a percentage of the company’s profits, to be reinvested back into the company until retirement. Losses were also charged against employee accounts. (Franz, chapter 3)

Dolge spoke frequently on the major social and economic issues of his day. When the Knights of Labor agitated for an eight hour day in 1886, he reduced work hours from ten to nine, explaining that further reductions would be possible with increased productivity. He worked hard for the Republican party and was among the strongest voices for a protective tariff, arguing that his well-paid workers should not be expected to compete against Germans or Frenchmen earning far less. 

He was an advocate for public education, endowing a new school and later becoming deeply embroiled in controversies over such issues as the mandated teaching of German as a foreign language. At the school’s dedication in 1887, he spoke of public education as essential to democracy and the only sure bulwark against radical agitation:

The future of this great country, the inviolability of our free and liberal institutions, can be guarded only by a rising generation, which by means of an excellent education, will not only keep the unruly element in check, but raise it up, elevate it, so that it will generate good and worthy citizens able to analyze and understandingly resist the false teachings of adventurous agitators and revolutionists.

He was far ahead of his time in calling for better education of teachers, at a time when many were teenage girls only a bit ahead of their pupils:

To build school houses, equip them properly, to hire the very best teachers at such a liberal salary that it is worth their while to spend their lives in this arduous and most responsible of all professions, is the duty of every community, may it be ever so small or poor

Dolge was also ahead of his time in advocating physical education in the school curriculum and did much to promote a form of gymnastics popular in Germany, known as turnverein. He built a gymnasium and clubhouse for the workers and their families. Many athletic competitions and celebrations, known as turnfests, were held in High Falls Park, which Dolge developed and donated to the village. At such festivities, Dolge made sure that plenty of beer was on hand, but was against saloons and stronger drink.

Commemorative stein from a Dolgeville Turnverein

(His many writings on economic and social issues were published by him in two, somewhat overlapping collections, now available via google books: The Just Distribution of Earnings and The Practical Application of Economic Theory. The books reveal his desire to spread his ideas, evidenced by the many speeches he made in the US and in Europe, as well as by the letters he wrote to numerous newspapers.)

And yet within the space of a week, in April 1898, all of Dolge’s enterprises collapsed. He was branded as a bankrupt and a fraud, compelled to hand over his thriving industries to strangers, and to leave Dolgeville forever. 

Richard Buckley, in his history of Little Falls, describes an incident from exactly one year before his forced bankruptcy that may have made Dolge a marked man. Speaking at a meeting of the University Club, chaired by D.H. Burrell, Dolge stated that “almost every conflict between capital and labor originates in the demand of laborers for a betterment of their condition.” He said that too many manufacturers subscribed to the notion that “profits rise as wages fall,” and argued that the recession of 1892 was due to a collapse in demand caused by the failure of Congress to pass a protective tariff that would safeguard high wages for workers.  In a remarkably prescient observation, Dolge said that “Capitalists must learn that wage earners of today are of greater importance to the community as consumers than as producers.”  (Buckley, p. 114)

One can imagine the shocked countenances of the wealthy gentlemen of Little Falls as Dolge made these pronouncements. And their mouths must have dropped even further when he went on to suggest a national industrial/labor senate, which would serve to arbitrate all disputes between workers and owners.

One year later the Herkimer County Bank, on whose board D.H. Burrell sat, forced Dolge to declare insolvency and to place his assets into receivership. The factories were closed for several months, a fraud suit was initiated against Dolge, and all the contracts with his workers were declared void. The promised pensions vanished and those already being paid stopped suddenly. 

Although The Little Falls Evening Times initially described the failure as a temporary adjustment, reflecting uncertainty in the money markets due to the Spanish-American War, the key role of Judge George A. Hardin as the named plaintiff for the Herkimer County Bank against Dolge & Son points to a conspiracy to bring down the one local capitalist who seemed to be an enemy of his class.  

Judge George A. Hardin, Courtesy New York Courts, 
Appellate Division Law Library, Rochester

In a farewell address to his workers Dolge explicitly accused Hardin and Schuyler Ingham, another member of the bank’s board, of causing the bankruptcy for their own profit. The rapid selling off of the properties, including the 18,000 Adirondack acres, for pennies on the dollar and the appointment of Ingham as director of a newly constructed felt trust suggests that it was more than Dolge’s anger speaking. And the venom of Hardin’s unguarded comment to the Little Falls Journal & Courier reveals a deep personal and political motivation: “Dolge is an anarchist, an atheist and a communist.”  He also attacked Dolge personally for backing the village newspaper, the Dolgeville Herald, and for building an expensive mansion. And when Hardin died three years later, Dolge wrote from California that the man was clearly a thief since he left a fortune of $800,000 although during the last 28 years of his life he never earned more than $10,000 a year as a judge. (Buckley, chapter 7)

Dolge gave his version of the events in a self-published book, The Story of a Crime, which Eleanor Franz quotes in her biography. The book is very rare and, according to Franz, most copies were destroyed. In the book Dolge blamed himself for trusting Ingham and Hardin, with whom he had been in business since the very costly Dolgeville railroad was first proposed in 1882. He maintained that the two told him they would handle the cash flow problem, and then foreclosed on him, even though his assets were twice what he owed. He said that he soon obtained loans from New York backers that would satisfy the Herkimer County Bank and the American Exchange Bank in New York, but when he told Ingham he had the funding, Ingham told him he was too late.

Dozens of attorneys were soon handling the mass of suits and countersuits that followed the collapse. A case of fraud against Dolge was dismissed, but not before a very revealing hearing was held in March, 1899. At that hearing Schuyler Ingham was questioned about a power of attorney that Dolge’s son Rudolf had given, at the urging of Hardin and Ingham, to a mysterious figure by the name of Robinson, associated with the American Exchange Bank. It appears that the default was triggered by a joint action of the Herkimer County Bank, on whose board Ingham and Hardin sat, and the New York bank where Hardin and Ingham’s man Robinson had a major interest.

A report in the April 12, 1898 New York Times stated that that while Rudolf was in South America, “his representative made application at Utica for dissolution of the firm and the appointment of a receiver.” This was evidently the mysterious Robinson. The Times writer voiced the general surprise at the proceeding, citing Dolge’s assets which far exceeded his liabilities. 

It is not clear how the Dolge enterprises were structured but it may have been a simple partnership between Alfred and Rudolph, the oldest of his five sons, who was then 29. Why Rudolf would give Robinson the power to initiate a suit against his father’s firm is not known. Perhaps there was a falling out between Rudolf and Alfred that led the son to go to Venezuela. Or perhaps he was simply naive. Or perhaps Rudolf had some secret which allowed the two men to blackmail him. 

At the heart of the collapse is a family drama which may never really be known. Rudolf was clearly a beloved son, given major business responsibilities in his early 20s, and his wedding in 1893 was celebrated in grand style. At the wedding, grandfather Christian Dolge called Rudolf “the crown prince of Dolgeville.” Strangely, however, he left the US for Venezuela four years later, claiming poor health, yet lived in apparent good health for many years, becoming active in Venezuelan industry, science and literature. Rudolf signed the fateful power of attorney on a quick visit back to the US in 1897, at which time he met with Ingham and Hardin, probably in New York, but whether he saw his parents is unknown. 

The question of what happened was a source of intense controversy in Dolgeville for decades, and although some citizens turned against Dolge, his loyalists, such as the volunteer firemen of the Alfred Dolge Hose Co., would not hear a word against him.  Whether the plot to destroy him was motivated by greed or personal hatred, or a mix, will probably never be clear. He may well have been over-extended in terms of loans, but it was the actions of the Herkimer County and the American Express banks, both under the influence of Ingham and Hardin, that brought him down – and profited both men. 

D.H. Burrell, from Nelson Green's
History of the Mohawk Valley

There is no evidence that D.H. Burrell, the founder of Cherry-Burrell, was involved in the plot although, in fairness, he was on the bank’s board and obviously had huge influence over the bank’s decisions. He was himself a more classic philanthropist, known as a fair employer, and his choice of charities were conservative. He endowed the local YMCA, the Presbyterian Church and funded the building of the Little Falls City Hall in 1916. But he is reported to have sharply questioned Dolge during his rather radical presentation at the University Club in 1897.

As to Dolge’s immediate reaction to the plot, he had no choice but surrender his holdings Although he called Wilhlem Liebknecht his mentor, he never really shared in Marx’s revolutionary dream of placing the means of production (and defense) in the hands of the workers. On the contrary, he took pride in keeping labor agitators out of Dolgeville. Unlike Wilhelm’s son Karl, who proclaimed the 1919 communist revolution in Berlin with Rosa Luxembourg and ended up assassinated by rightist gunmen, violence was not part of Alfred Dolge’s make-up. 

For all his love for German culture and his annual trips back to Europe, he was truly an American and believed that hard work would lead to prosperity for all.  But he never had a mindless faith in the free market and knew that the raw pursuit of profit had to be restrained or it would drive the working class into poverty. Thus, he would not have fit comfortably into either of today’s political parties.

The destruction of his dream had much to do with his own faith in human nature, in that he trusted dishonest men who took advantage of him and his son.  And although he left Dolgeville in sorrow and never returned, his sunny spirit has, I am convinced, remained in the village he created. Hard-working people continued to lead productive lives and the kinds of bitter strife that afflicted Little Falls and other industrial towns never came to Dolgeville.  He did not, despite Hardin’s bitter prediction, commit suicide. He went on to California where he founded a second Dolgeville in what is now greater Los Angeles, continued to write, and made a sufficient financial recovery to live comfortably, dying in 1922 on a round-the-world trip with his beloved Anna.


 Anna and Alfred Dolge with friends, hiking in the Harz Mountains
of Germany in 1921, from Dolge by Eleanor Franz

And as for Judge Hardin?  

I grew up in Little Falls a few blocks from where Hardin had built a lavish mansion on Gansevoort Street facing the Western (now Burke) Park.  By the time I was a boy, all that remained of the mansion was a wall and a lone gazebo in a vast empty lot. And when I asked my father what was once here, he told me that a bad man used to live there but he had died in great terror over his many sins. 

SOURCES:

Eleanor Franz, Dolge, available from the Herkimer County Historical Society

Richard Buckley, Unique Place, Diverse People, a history of Little Falls available from the Little Falls Historical Society

Works by Alfred Dolge, available on google books

The Just Distribution of Earnings, So-called Profit Sharing (1889)
The Practical Application of Economic Theories in the Factories of Alfred Dolge & Son (1895)
Pianos and Their Makers (1911)

FOR ANOTHER PERSPECTIVE ON JUDGE HARDIN:
See my novel, Roxy Druse and The Murders of Herkimer County, in which the judge makes several appearances. Available at Wilderness Hill Books.

UPDATE  June 11, 2013
My new short biography of Alfred Dolge is now available on Kindle for 99 cents and as an illustrated paperback for $7.95. The Kindle version can  also be read on tablets,smartphones and PCs by downloading the free Kindle app. Amazon Prime members may also borrow the story through the Kindle Owners Lending Library.