by Michael Cooney
Although Donald Trump has pledged not to cut Social Security or Medicare, there can be little doubt that Republicans in Congress will move quickly in 2017 to damage, if not destroy, the safety net upon which the great majority of Americans, including his voters, depend. The groundwork for this assault has already been laid by Simpson-Bowles commission created by Obama in 2010. and rival deficit-cutting plans were advanced at the time by Republicans and “centrist” Democrats. Except for Bernie Sanders and Elizabeth Warren, there was seldom a reference to the simple solution of raising or eliminating the income cap on the FICA tax.
Such hostility to Social Security may seem to be something new, a response to enormous federal deficits but in fact this vital safety net has been opposed by the wealthy class for generations, back to when the concept of social security was first developed by a capitalist here in upstate New York who believed that his mission was to create an economic system which enriched the lives of workers, as well as himself. But after he had built an entire village based on his own version of enlightened capitalism, the other millionaires of the Mohawk Valley whom he had regarded as his colleagues forced him into bankruptcy.
This man, a German immigrant named Alfred Dolge, is almost completely forgotten beyond the village of Dolgeville, NY which he founded, and but his role as a forerunner of the system is credited on the Social Security website. Although government pensions had been granted to elderly Revolutionary and Civil War veterans, it was Dolge who first made employee and employer contributions the source of funding, and made all workers eligible.
After finding success in the piano industry in New York City, Dolge decided in 1874 to transform what was then the tiny hamlet of Brocketts Bridge into an industrial village of his own design. As the work force grew, Dolge put into practice ideas that he had first developed as a boy in Germany. His father Christian had been imprisoned for his role in the 1848 uprisings and had inspired in Alfred an appreciation for such disparate economic thinkers as Karl Marx, Adam Smith, and David Ricardo. (A number of the articles and booklets in which Dolge described his theories and practices can be can found on the internet.)
In addition to old age insurance, Dolge’s system provided support when workers were disabled, an important feature of the present Social System usually ignored by so-called reformers. 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.
And yet within the space of a week, in April 1898, all of his enterprises collapsed. He was branded as a bankrupt and a fraud and compelled to hand over his thriving industries to strangers. The pension and social welfare plans were junked and workers’ investments vanished. The industrialist left Dolgeville forever.
From Dolge’s point of view, his fate had been sealed a year earlier when he spoke at a meeting of the University Club in Little Falls, a forum for the industrialists of the Mohawk Valley. He had argued that too many manufacturers subscribed to the notion that “profits rise as wages fall,” and postulated that the recession of 1892 was due to a collapse in demand: “Capitalists must learn that wage earners of today are of greater importance to the community as consumers than as producers.”
One can imagine the shocked countenances of those wealthy gentlemen 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, over whose board presided the leading Little Falls manufacturer, D.H. Burrell, 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 local newspapers depicted 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.
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 18,000 Adirondack acres, for pennies on the dollar and the appointment of Ingham as director of a newly constructed trust suggests that it was more than Dolge’s anger speaking. 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.
In a self-published book, The Story of a Crime, 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 wrote that he soon obtained loans from New York backers that would satisfy the Herkimer County Bank and the American Exchange Bank, but when he informed Ingham that he had the funding, Ingham told him to get lost.
A case of fraud against Dolge was dismissed, but not before a very revealing hearing was held at Herkimer 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. 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 ally Robinson had a major interest.
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 maybe he was simply naive. Or perhaps Rudolf had some secret which allowed the two men to blackmail him.
The question of what happened was a source of intense controversy in Dolgeville for decades, and although some citizens turned against Dolge, his loyalists, among them the volunteer firemen of the Alfred Dolge Hose Co., would not hear a word against him. Whether the plot to destroy Dolge 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 greatly profited both men.
As to Dolge’s immediate reaction to the plot, he had no choice but to surrender. Although he called the German Socialist Party’s founder, Wilhelm Liebknecht, his mentor, he never shared the revolutionary dream of placing the means of production, as well as defense, in the hands of the workers. On the contrary, he took pride in keeping labor agitators out of Dolgeville, and did not share his power with workers in any real way. Unlike Wilhelm’s son Karl, who proclaimed the 1919 communist revolution in Berlin with Rosa Luxembourg and ended up assassinated by rightist gunmen, Dolge was not one to revolt against the existing order.
Dolge himself, despite Hardin’s bitter prediction, did not commit suicide. He went on to California where he founded a second Dolgeville in what is now Alhambra, continued to write, and made a sufficient financial recovery to live comfortably. Never one to deny himself and his family a reasonable share of the profits, he died while on a European tour in 1921. The elegant mansion in Dolgeville which he was forced to abandon in 1898 survived until 2014 when it was destroyed by fire.
The lesson of this forgotten tale is, as I see it, is that capitalism can truly be what our politicians like to say it is – a source of prosperity for both employers and workers – but only if we follow the example of Alfred Dolge and learn from his experience to watch our backs when dealing with millionaires and billionaires.
This article is based on materials in the Herkimer County, Dolgeville-Manheim and Little Falls Historical Societies.
Michael Cooney has written widely on upstate history. His blog is at http://upstateearth.blogspot.com