1

Beaver Pelts, Big Government, and John Jacob Astor

Beaver pelts were one of the first targets of government subsidies in the United States. Buying and selling furs was a major industry throughout early American society, and the key animal in the fur trade was the beaver. Beaver pelts were in demand for hats that were in style all over Europe in the 1700s. Trading furs was a worldwide enterprise, linking fashionable men and women in Paris to New York exporters who bought pelts from frontier traders who bargained with Indian trappers. The pelts of beavers, muskrats, otters, and minks went one way to become hats, coats, and rugs. Kettles, blankets, axes, and muskets went the other way to pay Indians for their trapping skills.1

At first, fur trading in the United States followed established patterns. The French and British had traded with the Indians for centuries, and the Americans simply picked up where they left off. Trapping methods, river routes, and trading posts were all in place.2

The man who confounded the normal development of private enterprise in furs was none other than President George Washington. Washington grew up in an era of mercantilism: Governments would freely grant monopolies to gain certain political and economic advantages. Adam Smith, of course, challenged this kind of thinking in 1776 in The Wealth of Nations, but ideas take time to percolate. Washington analyzed the British fur trade in the Michigan area (then called the Northwest Territory), and he considered British interference a menace to America’s future. British agents might stir up the Indians, win their loyalties, and thwart U.S. expansion.3

Private American traders, Washington argued, were too few in number to compete with the larger, more experienced British. The U.S. government itself was needed to build large trading posts, oust the British, “bring in a small profit, . . . and fix them [the Indians] strongly in our Interest.” The Indians especially needed to see evidence of American strength, so Washington recommended that the government build and operate a series of fur factories throughout the Northwest Territory (modern-day Ohio, Indiana, Illinois, Michigan, and Wisconsin) and the American South. With Washington’s support, Congress appropriated $50,000 for the new factories in 1795, and raised it steadily in later years to $300,000.4 Such a subsidy was a large expense for a new nation, and one that tested government’s ability to succeed in business.

Here is how the factory system worked. The government created a bureaucracy—the Office of Indian Affairs—to conduct the fur trade. It used the $300,000 from Congress to set up trading posts (usually near military forts), stock them with goods, and pay American agents to buy, store, and transfer furs from the trading post to Washington, D.C., where they would be sold at auction. Once the factories were funded, they were supposed to be self-supporting, and perhaps, as Washington said, “bring in a small profit.” Agents in the factories would use the first batch of goods to buy furs; then, when the furs were sold, the agents could buy more goods and repeat the cycle.5

Almost from the start, however, the factory system struggled. Well into the 1800s, British companies were trading actively throughout the Great Lakes area. So were private American traders. The factories were so poorly run that many Indians held them in contempt and refused to trade there. In 1816, President James Monroe appointed Thomas McKenney, a Washington merchant, to take charge of the Office of Indian Affairs and help the factories expand their business.6

Tall, with fiery red hair and a hook nose, McKenney worked hard and took his job seriously. He wrote long letters to Indians, invited them to Washington, and tried to expand his staff so he could deal with them more directly. Indians needed to be assimilated into American life, McKenney argued. Schools and farms, not trapping and hunting, were McKenney’s vision for future Indian life. And he believed that an active government was the best way to trade with the Indians and help them assimilate into American culture.7

As chief officer of the government fur trade, McKenney put his stamp on the business in many ways. First, he tried to slash costs by limiting credit and gifts—some called them bribes—to the Indians. Giving gifts had long been a custom in the fur trade, and many Indians also requested credit for supplies for trapping. Both trends, to McKenney, were expensive and risky, and he stopped them when he could.

Second, McKenney tried to “buy American” for the factories when possible. Indians, for example, needed muskets. McKenney rejected English imports and gave large contracts to Henry Deringer, which helped Deringer’s Pennsylvania gun factory become a major weapons producer.

Third, McKenney so much wanted Indians to become farmers that he stocked the factories with hoes, plows, and other farm equipment. It was part of his campaign to “amend the heads and hearts of the Indian.” He urged agents at the factories to have gardens outside their walls to show the Indians what they could grow if they would just exchange their pelts for plows.8

McKenney’s ideas were a disaster. Indians wanted gifts, needed credit, and shunned plows. But since McKenney was funded regularly each year by government, regardless of his volume of trade, he had no incentive to change his tactics.9 Private traders, however, had to please Indians or go broke. As private traders grew in numbers and dealt successfully with the Indians, an immigrant named John Jacob Astor joined their ranks, learned the business, and began to prosper.

Astor, the son of a German butcher, came to the United States in 1784 at age twenty to join his brother in selling violins and flutes. Soon, however, he changed his tune. He became fascinated with the fur trade and studied it day and night. He learned prices, markets, and trade routes for all kinds of pelts. The fur territory of New York and Montreal became Astor’s initial trading domain. He bought and sold cautiously at first, then with more confidence as the profits rolled in.10

He was an odd man to be such a risk taker. Quiet and almost secretive in his business dealings, Astor had a keen mind for enterprise. But he spent years at a time out of the United States, estranged from his wife, and fighting bouts of depression. At the same time, he had a vision of how America would grow, how the fur trade fit into that growth, and how to market furs around the world.11

Astor distinguished himself from others through his foresight and perseverance. If the matrons of France wanted beaver hats and otter coats, and if these animals roamed the forests of New York, then that was all most traders cared to know. Astor, however, thought more of world trade. Europeans liked to fight each other; wars disrupted markets; why not expand and sell furs to the Chinese—not for fashion, but for warmth in their unheated houses? Besides, he could bring the tea back from China and profit at both ends.12

The large market of the Far East prompted Astor to turn his sights west to Michigan. New York and the Atlantic coast were depleted of furs by the early 1800s. The Great Lakes area—especially the Michigan Territory—then became the heart of the fur trade and pumped out thousands of skins for coats and rugs all over the world. Astor founded the American Fur Company in 1808 and made his move to challenge the government factories.13

Under Astor, the American Fur Company resembled a modern corporation with specialists, division of labor, and vertical integration. He ran the company from his headquarters in New York. Mackinac Island, in the Michigan Territory, was the center of the actual trading where most furs were bought, packed on boats, and sent over to the east coast. Astor’s agents dotted the rivers throughout the Northwest Territory, and they had log cabins well stocked with goods. They supplied the company’s fur traders, who would live with the different Indian tribes and supply them with goods and credit as needed.14

In conducting business this way, Astor differed from McKenney and the government factories. McKenney and his predecessors just built trading posts, stocked them with goods, and expected the Indians to come there to trade. Many Indians, however, lived hundreds of miles from a factory and had no supplies for trapping. Even if McKenney had given credit easily and had known whom to trust, the Indians would have been hampered by distances. Under Astor’s system, the fur traders lived with the Indians, learned whom to trust, and bought and sold on the spot. If an Ottawa brave capsized his canoe and lost his musket and powder, he could get replacements from Astor’s local trader and avoid the ninety-mile walk through swirling snow to see if the government agent in Detroit would give him replacements on credit.15

Astor built on this advantage by trading the best supplies he could find at reasonable rates of exchange. Indians wanted guns and blankets, and Astor supplied them at low cost. The best blankets he could find were British-made blue-striped blankets, and Astor bought them at 15 percent less than McKenney paid for lower-quality blankets made in America. Astor bought British-made Tower muskets, the best on the market, for about $10 apiece, but McKenney paid $12.50 each for Henry Deringer’s muskets made in Philadelphia.16

One reason Astor excelled was that he accepted the Indians as they were, not as he wanted them to be. If they desired axes, kettles, and muskets, he tried to find the best available and sell to them at competitive prices. He respected Indians as shrewd traders and knew he had to have the best goods to get the most business. McKenney, as we have seen, squandered government resources on hoes and plows that went unsold. He also bought Jew’s harps by the gross, and they sat on the shelves gathering dust. One time McKenney splurged and bought a Chinese Mandarin dress, which he sent to the Osage factory along with a note admitting it would be hard to sell.17

McKenney was frustrated with Indian culture and wanted to change it. He refused to sell liquor in government factories and urged Indians to be sober, virtuous, and industrious. “The same devotion to the chase, and those irregular habits which have characterized the sons of our forests yet predominate,” he lamented.18

Liquor was also an item Astor preferred not to supply, even though he knew many Indians wanted it. Not that Astor was a moralist; he was a realist. Drunken trappers gathered no pelts, he discovered. If the factories had been his only competition he probably wouldn’t have traded liquor at all. But the traders with Britain’s Hudson’s Bay Company carried so much liquor they could almost have created another Great Lake. Astor believed that to be competitive he needed to have some liquor available for trade. Ramsay Crooks, Astor’s chief administrator, stated company policy this way: “If the Government permit[s] the sale of this pernicious liquid we can have no hesitation in availing ourselves of the privilege, though we are convinced its total prohibition would benefit both the country at large and the natives who are its victims.”19

Trade was not the only area where Astor outmaneuvered the government factories. Motivating his men was another. He used a merit system to reward his top producers. “As with skins,” he said, “for good men we cannot pay too dear & indifferent ones are at any price too dear.” Astor paid his chief managers good salaries plus a share of the profits. This guaranteed attention to detail, which Astor needed to stay on top. McKenney and his staff, by contrast, received a standard salary from Congress with no bonuses given in profitable years, and cuts given when trade fell. If McKenney had been on a merit system, he might have been less moved to stock his factories with plows, Jew’s harps, and Chinese dresses.20

One final area of Astor’s genius was his marketing savvy. He sold his furs at auctions all over the world. If he didn’t get the prices he wanted in New York, he sent furs to auctions in Montreal, London, Hamburg, St. Petersburg, and Canton. He studied the bidding, searched for trends, and moved quickly when prices changed. Deerskins, Astor once predicted, would go up in price in Hamburg; muskrat would sell higher in St. Petersburg, Philadelphia, and Canton. He acted accordingly and reaped strong profits in each of these cities. Another Astor strategy was this: If he sensed an upward trend in the price of raccoon skins he would alert his agents to collect all they could get. If demand slowed and prices dropped, Astor withdrew his raccoon skins and stored them in New York, Paris, or Canton until prices rose.21

McKenney, by contrast, lacked sophistication. He had the furs collected in his factories sent to Washington. Then he sold them at auction in nearby Georgetown for whatever price they would bring. He didn’t sell in different cities, nor did he withhold any from the market in bad years. But then again, he had no incentive to study prices, trends, and foreign markets because his salary was constant whether or not he made profits. In any case, even if he had developed insights into markets, Congress might not have approved the risks and costs of storing beaver pelts during depressions, or stockpiling deerskins to send to Hamburg.22

Sometime after 1808, John Jacob Astor surpassed the government factories and emerged as the leading exporter of furs in the United States. He widened his lead after the War of 1812. By the 1820s, his American Fur Company employed more than 750 men, not counting the Indians, and collected annual fur harvests of about $500,000, which made it one of the largest companies in America. Many independents also popped up to trade furs. For example, William Ashley in St. Louis, Pierre Menard and Jean-Baptiste Vallé in Illinois, and the Rocky Mountain Fur Company out west all traded furs aggressively. The government system of expecting Indians to come to the factories to trade was proving to be outmoded.23

McKenney nervously watched the government’s share of the fur trade decline year by year. “Why do the factories lose money?” Congress asked when McKenney came before them each year to renew his subsidy. He was embarrassed by Astor’s dominance and perplexed at what to do about it. At one point, he urged his agents, or “factors” as they were called, to stir up Indians against private traders. “[A]ll correct means that may be taken to expel those traders,” McKenney wrote, would be “of service to humanity and justice.” What these “correct means” were became clearer when he told a factor to impress the Osages “with the belief that such is the design of those traders that [the Indians] must get rid of them; & hope not to be accountable for their own efforts to drive them out.” To another factor, he wrote, “I should judge, with your long acquaintance with the Indian tempers, you might upon the most humane and honourable grounds, turn their prejudices against these their enemies [that is, private traders].”24

When sabotage failed, McKenney briefly copied Astor’s technique of directly trading with the Indians. He sent out “subtraders,” people who took government goods from the factories directly to the Indians. He took this step very reluctantly. “It will be necessary for you to use extreme caution in trusting out goods to traders,” McKenney wrote one of his factors. “Boats may get upset . . . and even if . . . they should escape being drowned, the tommahawk [sic] may put them to rest—and relieve you from the trouble of counting their returns.” Nonetheless, he used subtraders in Green Bay and Chicago and reported “an [i]ncrease of factory business.” But it didn’t last. Astor and the private traders were too shrewd and aggressive for McKenney, and they soon recaptured lost markets.25

By 1818, McKenney had reached a dramatic conclusion: The best way to beat Astor was to influence Congress to ban the private fur traders. If this could be done, McKenney could again monopolize the fur trade, sell to the Indians what he wanted them to have, and pursue his dream of amending their heads and hearts. McKenney’s chief ally in the House of Representatives was Henry Southard, chairman of the House Committee on Indian Affairs. In a letter to Southard, McKenney argued vigorously for a government monopoly. “I know of no check that could be devised having such a powerful influence as that which this sort of dependence would impose on the Indians,” McKenney wrote Southard. “Armies themselves would not be so effectual in regulating the native Inhabitants as would a state of dependence on the Government for their commercial intercourse.” Sure, McKenney admitted, a monopoly “embraces the idea of compulsion.” But “the power over the Indians is covetted [sic] only for their good—and also to prevent them from doing harm.”26

To John C. Calhoun, secretary of war and later vice president, McKenney wrote that the factory system “has its foundation in benevolence and reform.” The private traders, by contrast, wanted only profits. They didn’t care about reforming the Indian, McKenney argued, and they even sold him liquor. Calhoun liked McKenney and seems to have been persuaded if not for a monopoly then at least for greater government control. “The trade should,” Calhoun wrote, “as far as practicable, be put effectually under the control of the Government, in order that . . . [the Indians] may be protected against the fraud and the violence to which their ignorance and weakness would, without such protection, expose them.”27

Even with friends in high places, however, McKenney couldn’t muster the support in Congress to ban private fur trading. He therefore presented two backup plans. First, the government should increase his subsidy from $300,000 to $500,000. That way he could build eight new factories west of the Mississippi River, which would increase his trade with distant Indians, bring American culture to them, and thereby “serve the great object of humanity.”28

Second, McKenney wanted to increase the license fees for his competitors. If he couldn’t ban private fur traders by law, perhaps he could raise their costs of doing business, and thereby improve the competitive position of the factories. Under existing law, anyone who posted a $1,000 bond could buy a five-dollar license from an Indian agent and trade for two years. McKenney wanted to increase the license fee to $10,000. He argued that hordes of unlicensed traders roamed the West buying furs and selling whiskey. A higher license fee and stiffer penalties, McKenney argued, would slash the number of traders and make them easier to regulate and supervise.29

Astor was appalled at McKenney’s schemes. Astor was the top fur trader in the country, a man popular with Indians, because he gave them what they wanted, where they wanted it, and when they wanted it. McKenney, by contrast, was failing because he expected Indians to march hundreds of miles to factories to trade for plows they didn’t want or muskets they did want but not at McKenney’s high prices. Now McKenney was using government to do to his competitors what he could not do to them in the marketplace.30

Astor hated to play politics, but he believed he had to be politically shrewd to survive. He wrote to President James Monroe and explained how the American Fur Company helped the U.S. economy. He sent Ramsay Crooks, his chief agent, to Washington to talk with congressmen, and even put some of them on his payroll. Other politicians came to Astor’s aid. Governor Ninian Edwards of the Illinois Territory challenged Calhoun: “For my part, I have never been able to discover, and I defy any man to specify, a solitary public advantage that has resulted from it [the factory system] in this country.” Governor Lewis Cass of the Michigan Territory told Calhoun that the government factories were “obnoxious and contemptible” to the Indians. “The Government,” Cass said, “should never [c]ome into contact with them, but in cases where its [d]ignity, its strength or its liberality will inspire them with respect or fear.”31

From 1816 to 1822, Congress heard from both sides and had frequent debates on the fur trade. The bill to ban private traders, Astor was pleased to learn, never made it out of the House Committee on Indian Affairs. Neither did the bill to increase McKenney’s subsidy to $500,000.32

In 1820, however, the Senate passed a bill to force each trader to post a $10,000 bond for the right to trade. The government, through Calhoun and McKenney, would be in charge of issuing licenses, and they had the right to turn down unsuitable applicants. When the bill went to the House, Astor’s friends sprang into action. “What is this but giving to the Sec[retar]y at War power to create a Monopoly?” asked William Woodbridge, the Michigan Territory’s delegate to Congress. “The plain English is that all our citizens are if possible to be excluded from the Indian trade . . . [and] the . . . Factory Gen[tleme]n are to take it all.”33

Ramsay Crooks worked overtime in Washington exhorting House members to quash the new license bill. One of the weapons in his arsenal was an eight-page pamphlet he circulated to challenge McKenney’s “perversion of facts.” The pamphlet excoriated the factory system:

It never drove a foreign trader from the country; it never ministered to the wants, or relieved the necessities of the Indians in the day of distress; and no instance can be adduced, of its ever composing the differences of contending tribes.34

The prospects of another government-licensing bureaucracy must have alarmed Astor. Four years earlier Congress had passed a law requiring all foreigners to be licensed to trade. Before Astor’s staff of traders was notified of that law, Major William Puthuff, the federal Indian agent at Mackinac Island, arrested Astor’s men as they brought furs to his headquarters on the island. Puthuff used four boats to patrol the island and seized furs from all unlicensed traders—Americans and foreigners alike—throughout the summer in 1816. He further harassed Astor by arbitrarily raising the license fees from five dollars to fifty. Astor finally protested to Calhoun, and Calhoun eventually fired Puthuff. The new licensing bill, like the old one, promised more bureaucrats and fewer traders in the American West.35

After a hard-fought debate on licensing, Astor won, and the House refused to act on the Senate’s bill. Crooks was ecstatic. “[H]ad Mr. Secretary Calhoun carried his point in getting the proposed law passed,” he wrote Astor, “it is no longer concealed that his first step was to license so few traders that the factories were sure of reviving.” Without more government help, McKenney was in trouble. His eight factories showed a drop in fur sales from $73,305 in 1816 to $28,482 in 1819. The next year, during the debate on the licensing bill, one of his factors told him that his trade had “almost [e]ntirely ceased.”36

With McKenney’s poor record exposed, Astor took the offensive and urged Congress to abolish the whole factory system. Step one for Astor was to get Congress to see how unpopular the factories were with Indians. Calhoun, McKenney’s ally, unwittingly cooperated when, as secretary of war, he helped authorize Jedidiah Morse, a Congregational minister, to go into Indian country and report on the Indian trade. Astor and McKenney had made so many charges and countercharges that Calhoun wanted to get reliable independent information on the issue. He told Morse to “report such facts, as may come within your knowledge, as will go to show the state of the trade with them [the Indians], and the character of the traders, and will suggest such improvements in the present system of trade.” Morse was considered a neutral observer and his firsthand report would be the most systematic investigation of the government factories ever done.37

Morse visited most of the government factories and interviewed the men who worked in them as well as the private traders nearby. He talked with many tribes of Indians about the fur trade, studied their habits, and recorded their views. He spent almost four months in travel—including twelve days in Detroit and sixteen days on Mackinac Island—and even longer writing up his research.38

In his report he came down clearly against the factories. “In the first place,” Morse wrote, “I have to observe that the Factory system . . . does not appear to me to be productive of any great advantage, either to the Indians themselves, or to the Government.” This conclusion was devastating because it revealed that the factory system had failed to do what Washington had set it up to do—impress the Indians, gain their respect, and challenge the British in the Northwest Territory. Morse further wrote that “the Indians, who are good judges of the quality of the articles they want, are of the opinion that the Factor’s goods are not so cheap, taking into consideration their quality, as those of private traders.” Even John Johnson, the government’s Indian agent at Prairie du Chien, admitted he had received expensive goods from McKenney that were “inferior and unsuitable [in] quality for Indian trade.”39

Morse was not completely pleased with private traders. They traded too much whiskey, he wrote, and they gave Indians too much on credit, which weakened their work ethic. But he couldn’t deny their success, or the “want of confidence in the Government . . . expressed by the Indians in my interviews with them.” Abolishing the factories, Morse concluded, was “decidedly the best course, the best adopted to raise and preserve the reputation of the Government in the estimation of Indians, and to secure for it their confidence and respect; the best fitted in all respects to accomplish the great object of imparting to them the blessings of civilization and Christianity.”40

Armed with the Morse report, Astor’s allies in Congress moved to abolish the factories in 1822. Thomas Hart Benton, the new senator from Missouri, had been a lawyer for Astor and knew the fur trade well. On the Senate floor he ridiculed McKenney’s purchases, particularly the eight gross (1,152) Jew’s harps he had recently sent to the factories. What use, Benton asked, could Indians have for Jew’s harps? “I know!” he said sarcastically. “They are part of McKenney’s schemes to amend the heads and hearts of the Indians, to improve their moral and intellectual faculties, and to draw them from the savage and hunter state, and induct them into the innocent pursuits of civilized life.”41

Not surprisingly, Benton urged Congress to end the factory system. “[E]very public consideration,” Benton argued, “requires it to be immediately abolished, the accounts of all concerned be settled up and closed, the capital be returned to the public treasury, the salaries of all officers be stopped, and its profit and loss be shown at the next session of Congress.” Most congressmen agreed. The Senate voted 17 to 11 to end the factories; the House soon followed; and on May 6, 1822, President Monroe signed Benton’s bill.42

The closing of the factories was a story in itself. The merchandise inside them was to be collected and sold at auctions around the country. The money received would then be returned to the government to offset the $300,000 federal subsidy. Congress entrusted the Treasury Department, not McKenney, with closing the factories and holding the auctions. In doing their work, the officials in the Treasury were stunned at how unpopular the factory goods were. Lewis Cass, who had a batch sent to him in the Michigan Territory, was appalled at their poor quality. “These goods,” Cass said, “were selected I presume, as the worst and most unsaleable in the factories, and certainly they well deserve this character. They are not fit for distribution.” Others agreed. The auctions themselves, which became the true test of the market value of the articles in the factories, brought grim news. The government, on its $300,000 investment, received a return of only $56,038.15. As Senator Benton had said, “The factory system grew out of a national calamity, and has been one itself.”43

Many congressmen were astounded at the waste of government funds revealed by the auctions. If Astor could make millions of dollars trading furs, how could the government lose hundreds of thousands? Critics demanded answers, and Congress formed a committee to investigate why the factories were so unprofitable. Congress sifted through mountains of records and interviewed lines of witnesses. McKenney was on the spot and had to testify, but the committee found no corruption, just “inexplicable” losses. The factory system had simply failed, the committee concluded, but it needed to be studied “not only as a matter of curious history, but for the lesson it teaches to succeeding legislators.”44

Astor, meanwhile, continued to expand and prosper. New companies entered the fur trade during the 1820s and existing ones continued to challenge Astor. The competition was keen, and Astor’s volume of business varied from place to place. In Green Bay, for example, he was a small trader; in Chicago he dominated fur traffic. In the newly settled Great Plains and Rocky Mountains, he often formed partnerships with existing companies. In the Michigan Territory, the Hudson’s Bay Company was Astor’s ever-present rival. The American Fur Company, however, remained the largest firm in the field after the factories were closed. Astor, better than any American before him, had mastered the complex accounting and organization needed to conduct a worldwide business.45

Astor always knew he had to please the Indians to stay on top. He rarely showed affection for them, but he respected them as suppliers and consumers. Their tastes dictated what he bought; their labor dictated what he sold. Indians were usually shrewd traders, and Astor built his business assuming they would stay that way. Lewis Cass and William Clark, who spent much of their lives working among Indians, made this report to Congress:

Contrary to the opinion generally entertained, they [the Indians] are good judges of the articles which are offered to them. The trade is not that system of fraud which many suppose. The competition is generally sufficient to reduce the profits to [a] very reasonable amount, and the Indian easily knows the value of the furs in his possession; he knows also the quality of the goods offered to him, and experience has taught him which are best adapted to his wants.46

By the late 1820s and into the 1830s, the fur trade began to decline. Astor always knew the trade couldn’t flourish forever, because furs were being collected faster than the animals reproduced. More than scarce animals, changing tastes slowed down business. As Astor noted from Paris in 1832, “they make hats of silk in place of Beaver.” The Industrial Revolution and the popularity of cheap, mass-produced clothing also shut down markets for furs. “[M]any articles of manufacture which are now very low can be used in place of deer skins & furs,” Astor observed in 1823. “[T]hey receive of course the preference.”47

Just when Astor was wounded by mass production and new fashions, the U.S. government put a tourniquet around his neck. First, to protect the budding American textile industry, Congress passed a tariff on English imports. That meant Astor had to pay more for British woolen blankets, which were prized by the Indians. The Hudson’s Bay Company, of course, as a British company, imported the blankets duty-free into Canada and used them in trade against Astor in the Great Lakes area.48

Second, Congress shut the faucet on the flow of liquor into Indian territory. Astor would have willingly turned the handle himself if other traders would have agreed to leave it off. But as long as so many Indians wanted whiskey, there would always be American and British traders who would supply it. Astor met with George Simpson from the Hudson’s Bay Company to try to work out a mutual agreement to quit trading liquor, but nothing binding was ever worked out.49

Third, congressmen evicted his labor supply, or at least rearranged it. In 1830, they voted to remove about one hundred thousand eastern Indians to the Great Plains area. Astor’s major depots at Detroit and Mackinac Island lost many of their longtime suppliers as the fur trade moved west.50

These three interventions by government badly damaged Astor’s fragile position in a competitive market. What must have especially galled him was that a key person behind two of these policies was his old rival, Thomas McKenney. Having been ousted as superintendent of Indian trade in 1822, McKenney resurfaced in government two years later. His old friend John C. Calhoun waited until the furor over the factories died down and then slipped McKenney into the War Department as senior clerk in the bounty land office. Then in March 1824, with congressional approval, Calhoun created the Bureau of Indian Affairs, with almost one hundred employees—agents, interpreters, clerks, and copyists—and Thomas McKenney as superintendent.51

As head of the Bureau of Indian Affairs, McKenney continued his program to reform Indian culture. In his letters to the Cherokee, Choctaw, Creek, and others, he often addressed them as “My Children.” The government agent was their “Father.” McKenney was their “Father in Washington,” and the secretary of war was the “Great War Chief.” Those who criticized the government were “bad birds.” At least one Indian agent complained that these letters weakened his influence. But McKenney believed that “Indians are only children and require to be nursed, and counselled, and directed as such.”52

McKenney’s views of the Indians ran headlong into Astor’s plans to employ them in the fur trade. The liquor issue was a major point of dispute. In 1824, Congress passed a law—one McKenney had long advocated—that required government Indian agents, not traders, to choose the places where the fur trade would be conducted. The idea here was that if Indian agents controlled the trading posts they could stop liquor from being traded. McKenney defended the need to keep trade “within the eye of the officers of the Government,” but Astor and his staff disagreed. How could they trade furs in the most economical way if government dictated to them where to trade and what not to trade? Robert Stuart, Astor’s manager on Mackinac Island, called the law “truly a curiosity unless it originated in the fertile brain of Mr. McKinnie [sic]; but if so, it is perfectly reconcilable with the rest of his blundering absurdities.”53

The Indian removal plan, which McKenney helped sponsor, was even more damaging to Astor. McKenney argued that new land and a fresh start free of whiskey would help the Indians assimilate into white culture. He called the Indian removal plan “one of the kindest that has ever been perfected.” Astor and the Indians dissented; they didn’t want to be forced to change their ways of life and business. But McKenney worked hard to help negotiate treaties that sent the Cherokee, Choctaw, and Chippewa, among others, moving westward.54

In 1834, three years before Michigan became a state, Astor quit the fur business and sold the American Fur Company. The new silk hats, the factory clothes, and the government restrictions on where he could trade, what he could trade, and where Indians would live all told him it was time to leave. Also, Astor was seventy-one years old and ready for less strenuous work. The same skills that made him America’s largest fur trader also made him profits in New York real estate. For many years, he had been buying lots in northern Manhattan, developing the property, and selling it at a profit. This he continued to do. He also invested in the Park Theatre, the Mohawk & Hudson Railroad Company, and the Astor House Hotel. By the time of his death in 1848, he had accumulated America’s largest fortune, about $10 million.55

The last years of McKenney’s life were not so pleasant. President Andrew Jackson fired him as superintendent of Indian affairs, which ended McKenney’s career in government. Outside of government, McKenney floundered, and he spent much of the rest of his life trying to get back in. He had no business skills, so he turned to writing and lecturing on American Indians. He published a three-volume History of the Indian Tribes of North America and his Memoirs, but sold only a few copies. He always had trouble managing money. His wife died; his son became a wastrel; and McKenney lived out of his suitcase, borrowing money and moving from city to city. In 1859 he died, at age seventy-three, destitute, in a Brooklyn boardinghouse.56