The Coke Machine - Michael Blanding [9]
In the face of so much evidence that the drink contained cocaine, albeit a very small amount, it’s a wonder the company continues to insist otherwise.1
Of course, it took more than chemical appeal for the drink to expand as rapidly as it did. It also took money. With little cash on hand in 1891, Candler decided he needed to raise at least $50,000 to build a bigger factory and pay for salesmen and advertising. He found it in a relatively new form of business: the corporation.
Despite the ubiquity of corporations in our modern era, the arrangement is really only as old as America. One of the very first corporations chartered by the British Crown raised capital for the costly undertaking of exploring the New World. The Virginia Company wasn’t particularly successful as a company—losing £100,000 before it was disbanded—but it did succeed in transplanting the survival of the corporation itself. After dozens of British families lost their fortunes from the collapse of the notorious South Seas Company in 1720, Parliament banned the risky propositions. When the father of capitalism himself, Adam Smith, wrote The Wealth of Nations in 1776, he spoke out against corporations, arguing that the “directors of such companies . . . being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery.”
That was all very well in Europe, however, where a landed aristocracy could form partnerships to fund costly projects. In the United States, businessmen had comparatively fewer wealthy investors to fund their projects, requiring them to sell greater amounts of lower-priced shares to create the same investment. The corporation took off as the most popular form of business, with more than three hundred of them taking root in the United States in the two decades after the Revolution. And unlike their British counterparts, some American corporations such as the great maritime trading companies of New England were incredibly profitable. Their owners, in turn, created the textile mills that rapidly industrialized the United States beginning in the 1830s. No corporations were as successful, however, as the railroads, which raised huge reserves of capital—more than $1 billion by 1860—to build their networks, along with sophisticated management structures to operate them.
The increasing wealth of corporations led to an increase in their power. In their early days, corporations were chartered by states for specific purposes, with strict time limits, to prevent them from being “detrimental to, or not promotive of, the public good,” according to a ruling by Virginia’s top court in 1809. Some states even passed laws allowing them to revoke corporate charters whenever they deemed fit. That changed, however, in the mid-nineteenth century, when after increased lobbying at state capitals, some states began loosening their rules in an effort to attract more corporate dollars. Delaware and New Jersey led the pack, allowing corporations to exist in perpetuity for any purpose they desired, and codifying the concept of “limited liability,” which shielded share owners from responsibility for the actions a corporation performed in their name. Then the courts, most notably in a California case won by Southern Pacific Railroad in 1886, declared corporations to be virtual “persons” who could sue or own property in their own rights. And in 1880, the federal government struck down state laws requiring companies to abide by local health and labor laws in order to trade in