Easy Payments from a Presbyterian Paragon

© by Dan Graves

It is hard to imagine a sober and active Presbyterian industrialist as a major contributor to today’s credit morass. Yet McCormick was.

Cyrus McCormick, industrialist

Cyrus H. McCormick made credit a key component of his marketing system

When Cyrus McCormick invented the first successful reaper in 1832, inventions were not a path to success. There was no market for his machines. Farmhands opposed it, thinking it would rob them of jobs. America’s farmers were skeptical; after all, most could not even be induced to replace their wooden plows with iron. Rivals, however, saw the reaper’s potential and stole McCormick’s ideas. If he was to profit from his hard work, he had to create a market and outsmart his competitors.

Outsmart them he did. As biographer Herbert Casson remarked, “Cyrus Hall McCormick invented the reaper. He did more—he invented the business of making reapers and selling them to the farmers of America and foreign countries.”

McCormick moved from his native Virginia to a swamp called Chicago, which he saw as a natural distribution point. He developed a factory with assembly lines. He advertised. He created franchises and stocked them with machines ready for farmers to buy. He sold his reapers at published prices with written guarantees. All of these were cutting edge business practices.

And he sold on credit.

McCormick was the first industrialist to do so on a wide scale. If ever payment plans seemed justified, it was in this instance. For most farmers, coming up with the $100 asking price was like finding $25,000-$45,000 in ready cash today—they couldn’t just walk into a local bank and borrow it. Try making that kind of money on the earnings of five acres of wheat mowed by hand—about all that the average farm could harvest during the seven to ten days between wheat ripening and spoiling. With one of Cyrus’ machines, however, a farmer could reap six acres in a day, forty to sixty in a season. With more wheat to sell and less wages to pay, the careful farmer could soon earn enough to pay off his purchase.

Contemporaries were shocked that McCormick would trust strangers to repay him. They predicted financial disaster, but his trust was vindicated; very few farmers defaulted on their payments. McCormick, the farmers, and the nation prospered. The United States became a major exporter of wheat.

Cyrus McCormick, a stout Christian and philanthropist, sponsor of a national religious magazine and founder of a Presbyterian seminary, had no intention of doing harm when he developed and promoted easy payment plans. But they became an alluring quicksand in a nation that, with the rise of prosperity, threw off restraint and used them to finance not just essential equipment, but even pleasure goods.


Sources:

  1. Casson, Herbert Newton. Cyrus Hall McCormick, His Life and Work. Chicago: A. C. McClurg & Co., 1909. [source of the image]
  2. de Camp, L. Sprague. The Heroic Age of American Invention. New York: Doubleday, 1961.
  3. National Cyclopedia of American Biography, Volume V. New York: James T. White & Company, 1894.
  4. National Geographic Special Publications Division. Those Innovative Americans. Washington, D.C.: National Geographic Society, 1971.
  5. “Six Ways to Compute the Relative Value of a U.S. Dollar Amount, 1774 to Present.” http://www.measuringworth.com/uscompare/ (Accessed August 31, 2009.)
  6. Thwaites, Reuben Gold. Cyrus Hall McCormick and the Reaper. Madison: State Historical Society of Wisconsin, 1909.

I originally wrote this article for BeatingDebt.org

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