Before There Was Wal-Mart, There Was Julius Rosenwald

History

By Loren Fox

Published June 09, 2006, issue of June 09, 2006.
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Julius Rosenwald: The Man Who Built Sears, Roebuck

And Advanced the Cause of Black Education in the American South

By Peter M. Ascoli

Indiana University Press, 392 pages, $35.

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Although few remember, Sears once set the pace for the mass-market world of retail shopping in ways that Wal-Mart does now. Perhaps even less remembered and more interesting, the man responsible for its success was not marketing mastermind and company founder Richard Sears. As Peter Ascoli makes clear in his new book, it was Julius Rosenwald, a pioneering Jewish businessman and philanthropist.

Rosenwald, known as “J.R.,” showed no early promise. He left high school after two years, and with family help he plunged into the clothing trade in New York and then in Chicago. Rosenwald was a 34-year-old husband and father of three when his brother-in-law offered him the chance to invest in a struggling mail-order sales business called Sears, Roebuck and Co. He joined the five-year-old company in 1896 as a senior executive and found a mess: an office heaped with piles of clothing and stacks of unopened mail; crates used as desks; departments falling three or four months behind on orders. With an eye for detail and fondness for explicit plans, Rosenwald made his mark by imposing administrative order. After installing systems for shipping and organizing the accounts, he oversaw the building of a mammoth new headquarters-and-warehouse on Chicago’s West Side. By then, Sears, Roebuck was the nation’s largest mail-order merchant, handling more mail per day than the city of Milwaukee.

Remarkably, Richard Sears, who believed that mail order was a short-lived fad, left the company in 1908, leaving Rosenwald in the position of CEO. (Co-founder Alvah Roebuck had left years earlier, also lacking faith in mail-order sales.)

Within 10 years of joining Sears, Rosenwald became a wealthy man. Soon he extended his discipline and organization skills to philanthropy. Indeed, Ascoli — a historian at Spertus Institute of Jewish Studies as well as one of Rosenwald’s grandsons — focuses less on his subject’s career at Sears than on Rosenwald’s charitable activity. Rabbi Emil Hirsch, a leader of Reform Judaism, influenced Rosenwald with his idea that tzedakah, or charity, should carry a tinge of social justice. Rosenwald started locally, giving money to Jane Addams’s Hull House (and befriending Addams) and to local Jewish causes. He became chairman of Chicago-area charities federation the Associated Jewish Charities and donated the equivalent of what would today be $5 million to the University of Chicago. By 1905, he’d pledged $4,000 to a Jewish agricultural community in Michigan, but only on the condition that the community raise another $20,000. It was the first time he gave a “challenge” grant, and it became one of his standard methods because he believed strongly that those he helped had to help themselves, as well. Eventually, the grandest example of this approach was the $1 million challenge grant he gave to the American Jewish Committee to aid Jewish victims of World War I.

Rosenwald was characteristically methodical in broadening his charitable activities. He became close friends with influential black educator and activist Booker T. Washington, and later donated thousands to his school, the Tuskegee Institute. Through Washington, Rosenwald donated money to Fisk University and to other black institutions. He also convinced other businessmen to donate money to his causes, through challenge grants and personal appeals.

In his charity, as in his professional life, Rosenwald combined a magnanimous nature with caution. He tested institutions like Tuskegee before donating substantial sums, and he monitored how his donations were used. This approach made him comfortable enough to pursue potentially contentious projects, such as the schoolhouse-building program that eventually created thousands of “Rosenwald schools,” serving hundreds of thousands of black schoolchildren throughout the South. In business, his generosity served him well during the 1921 recession, when Sears, Roebuck ran into crisis and Rosenwald saved it by essentially donating money to the company. It also led him to create one of corporate America’s first employee profit-sharing plans at Sears, which may have also staved off unionizing at the firm.

The Julius Rosenwald Fund, the foundation he created in 1917 to manage his philanthropy, distributed millions to black education and to Jewish causes before liquidating in 1948, 16 years after Rosenwald’s death. It was one of the first charitable foundations to liquidate, as its namesake opposed permanent endowments, feeling that each generation had to perform its own charity.

That philosophy didn’t catch on, to Rosenwald’s disappointment. And his generosity didn’t shame governments into providing more money for black education in the South. But Rosenwald’s successes overshadowed his failures. As Ascoli shows in this dry but thorough biography, Rosenwald was a compelling figure, a mensch who followed his principles, mixing good business with good social justice. In an age when Wal-Mart generates so much controversy, it’s just one more reason to remember its old competition.

Loren Fox is a journalist in New York and the author of “Enron: The Rise and Fall” (originally published in 2002 by Wiley).






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