Through legislation beginning in 1796 and renewed every three years thereafter, the United States of America established the factory system (1796–1822), which was to construct trading houses mainly on the unsettled U.S. frontier where a factor, appointed by the president, could trade goods for furs with the members of given Native nations or tribes located in the district of the factory. The factory system was a forerunner to the trust relationship between Indian tribes and the federal government as established by the commerce clause in the U.S. Constitution.
The Secretary of War, through the Superintendents of Indian Affairs, oversaw the day-to-day operations of purchasing goods and transporting them to the factories as well as overseeing the selling of furs. The sites for the factory trading houses were located in the westward territories and the south. The United States' intention was to control who traded with the Indians and to build and maintain friendly relations, while making them dependent on American goods instead of British goods.
Dating back to the first white presence on the North American continent, the colonial powers recognized the necessity of establishing ground rules for trading with the Indians. Not until after the French and Indian War ended did the control shift completely to Great Britain and in particular to London. After the American Revolution, the newly formed American government issued acts to regulate the intercourse of trade with the Indians under their jurisdiction. British traders continued to trade with Indians in what was considered American lands. Following the end of the Northwest Territory Frontier Wars in 1795, the Jay Treaty required all British traders to cease operations in the United States and its territories.
In most cases, the U.S. Army established a garrison on or near the site of a factory trade house. The construction of the factory buildings, as well as the garrison, was often done by the soldiers, though sometimes workers such as sawyers and carpenters had to be brought in. Factory trade houses were built of local materials, mostly logs, and included a trade room; it was similar to a store whose shelves were filled with trade goods. Often the factory building was also a residence for the factor, though sometimes another house would be built for him and his family, if he had one. In addition to the trade house, other buildings were constructed to store the overstock of goods, a residence for the interpreter, and storage for the traded furs. In the outbuildings, the furs would have to undergo further cleaning, and, depending on the climate or time of the year, they would have to be frequently turned and beaten to get rid of worms.
The trade goods often were manufactured not only in the United States, but also in Great Britain, Germany, France, India, and China, and other nations. They were sold or traded to Indians at a small percentage over cost to keep the prices low. Some of the goods were clearly items that were of no interest to the Indians, things such as china teapots, Queensware dishes, and ladies' parasols. Regulations stipulated that whites were not allowed to purchase goods from the factory, but they often did. In this middle ground where the two cultures met, soldiers and their wives charged against the promise of future pay just as individual Indians did in the hope of successful trapping. Often, the absence of sutlers located in or near the peace establishment army posts necessitated members of the garrison to charge at the factory or trade furs from hunting. Soldiers often racked up more credit than Indians.
At first, issuing credit to Indians was forbidden, but soon it became a necessity before the winter hunting and trapping seasons. Furthermore, it was learned that, if they could not pay or failed to pay with furs, the government could then take the money from other sources such as annuities or force the tribe as a whole to sell land to pay off the debts. This appears to have been an aim of Thomas Jefferson in February 1803 when he informed William Henry Harrison, governor of Indiana Territory, that the government would "push" their trading houses, enjoy getting the more important leaders heavily into debt, and then trade the debt for ceding land (Esarey, 1922, 71). By selling the trade goods so low, Jefferson assumed the Indians would not want to go to anyone else, especially private traders who could not afford to sell goods so low.
The Indians trapped from the late fall through the winter, and in the spring they brought in their dressed furs to be traded. The types of furs ranged from bear, mountain lion, deerskin, beaver, and muskrat. The goods offered in trade to the Indians ran the lot of cloth like woolens (baize, blanket, and shroud), cottons (calico and homespun), linen, and silk ribbons. Other goods included fishing equipment; knives, tomahawks, guns, gun powder, and shot; brass, copper, and even sheet iron kettles; sewing implements; snuff boxes, bridles, saddles, looking glasses, silk stockings, hats; and much more. At least once a year, the factor shipped furs to the East to be auctioned to manufacturers. These manufactures would make sundry articles of the furs, including hats from beaver, breeches from deerskins, and hat coverings from bear fur for the U.S. Army. Some furs were shipped to other parts of the world, including Europe and China.
One of the projects of the factory system was to encourage agriculture and education among the Indians. Religious organizations, like the Moravians and Quakers, became the agents of the government to work among the tribes to teach them farming, animal husbandry, and domestic sewing arts as well as to convert them to Christianity. The U.S. government factories issued the farming implements, payment coming out of annuities and presents to the tribes, and often paid the salaries of religious men and women working among the tribes. At first, many Indians did not take to the concept of their males farming because, culturally, it was female work. Fines could be levied against annuities if an Indian was found to be trading or selling government-issued farm implements to other Indians or whites. After the War of 1812, Baptists and Presbyterians were offered government funds to commence Indian schools in Kentucky, Missouri, and Kansas. At these schools, Indians were taught reading, writing, arithmetic, and gender-specific occupations; females learned to spin, weave, and sew while the males learned carpentry and farming. They were also instructed in the Christian religion. In the beginning, permission of the parents was sought and no one was forced to attend. However, after the closure of the factory system, this would change.
Criticism of the factory system was most intense from private fur-trading companies. In particular, John Jacob Astor of the American Fur Company lobbied congresspeople, presidents, and others with influential connections to close down the factory system. By 1820, with Lewis Cass, the governor of Michigan Territory and Chouteaus, a prominent fur trade family from St. Louis, Astor pressured Congress to see that the government had no business regulating the trade with Indians. First, it failed to build and keep friendly relations with the Indians, resulting in the outbreak of the War of 1812; second, the trade goods were inferior; next, factors did not go out to tribal villages to trade with the Indians, rather they were required to stay at their factories; and lastly, despite the best efforts of the factories, the illegal selling of alcohol by small private traders continued to increase. Despite all the efforts of the factory system officials, the private traders won out and the system was closed down in 1822.
Sally Colford Bennett
Esarey, Logan, ed. 1974. Governors Messages and Letters, Messages of William Henry Harrison, Vol. I 1800–1811. New York: Arno Press. [Originally printed 1922. Indianapolis: Indiana Historical Commission.]; Lavender, David. 1964. A Fist in the Wilderness. Lincoln: University of Nebraska Press.; Madsen, Axel. 2001. John Jacob Astor: America's First Multimillionaire. Hoboken, NJ: Wiley.; Peake, Ora Brooks. 1954. A History of the United States Factory System, 1795–1822. Denver, CO: Sage Books,; Richards, James K. 1988. "Destiny's Middlemen, Astor's American Fur Company." Timeline 5, no. 29: 30–39.