The Washington PostDemocracy Dies in Darkness

Opinion The overlooked hero behind Sears’s success

Signage is displayed at the entrance to a Sears department store.
Signage is displayed at the entrance to a Sears department store. (Alejandro Cegarra/Bloomberg)

Stephanie Deutsch is the author of “You Need a Schoolhouse: Booker T. Washington, Julius Rosenwald and the Building of Schools for the Segregated South.”

Sears chairman Eddie Lampert’s ESL hedge fund staved off, at least temporarily, the company’s liquidation with a $5.2 billion bid at a bankruptcy auction last week in New York. Creditors of the former department store colossus are challenging the sale in court. The fate of the company’s 425 stores, and with it the jobs of 45,000 employees, is likely to be determined in early February.

Sears’s bankruptcy declaration in October prompted a wave of media coverage focusing on Sears’s mid-20th-century glory days and its roots in a mail-order watch business operated by Richard W. Sears with the help of watch repairer Alvah C. Roebuck. Often overlooked in those nostalgic chronicles was the man who bore much of the responsibility for building the company into a paragon of U.S. retailing. With Sears’s future hanging in the balance, this seems like a good moment to give Julius Rosenwald his due, not least because of how he put his Sears fortune to philanthropic use: partnering with African American communities across the segregated South to build schools.

Rosenwald was born in Springfield, Ill., in 1862 to German-Jewish immigrant parents.

He grew up working in the family’s clothing store, never finished high school and as a young man started a moderately successful business in Chicago manufacturing clothes. Sears, Roebuck and Co. owed him money for men’s suits in 1895, the year that Roebuck asked Sears to buy him out. Eventually, the opportunity to take an ownership stake in the company came Rosenwald’s way.

In Richard Sears’s heyday, it was said that he could “sell a breath of fresh air,” but he was more interested in promotional gimmicks than in ensuring customers’ orders were reliably and promptly filled. Rosenwald had worked behind store counters, where the offerings were limited, and he understood the hunger felt in small towns and in the countryside for the huge array of new products appearing with America’s late-19th-century manufacturing revolution. He emphasized efficiency, innovation and customer service, knowing that catalogue shopping was effective only if buyers received, in a reasonable amount of time, the clothing, seeds, tools, baby carriages and sewing machines they had ordered.

Working with a creative staff, Rosenwald initiated an ingenious system to open letters mechanically and to fill orders through a network of chutes and conveyor belts. When the growing company needed larger quarters, Rosenwald took the lead in finding land on Chicago’s West Side and commissioning an enormous facility that included a printing press for the catalogues that sat beside a railroad yard for speedier shipping. To finance the project, he turned to a friend from his days as an apprentice to his uncles in New York, Henry Goldman (then part of the young investment company Goldman Sachs), who suggested taking the company public. The initial public offering in 1906 , the first for a U.S. retailer, made millionaires of both Sears and Rosenwald. In 1908, Richard Sears retired; Rosenwald wasn’t done.

In his youth, Rosenwald had told a friend that his goal in life was to have an annual income of $15,000 — $5,000 to live on, $5,000 to save and $5,000 to give away. Now he had millions. Initially, he donated money to help Jewish organizations in Chicago and to aid victims of Russian pogroms. But in 1910, alarmed by a surge of racial violence in the United States, he began directing his philanthropy toward African Americans.

Around that time, he was invited by the famed African American educator and author Booker T. Washington to visit the Tuskegee Normal and Industrial Institute that Washington had founded in Alabama. Rosenwald toured the school, joined the board and followed Washington’s suggestion that he donate money to assist six nearby rural African American communities in building schoolhouses.

From that beginning grew a program that, over the two decades before Rosenwald’s death in 1932, built more than 5,000 schoolhouses and related structures in 15 states across the South. A 2009 study by the Federal Reserve Bank of Chicago estimated that a one-third increase in completed schooling by African American students in the region was attributable to Rosenwald schools. The study also noted that “the Rosenwald program caused approximately 90,000 additional students to attend schools during the early 1930s.”

The schools played such a vital role in the education of African American children before the end of legalized segregation that the collection of the National Museum of African American History and Culture in Washington includes student desks and a potbellied stove from the Rosenwald-funded one-room Hope School in Pomaria, S.C. The civil rights lawyer Charles Morgan Jr. once observed that from Rosenwald schools “came the parents of the generation who marched and sang and risked their lives in the revolution for equal justice under the law.”

Though the company was rescued from liquidation this month, Sears’s impact on America faded long ago. But the person who was instrumental in building the business left a legacy that still echoes today.

Read more:

Robert J. Samuelson: Capitalism’s tough love: The real lessons from the fall of Sears and GE

Helaine Olen: The Sears bankruptcy wasn’t inevitable

Megan McArdle: The best Sears product came with a 126-year warranty

David Von Drehle: Cherish the demise of Sears

Sebastian Mallaby: Is there a financial time bomb in sight?