Theme 2: Module 8
Janus-Headed MED: Connecting the Urban Dots
Without any plan, or even conscious awareness, American S&L MED bifurcated Janus-like, composed of two distinct, yet closely related, but differently-purposed sets of MED strategies. The first (I call Janus-Inward) looked inward, internal to the jurisdiction, to urban residential, physical and economic base development. The second, (Janus-External) focused on the external, its connection to and relationship with other perceived-relevant cities, to urban networks, to economic market areas and encouragement of trade, finance, migration, and a host of other interrelationships with larger regional, national, and even global markets. Sometimes I may refer to this external set of strategies as a jurisdiction’s foreign policy.
Why do we explore this Janus-headed distinction in ED strategies and EDOs? It is evident from our history that Eras and Ages do shift in their concern for internal jurisdictional development as opposed to external competition and relationships. It also reflects academic historical commentary, as expressed for example by Sam Bass Warner:
Our urban history is the history of conflicts and the possibilities wrought by growth of the nation, and the growth of the units [firms and businesses] of its organization. It is also a history of the increasing interconnectedness of these units which stems from the development of the economy and its cities …. one can speak of the structure of a city in terms of its land-use patterns [Janus-Inward], or of its transportation networks [Janus-External] …. general categories of the urban structure will be two: the national network of cities [our urban competitive hierarchy], and the patterns of land-use within cities. (Sam Bass Warner, the Urban Wilderness, p. 57.)
Early Republic focused on external–out of logic and necessity–since this is when Big Cities became “Big Cities”; Gilded Age Big Cities–again out of logic and necessity-had to develop its internal physical infrastructure to cope with huge population explosion and diffusion of population as it “drove to the periphery”, the city’s jurisdictional boundaries. Different sets of EDOs flourished in each Era, and the same strategy, attraction for example, served different purposes, and not infrequently shifted its targets and constituencies. So too with infrastructure–which from 40,000 feet up was a constant during the 19th century.
In later periods, the Transition and our Contemporary Era, these two competing strategic focuses will compete with, if not oppose each other. They may require different sets of EDOs to do the same–often illogically to outside (and inside) the jurisdiction. There is a logic, and arguably a need, in such “duplication” if one accepts competing strategies and EDOs serve different “masters”–goals and purposes. In the Classical Era (until 1975 or so), Big City economic and population growth obscured potential strategy competition, sufficient resources were available to do both. Not so when decline reared its ugly head.
Perhaps, the most difficult period of Janus-headed strategy competition was the Age of Urban Renewal (1925-1975–within the Classical Era), when instead of focusing on markets and relationships external to its own region, Big Cities turned their “foreign policy focus” on their own metropolitan market area–decentralization or suburbanization was the enemy. Janus-Inward strategies (neighborhood modernization, public housing, CBD redevelopment) were tasked to confront perceived Janus-External competition–and Janus-External infrastructure (highways connecting central city with suburbs) tasked also to serve Janus-Inward goals (CBD revitalization, mitigate deteriorated housing).
Without getting too far ahead of ourselves, this confusion of Inward and External strategies, EDOs and goals did not work well in the past. Today we face a similar dilemma. Global hierarchical competition is a defining characteristic of our Contemporary Era but how it is addressed is often confused in our cities and states. The next paragraph hopefully provides contemporary relevance to our focus on the Janus-Head bifurcation of strategies and ED initiatives.
Each Janus Head likely adopts a different world view. For example, “mobility of capital” (and exit by people, I would add–BTW I prefer to call it hierarchical competitiveness) mean different things (are defined differently) to each Janus-Head. National, regional or global competition is very real and can call for public subsidy; attraction is markedly more difficult–that is the task of Janus-External EDOs. Using public subsidy with resident firms in one’s economic base, however, is more complex.
When a resident firm threatens abandoning its “home” in favor or external urban enemy complicates the strategy. Preventative retention is preferred, but has its limits. When one EDO is entrusted to deal with both Janus-Heads a schism in goals and initiatives is introduced. Recognizing that an ED strategy, tool, EDO, or program can potential serve two, potentially competing masters (goals), simultaneously, and that over different time periods almost certainly have served different ends, is an important lesson learned from our history. We will draw upon this lesson when we discuss “Gift and Loan clauses” later in the module.
Each Janus-Head manifests a distinct character, motivation, goal-structure and style which infuses formulation and implementation of MED strategies and programs. Each is advantaged and handicapped by the collision between community political cultures, as well as its past heritage. While the two Janus-headed MED nexus might sing the same lyrics, the two tension-filled sets of MED strategies and programs dance to different drum and tune. Each strategy involved different constituencies, tapped into different policy-making processes, programs, and used ED tools for different reasons. They also require differently empowered EDOs, and arguably different leadership.
Connecting cities to each other and to larger regional and national economic markets was essential to Early Republic city-building. Failure to deal successfully with that connection was inevitably fatal. Logic and necessity preferred the Janus-External Head during that Era. This task required transportation/ communication-related EDOs whose purpose was “to connect the urban dots” and economic markets. That Early Republic Janus-External focus is the topic of this module–and dominates Theme 2. In Theme 3 I shall dwell on Janus-Inward Gilded Age strategies/EDOs, and observe what happens to Janus-External EDOs. It ain’t pretty. The glory days of “Janus-Inward” MED lay in the Gilded Age (1870-1900). Boards of Trade/chambers of commerce/real estate exchanges were the workhorses of Gilded Age ED. Corporate Charters and Railroads were the Janus-External EDOs of the Early Republic.
The Early Republic Janus-External MED Strategy-EDO Nexus
The Policy Backdrop/Environment
When the American Republic began (1789) industrial capitalism (and urbanization) was a babe in the cradle. Horribly dependent on its mother, Great Britain, incapable to sustaining itself without her nourishment, our emerging MED had to learn from her experiences, while also starting down the long road to adult independent maturity. The love/hate worldview that resulted from these two conflicting realities permeated into our national foreign policy, and into partisan (Federalist versus Democratic) politics. The pivotal role of East Coast trading and finance-laden Big Cities in particular, stood in stark contrast to new cities founded in the “western” interior who were in direct, often violent conflict, with the British and their Indian allies.
That is why prolonged terrible relations, starting with the French Revolution, Napoleonic Wars, leading to the War of 1812 with Great Britain, the 1814-5 New England Hartford Convention, and final American 1815 “victory” necessitated innovation by American policy systems (and EDOs) in substituting our indigenous-devised solutions for British practices, experience, and resources (FDI, for example). War fostered growth of American business, industrial revolution and urbanization only because S&L policy systems firmly embraced ED innovation, creativity and experimentation. In so doing, our cities and states pioneered strategies, tools and programs substantially, certainly functionally, similar to those used in promoting today’s Transition/Contemporary Era technological innovation and economic growth. It may be some surprise ED strategies, tools, and programs that served successfully in the First Industrial Revolution have been reshaped to promote the Third and Fourth.
Experimentation played out differently between North and South. Each proceeded along a different economic path—industrial/finance capitalism or agriculture/export. This divergence impacted our ED history. Wonder why Jefferson and Jackson didn’t like banks and nationally-financed infrastructure? Why did Daniel Webster and Henry Clay support it? Because we were a nation, didn’t mean we were destined to view S&L ED uniformly–the national economy was bifurcated or bimodal. This bifurcated national economy existed for seventy-five to almost a hundred years and left behind its legacy-baggage on how we “do” S&L ED today.
Developmental Transportation EDOs:
The Janus-External worldview would have been populated by a host of new urban centers, which, in effect, were dots on a continental map that stopped at the Mississippi River—dots unconnected by paved roads or any other mode of transportation. That reality imposed itself on American S&L ED: someone (thing) had to connect the dots if the dots were to survive. Even in hindsight, the obvious reality that city-building led inevitably to installing transportation and communication contact with the rest of the world.
The British experience was not suitable for American cities to copy. Britain’s earlier railroad infrastructure had been installed by private enterprise with limited public involvement–mostly tax abatement and land donation. This was possible because Britain was already settled, with existing large urban centers, and established investment banks holding accumulated capital to invest. Loans to private entrepreneurs were made, on the expectation of profits derived from operation of the infrastructure after construction. In short, England was already “developed” previous to its transportation revolution. America wasn’t.
In the earliest decades, the role of the federal government in “internal improvements” was extremely controversial–the South, in the main, was opposed, the North supportive. In any case, most of the burden was likely to fall on state and local government. In an age of limited government, reliance on local government with virtually no fiscal resources was not an option– reliance on the private sector was the only way to go. That became the first, and defining priority of Early Republic Janus-External S&L MED.
Today’s commonly accepted notion of conflicts of interest and “appearance” of conflict, i.e. the clear separation of public and private spheres, was only beginning to be appreciated—its development is a part of our history. We still bear much of the heritage—baggage–from the experimentation that followed in the Early Republic–which is a major reason for understanding it. That our Two Ships, Progressivism and Privatism, approach private-public experimentation with different sets of standards further compounded the lessons we might learn. In 1790 when our tale of private-public partnerships begins, boundaries between private and public are far from today’s. The reader might remember our discussion of President Washington and his city-building. Applying the standard now levied upon President Trump, it’s likely Washington would have been impeached and incarcerated.
Connecting urban dots required construction expertise. Construction of land-based infrastructure project financing required financing similar to today’s construction loans. Such loans have no collateral assets and must be made on the developer’s past history—which for toll roads, canals and railroads were nonexistent. Also land-based infrastructure required a legally-secure right-of-way that could only come from using governmental eminent domain. Moreover, most of the land was government-owned and required transfer to another entity.
Often forgotten, management of transportation service after construction meant the builder of the infrastructure also had to assume responsibility for subsequent operations–somebody had to make the trains run on time–and pay for them in their startup years before revenues could support costs. Tax abatement was seen as an operating subsidy. BTW, the technology to operate on these transportation routes had not been “proven”, nor commercialized. It was not at all clear at the onset, whether canals or the new-fangled rocket ship of the day (railroad locomotive) was the way to go. Someone had to pick a winner transportation mode?
At the time of original financing, the proposed infrastructure project connected two geographies that had yet to develop;—say it another way, “there was no there “there”, and the here, “here” was not all that great either. As the London Times reacting to a British bank loan in a bankrupted 1874 American “wilderness” railroad project observed, the loan was predestined to failure; the railroad ran from “Nowhere-in-Particular to Nowhere-at-All”[viii]. Even in 1850, NY Senator William Seward (later famous for his Alaska folly) observed “a great and extensive country like this has needs of roads and canals earlier than there is an accumulation of private capital within the state to construct them”[ix]. Newly-founded, undercapitalized American banks could not satisfy capital needs without participation of foreign investors.
After 1800 American capital mostly consisted of savings from small homeowners held in small loosely-regulated, largely unknown and unrated state banks. Business capital was held in family-controlled firms or clumsy, illiquid business partnerships. The corporation, a flexible form of business structure only “appeared on a modest scale in the 1850’s notably in the railroad industry” (Trachtenberg, 2007, p. 4). Not only was a source of capital in question, but transportation infrastructure lacked a finance tool. S&L bond issuance in 1790 was far from what it is today.
When we talk about “developmental transportation”, we are dealing with financing and installing infrastructure that can’t pay for itself, but will at some point become self-sustaining, while creating prosperity and economic growth. For readers interested in a more intense understanding of “developmental transportation infrastructure”, Carter Goodrich’s, Government Promotion of American Canals and Railroads, 1800-1890 is the classic.
Cities/states carving a city out of the wilderness, and desiring to link it with other cities needed an organizational structure—an EDO in which the public sector had to bring certain of its powers (credit, tax funds, loans, eminent domain, and tax exempt bond issuance) into a vehicle or structure possessing private expertise, financial management, construction expertise, and effective infrastructure service delivery–along with some measure of accountability to citizen, taxpayer, financial markets, shareholder-investors, and the customer.
In 1800, it was not at all evident what that accountability translated into in terms of organizational structure, or realistic expectations. The caveat that state/local legislatures which approved these new forms of ED, lacked expertise and experience themselves. No one really knew where the industrial revolution was going, and the notion of a business cycle, with panics, was underappreciated. Jefferson’s concern regarding banks was also not without merit.
In a nutshell, these were the ingredients for creating our first improvised public-private partnership–the holy grail of S&L American MED. By holy grail, I mean MED’s search for a workable, effective, accountable public-private structure is just beginning. The quest will continue through the entire 19th century. In due course MED will experiment with railroad corporations as EDOs, franchises, utility companies, and boards and commissions. Until it stole the modern conception of the British port authority in the early 20th century, no hybrid private-public EDO filled the bill. The modern port authority did–and was subsequently adapted in the 20th century to become today’s development, housing, urban renewal, industrial, redevelopment authority. BTW the same evolution applies to tax-exempt bond issuance agencies, and tourist and convention “bureaus”.
As a final observation, it seems likely to me the underlying themes and realities that feed into the development of Early Republic ED strategies, EDOs, tools, and programs can sensitize us today when our attention is on developing “brave new worlds”, seemingly inevitable scenarios, disruptive technologies and the like. This caution seems very salient to those who argue we are entering into a new Era or Age, or evolving beyond the industrial revolution(s). The often simplistic exuberance and optimism of such commentators and advocates might invite caution and some humility if this history teaches anything.
The State-Chartered Corporation
We are retelling the “birth” of modern American capitalism during the Early Republic. American MED, operating at the nexus of capitalism,politics, society and government, cannot avoid playing a major role in facilitating and adapting to whatever path or transformation capitalism stumbled into. As legislatures and business people experimented to find structures that worked amid ceaseless change, dead ends,cul du sacs, and unsettling success, MED was dragged along. That meant the state-issued corporation charter as our first major EDO.
The structural vehicle initially used, arguably the only one legally available at the time, was the private state-issued corporate charter. The modern business “corporation” we know today did not exist until the 1850’s. The “corporation” that did exist in 1790 was of late medieval vintage. It required authorization by the state (or federal) legislature to exist. Accordingly, private corporations, such as the well-known British East India Company or Virginia/Jamestown Company, were rare. The predominant business organization was family partnership. Most private commercial ventures were run by “families”, including the family farm/plantation.
The Early Republic’s first EDOs were experimental adaptations of the medieval corporation. In 1790, there were only twelve, thirteen lending institutions, if you count Hamilton’s later National Bank, American. Corporate charters were approved at the discretion of the state legislature, for purposes alleged to be in the public interest. The opening legislative preamble almost always definitively specified the entity created was a public-private affair, with interests in both profit and the public welfare. The preamble for many such incorporations established that corporate charters were both a “corporation and a body politic”. “Among the privileges [included in these charters] were monopoly rights of way, tax exemption, the right of eminent domain, and the right granted to non banking corporations to hold lotteries in order to raise needed capital…”[i] (Bruchey, 1968, p. 130). Elaborate regulations establishing some measure of accountability were usually included in these charters (boards of directors, liability, permitted sources of financing and financial standards). Charters defined and limited the scope of action permitted the corporation.
Thus the charter created a semi-private, usually tax-exempt (for a specified period of time), corporation, operated and controlled by private investors and management. There were fiscal and accountability requirements, often including public membership on the board of directors.This was particularly true for developmental infrastructure corporations. In some cases (for example the NY State (Erie) Canal Corporation) verged on being a public-private entity.
The developmental transportation-related corporation customarily was empowered to own, construct, manage, lease and operate the infrastructure /transportation mode within a specified geography. Included in most state-chartered corporations were extensive array of eminent domain, tax-free bond issuance (called public subscriptions), right-of-way and adjacent land uses, ports and stations, and tax abatements. Public funds and investor equity flowed awkwardly into budgets and bank accounts.
Despite likely reader skepticism, the first decades adventures proved positive and more likely than not fared well. Until the 1840’s the state-chartered corporation/EDO “connected the dots” personified by the success of the New York State Canal Corporation. Specifically, canal-building went remarkably well. It was only when the economy turned south, transportation shifted to railroads, and legislatures became a bit too cocky–verging on negligence and corruption–did things go awry.
In their day, corporate charters were viewed as appropriate instruments of public policy. “From more than a generation, from the Revolution to the Panic of 1837, Americans had accepted state intervention in the economy as a legitimate, indeed essential function of government…. Invoking the public interest as justification, the states … consciously sought to stimulate economic growth through positive government action. They subsidized agriculture and industry, invested directly in private enterprise, constructed vast transportation systems at public expense, lent the public credit to private “entrepreneurs, and granted special legal privileges to [charter] corporations” (Gunn, 1988, p. 1).
Dr. Peter Galie uncovered the earliest corporate charter. He reports New York’s “first foray into government stimulus to create jobs dates back to 1790”. The New York State legislature incorporated the “New York Manufacturing Society” and authorized the state treasurer to use public funds to purchase shares in the corporation—a practice which today is illegal in every state. The Society’s purposes, expressed, were “to establish manufacturies (firms), and furnishing employment for the honest industrious poor”, purposes characterized by the legislature as “patriotic”. (Galie, 2012, pp. 2009-10)
The most common beneficiaries of state-approved corporate charters were “insurance companies, commercial banks, canal, dock and highway companies all concerned with the growth of cities and the expansion of internal trade”(Trachtenberg, 2007, p. 6). It is not unreasonable to assert “these business corporations were no more exclusively profit-seeking associations than were the chartered joint stock companies with which the English had” (Bruchey, 1975).
Little known, Early Republic state-chartered corporations were used to startup manufacturing companies, and city-building private ventures. Such charters provided state/municipal (public) venture capital to startup sectors such as manufacturing, banking and insurance. Bruchey’s Pennsylvania state charter study (Bruchey, 1968, p. 129) reported that 8% of that state’s charters (1790-1860) were issued to manufacturing firms. Between 1808 and 1815, Pennsylvania issued more charters to joint stock companies engaged in manufacturing than to all public utilities combined. This overlaps very nicely with the drift to, and including, the War of 1812 when the principal source of American private capital, British capital, was more costly or not available. States/local jurisdictions “stepped up to the plate” providing the missing capital to grow their manufacturing base.
Pennsylvania was not alone. “the strength of the American desire for economic development, the scarcities of capital funds in the early years following independence, and the sharpness of competition from foreign suppliers [of capital], manufacturing was endowed with a quasi-public and not private character, and given numerous encouragements by the state”. In the bastion of Progressivism, an 1818 Massachusetts corporate charter reads “Be it enacted by the Senate and House of Representatives in General Court assembled that the following named individuals hereby are constituted a corporation and body politic for the purpose of erecting a flour mill”.
Bruchey further reports that between 1808 and 1815 New York state issued more charters (165) to state-chartered manufacturing corporations than to all “public utilities–developmental infrastructure” corporations (164) combined. In 1817, NY offered freedom from jury duty and compulsory militia service to all textile employees. Vermont exempted manufacturing firms from state taxes between 1812 and 1830 (Bruchey, the Roots of American Economic Growth, 1607-1861, pp. 128-130). Eastern states and Big Cities clearly targeted manufacturing during the first decades of the Early Republic–state-chartered corporations were only one tool used by states in their agglomeration development.
Post-1815 reliance on state-chartered corporations deepened. Between 1824 and 1840, [mid] western and southwestern states issued $165,000,000 in bonds to provide banking capital to manufacturing firms. (Bruchey, 1968, pp. 129-30). Not infrequently, states guaranteed private corporation bonds–such indebtedness ultimately secured by taxes, not on the revenues and profitability of the corporation. What’s more, it appears that states played a secondary role, compared to municipalities, in financing start up financing to private corporations. Bruchey again reports that between 1830 and 1890 no fewer than 2200 laws passed by states authorized municipalities to provide local assistance to such entities (Bruchey, 1968, p. 135).
Pennsylvania offers the most detailed summary of how varied were the uses put to state-chartered corporations. Between 1790 and 1801 Pennsylvania chartered 27 commercial banks; between 1795 and 1801 32 corporations for supply of water and 4 for docks, and between 1786 and 1800 12 insurance companies. Amazingly, between 1790 and 1860, Pennsylvania charted 2,333 such corporations of with nearly two-thirds (64%) were transportation-related, 11% insurance, 8% manufacturing, 7% banking, 3% gas, 3% water, and 4% misc (Bruchey, p. 129). State-chartered corporations were no sideline or tangent in our history. They were the backbone of Early Republic city-building, development of manufacturing, financial agglomeration, and were the principal instrument or EDO in developmental-transportation infrastructure. In fact, unintentionally, Chief Justice Marshall in his 1819 Dartmouth College decision held a corporate charter to be contract that the state could not break without cause.
State-Corporation Charters as Engines of Technology Innovation and Venture Capital
Early transportation infrastructure (roads) meant access into a city’s hinterland—hinterlands were the source of domestic migrants, raw materials and agricultural products to process and export domestically and internationally. By the 1810’s or so the combination of domestic migration, immigration and transportation innovation facilitated significant city-building in the nation’s interior.
New cities grew rapidly, presenting both opportunity—and rivals for control of the hinterland in between. Distances were greater, as were trade volumes; waterborne transportation couldn’t satisfy demand. Railroads could–but the technology available was literally laughable given the vast distance and incredibly difficult topography. Success in canal-building (Erie Canal) resulted in herd of states and Big Cities to rush to building canals and roads to access them. Counter-intuitively, that success also inspired a novel (1820’s), horrifically expensive transportation innovation: the steam locomotive.
The race to break into the Erie Canal’s lock on Ohio’s Midwest grain and corn markets was when the Erie Canal opened for business in 1825-6. Pennsylvania State committed to fund its public/private, canal/railroad alternative, and Ohio approved an 1837 (Ohio) Loan Law creating a state program to loan one-third of canal or railroad expenditures to private entrepreneurs. Some large cities did not compete at all (Charleston SC). Where canals were not commercially feasible–they froze in winter and simply were useless in crossing mountains–some other technology had to be devised if the Big City was to compete in opening up the nation’s interior. Baltimore was a interesting case in point. If it wanted to challenge Pennsylvania in opening Ohio, it had to cross over the Appalachians. So he City and its private sector “innovated”.
Baltimore, the nation’s third largest city at the time, committed to an unproven and horribly expensive mode, the railroad. Inventor/investor, Peter Cooper (former real estate developer of Baltimore’s Canton neighborhood) and twenty-five local business investors led by Charles Carroll (signer of the Declaration of Independence) raised venture capital (VC) to finance design and installation of track, railroad stations, and a new technology (the steam locomotive) to compete in the race to Ohio. They had no track nor locomotive, just a hope and a prayer–and community support.
The investment group (1827) issued a 42,000 share “subscription” (a low-priced stock offering) to the Baltimore community. Like today’s crowd-sourcing, hundreds of Baltimore residents bought a share or two in a railroad with no assets or locomotive–$3mm (1827 dollars)–a substantial sum–to lay track between Baltimore and Ellicott City.
With the track installed (1830), investors proposed a late summer race between a horse/stagecoach and Cooper’s new-fangled invention, the “Tom Thumb” locomotive–America’s first steam-powered locomotive. The hope was the race would motivate investors into a second VC round to finance Tom Thumb, “the engine that could” power the Baltimore & Ohio and open up Ohio’s isolated agricultural production to eastern markets.
The race was held.
Tom Thumb broke down, almost immediately.
The horse literally trotted to victory.
and VC flowed into the project.
Doesn’t technological failure crush VC? Let’s ask Elon Musk. In Baltimore’s case, the 1830 race triggered a City of Baltimore buy-in. In return for board seats, the City injected $3m equity (proceeds from tax-exempt municipal bonds) into the private company, reorganized into a hybrid quasi-public city commission. Empowered to issue tax-exempt bonds and conduct eminent domain/tax abatement, that city commission/private corporation laid the track, built local stations and developed a working locomotive, complete with patents. B&O built the first passenger station and profit-making steam locomotive, and was the first to enter Ohio (1852). B&O won the competition with Pennsylvania. B&O went on to become today’s CSX.
The more things change, the more things stay the same!
Nearly 200 years later, innovation and VC still reflect hope, not actual performance. While Tesla’s Elon Musk got off to a better start, his Tom Thumb electric car already “worked” (selling for $100,000 with somebody else’s battery). Yet, despite no profits in sight, Musk’s “Tom Thumb”-equivalent electric car drowned in private/federal/municipal/state VC–like the 1830 B&O. More germane to state-chartered corporations is Musk’s SPACE X corporation which has entered into partnership with NASA (and others) to pave the way for interplanetary travel (colonization of Mars) and commercial development of space. Like B&O when it started, the technology did (does) not exist, and SPACE X, and its government and private partners had to experiment and develop it. The Tom Thumb-like failures are well-known to the reader. Yet, in its way, SPACE X is a 21st Century Silicon Valley opportunity for economic developers–and the nexus that firm/government partnership has already generated from its LA suburban HQ in Hawthorne CA, to Texas, Florida, Virginia, Washington DC, and Seattle.
Tom Thumb provides a glimpse into our three hundred-plus year economic development history, a history that includes public VC for privately-owned technology innovation–not to mention crowd-sourcing. In Baltimore’s city commission one sees an early version of our quasi-public development authority, and a government VC EDO. What’s more this was not new in 1830. State equity capital to private firms began in the colonial period. Tom Thumb and the B&O were only one example of literally hundreds.
Baltimore’s commission was not the first public/private railroad EDO, that being in 1817 New Jersey.
[i]Carter Goodrich, Government Promotion of American Canals and Railroads, 1800-1890 (Columbia University Press, 1960), reprinted by Greenwood Press, Westport CT, 1974, p. 268.
[ii] Peter Bernstein, Wedding of the Waters: Making of a Great Nation (NY, W. W. Norton &n Co, 2006).
[iv] Carter Goodrich, Government Promotion of American Canals and Railroads, 1800-1890 (Columbia University Press, 1960), reprinted by Greenwood Press, Westport CT, 1974, p. 10.
[v] “Lottery” compares to general public investing in public debt such as a bond. Using lotteries a significant portion of public infrastructure were financed, not through taxes, but citizen “investment”. The general public willingly purchased these infrastructure bonds.
[vi] Bruchey’s overview of 1790-1860 Pennsylvania’s charter issuance reveals total of 2,333 business charters/special acts were approved: 64% were transportation, 11% insurance, 8% manufacturing, 7% banking, 3% gas, 3% water, and 4% miscellaneous.
[vii] George Washington (1784) was an investor-owner of the Patowmack Company which attempted to connect the Potomac with western territories. The company went bankrupt. The early canals were short, and constructed in the South. The Great Dismal Swamp Canal (Virginia/North Carolina) opened in 1805 (Washington was involved with it as well) is allegedly America’s oldest presently-operating canal—it later become the starting point for the Inter-coastal Waterways Canal (Reynolds, Waking Giant, op. cit. p. 15).