New York City’s Breakout

 

As we have discovered in earlier modules, New York City’s rise can be traced from 1783, the departure of the Royalists, the 1784 Articles of Confederation capital, and the incremental shift of business elites from Boston/New England and the formation of New York City’s financial-trade-logistics clusters. New York City’s “breakout”, its rise to modern “World City” owes a great deal to the opening of the Erie Canal. New York City was “on the move” previous to the Canal, and while immigration in national aggregate had yet to “take off” the port of New York City attracted a disproportionate share of those smaller numbers. As important was the more pronounced flow of New England business elites in the period of Canal construction and 1825 opening. New York’s political leadership–both Federalist and Democrat–was remarkably pro-business, and during this period one can see serious evidence the perspective and orientation of NYC business elites exhibited a definite tilt to community development–which in these early years did not mean an anti-capitalist, anti-business bias. To the contrary, CD was seen as the balance necessary for capitalism to grow and expand.

In this module, using the biblical New York City tome, Edwin G. Burrows & Mike Wallace, Gotham: a history of New York City to 1898  (Oxford University Press, 1999), we outline the impact of the Canal’s construction and opening–with a perspective that asserts that the opening was a prime, not exclusive, cause of New York City’s subsequent rise to America’s urban hierarchical  leader of the pack.  In this description the focus will be on the effect of the opening on New York City’s economic base–and the enhanced shift in the composition (and philosophical tilt) of its business elites. In any event, as our narrative on the Canal observed, simultaneous with the 1810 approval of the transformative Canal Commission was a bi-partisan coalition of Democrats (that’s what urban Democrat-Republicans called themselves) and Federalists that made its approval possible, and provided the outlines of its dominant personages: DeWitt Clinton and Gouverneur Morris in particular.

This coalition also produced in early 1810 a plan (called “the Commissioners Plan, i.e. street commissioners), a street plan to be more precise, that transformed physical Manhattan. This is the appearance of its famous grid. The grid demonstrates that Inward MED and External MED enjoyed were to a degree autonomous of the other, and that New York’s Inward MED had a life of its own. The grid departed from European open boulevards, and clearly was compatible with capitalist real estate development and speculation. In its implementation eminent domain and demolition was critical, and historical preservation (of the early Dutch street pattern and architecture) was not a priority. For our purposes in tracing the Erie Canal breakout, I observe that as of 1810 New York City was still “on the rise” despite a statistically misleading decade of population growth between 1800 and 1810 (Manhattan’s increase over 60,000 to 95,000). Upstate grew far more dramatically than the City in that decade. It is worth note (1) that non-immigrant Tammany Hall stuck closer to the Tidewater national anti-British perspective, while (2) Democrat Clinton adhered closer to the Federalist pro-trade, pro-British/anti-War of 1812 tilt. Clinton would capture the Federalist nomination for President against Madison in 1812. The marked pro-trade, the more ships in our port the better, New England position clearly was strong in New York City at that time. This may have either pushed or reinforced Madison’s testy refusal to provide federal aid to the Canal as likely “unconstitutional” despite his doing so for Virginia’s canal system. All this in no way inhibited NYC shipbuilders from contributing their share of frigates, gunboats and privateers. The blockades, however, proved disastrous to the larger city economy.

The 1815 Peace, and the reopening of world trade was a major reason why Clinton quickly resumed his frustrated efforts to construct the Canal. In that year at a assembly of NYC merchants he assured that constituency the canal would make NYC “the greatest commercial emporium in the world“[1] (p. 428). Tammany opposed its construction. In April 1817 Albany approved construction to be performed by a state-owned agency, financed with state funds/bonds, and managed by non-private employees. The effect of its opening in 1825 was almost instantaneous. “Within a year of its opening boatmen were steering forty-two barges a day straight to Utica, bearing a thousand passengers, 221,000 barrels of flour, 450,000 gallons of whiskey (corn/wheat were cheaper to ship if made into whiskey), and 562,000 bushels of wheat… Enough money would be collected in tolls–nearly a half million dollars the first year alone–to repay the cost of construction, and help subsidize an additional six hundred miles of [feeder] canals in the state over the next fifteen years [2] p.431. Interestingly, the effect of this vast tonnage of agricultural products into NYC put the kibosh on that city’s remaining agricultural base.

The canal construction years overlapped with yet another major transportation innovation: the clipper ship. It was the clipper ship that ensured NYC’s successful postwar reentry to world ports and markets. Like all innovations, many thought it less than innovative, but English immigrant Jeremiah Thompson sailed his first clipper from the City in January, 1818 (winter in case you wondered, in a snow squall in fact) his ship, the James Monroe, left port and arrived in Liverpool twenty-five days later–a sister ship from Liverpool raced it and it arrived in NYC in forty-nine days. Thompson then commenced his regular “Black Ball Line, on a regular schedule shipped to Liverpool. The lure of profits attracted a weirdly-named sea captain from New Bedford (his name was, believe it or not, Preserved Fish) and he set a rival clipper line, the Swallowtail Line. “Within two decades fifty-two [clippers] would be traveling regularly from NYC to Liverpool and Le Harve, an average of three sailings weekly, with an average transit time of thirty-nine days” [3] p. 433. After 1820, clippers started carrying passengers. And that meant NYC became the destination of choice for a growing number of immigrants. Between 1820 and 1832 NYC immigration rose from 3,800 to over 30,000. In 1837 it exploded to almost 60,000 (three-quarters of the nation’s aggregate). Between 1820 and 1825, NYC’s population swelled from 124,000 to 160,000–and then with the Canal opening to 197,000 in 1830 [4] p.434. Innovation in transportation modes was indisputably critical to NYC’s demographic breakout.

A feeder network of three anthracite canals commenced operations between 1832-4 (Delaware and Hudson, Morris, and Delaware and Raritan) linking Kingston on the Hudson to Pennsylvania’s Lackawanna Valley. Less obvious was the subtle–but transformative–shift of New England-based commercial merchants to the City during the 1820’s. As Gotham asserts “during the 1820’s mercantile supremacy passed to [former New England merchants] Grinnells, Griswolds, Howlands, and Goodhues would had come down in the Napoleonic boom, and a swarm of newcomers who followed them“.

Newcomers specialized in particular commodities: for example, Phelps and Peck (from Hartford CT) opened up a metal import firm in 1818 NYC. Phelps shipped cotton from NYC to Liverpool, and Peck shipped sheet copper and brass wire from Liverpool to NYC. When the Canal opened the trade expanded into the Midwest using the Canal. When Peck retired in 1832, Phelps recruited his Connecticut-based brother-in-law to replace him and that created Phelps-Dodge. Also, in 1815, one of two brothers moved from Boston to NYC to establish a silk-importing trade. His brother moved down in 1827. If pressed, I am tempted to entitle the brothers the formal founders of the Second Wing of America’s CD movement–but I will resist that at this point, merely hinting that NYC during the Panic of 1837 (frankly, even previous to that) witnessed the launching of several pioneering CDOs funded directly and indirectly by the Tappens [5] p. 434.

One consequence arising from the fast-evolving services-based economy was the rise of a mostly male dominated middle-class managerial and administrative occupations. Such occupations offered some hope of a career and further improvement in both income and lifestyle. Another occupational cluster, sales people and wholesale traveling sales people, jobbers, was a gazelle-like occupation. All sorts of clerical positions opened up, which offered working classes some prospects of improvement and career as well. Longshoremen and “cart and junk men” got goods out of ship’s holds and transported them throughout the City and its neighborhoods–serving as delivery–like kiosks with service to your door. Budding affluence itself spawned professions such as medicine and offered small business opportunities for neighborhood-level consumer discretionary services–like bars, food, and dry-goods stores. Call it urbanization or whatever you will, growth in population brought increased prosperity. Suffice it to say, during these years such growth/prosperity was not always as apparent in other, smaller, North American cities with a different economic base.

These were also the golden years of John Jacob Astor who not only opened up fur trade in the West to the Pacific, but also NYC trade to Latin and South America.  German-born Astor, immigrated via England to 1783 NYC (his pre-canal story is told in an earlier module), but from 1799 on, he invested in NYC waterfront real estate which he sold in 1826 to Thomas Smith who imported massive amounts of tea from China, and stored in the Astor warehouses, but went bankrupt. In 1829, when Seth Lowe from Salem MA (my home town) moved down to NYC he purchased the property and international trade to China that Astor had established a quarter of a century earlier, infused it with the Salem clipper and whaling trade now relocated to NYC, and it was he who attracted the previously mentioned likes of Griswold, Goodhue, Howland, and Grinnell to do the same in the 1830’s. Lowe’s son, Abiel, moved to Canton China in 1833, cementing NYC’s leadership in the Chinese trade from Salem [6] p. 435.

Not surprisingly a shipbuilding agglomeration on the East River, and on the Hudson side as well. With raw materials arriving from the Canal down the Hudson, the Navy opened up a facility in Brooklyn, and the Black Ball Line commissioned its own ships. In 1824, several shippers, related service/manufacturing and shipbuilder companies formed the 1824 New York Dry Dock Company, which offered financing for users through its own banking subsidiary, and in 1827, a machine-driven runway that launched and pulled ships from the water. The key innovator in that agglomeration was Robert Fulton’s steamboat engineer, James Allaire, who moved Fulton’s engineering facilities from New Jersey to the NYC docks and in a few years grew into the nation’s largest boiler and marine engine manufacturer. Within the City as a whole a dispersed collection of small-scale manufacturers seized upon what little cheap space they could find and set up their facilities”

the great bulk of manufacturing after 1815 took place in small frame or brick houses, near the waterfront, without steam power or other elaborate equipment, and typically involved the production of light consumer goods–shoes, furniture, and clothing–for wholesalers or auction houses. After 1815 Brooklyn was a beehive of small shops that churned out playing cards, pocketbooks, combs, tinware, patent leather, iron chests, marble mantles, mustard, writing ink, pencil cases, white lead, paint, glass and more–among them furniture-maker Duncan Phyfe [6a] p. 443.

The net effect of all this commercial elite resurgence is captured in a nutshell by Gotham: “The web of canals, steamboats, and [clipper ships] that New York flung across the world in the 1820’s and 1830’s captured a wider and wider share of the nation’s import business–from 38% in 1821, to 62% in 1836. It also brought an unprecedented multitude of ships into the harbor. One day in 1824 there were 324 at anchor in Manhattan … on a single day in 1836 921 vessels lined the East River bulkhead … while another 320 bobbed along the Hudson … dozens of new wharves, hastily-constructed … spouted from the shores of both the East River and the Hudson River”. This in turn created a dramatically different composition of NYC business–and an entirely new breed of commercial elite: the wholesaler or “jobber” “who bought cheap imported British-manufactured goods at auction, and shipped them, on commission, to far-off country storekeepers via coastal [clippers] and the Erie Canal” who in turn brought back agricultural produce and fuel to NYC–creating yet another cluster of commercial traders.

“By 1840 [there were] 417 commercial houses active in [NYC] foreign trade [and NYC] had 918 commission firms [wholesale] firms that consigned goods to domestic markets in every region of the [nation] [7] p. 436. The network of jobbers, now centralized in NYC, supported a series of elite hotels that served as great locations for using the nation’s business expense accounts, and a “Restaurant Row” that included the famed Delmonico’s. Adjacent to the never-very-far-from the waterfront was a nexus of retail stores, dry-good stores–and after 1827, the New York Arcade which housed forty stores on Broadway. One of the, started in 1818 by a transplanted Connecticut merchant, acquired the moniker of Brooks Brothers by 1837. The vast retail cluster was soon dominated by our Tappan Brothers [8] pp 437-9.

We can also include several new clusters that developed during this period. These clusters were not created directly by the Canal, but the opening of the Canal provided opportunities which cemented their success in New York City. A good example of an agglomeration that developed along these lines is publishing, especially book publishing. As early as 1823, Arthur Tappan who had just emigrated from New England a year earlier, founded the Journal of Commerce–a business publication that also advocated abolitionism and a strong CD agenda. By 1830, NYC had about 47 newspapers, 11 were dailies including the 1829 Courier & Enquirer [9] p. 440 which soon became the nation’s largest circulating newspaper. The Journal by that time had a readership and delivery service as far away as Washington D.C.

In this publishing atmosphere, book publishing flourished. Charles Wiley was among the very earliest, followed by the Harper Brothers who developed a following on its rush publication of great British authors. Daniel Appleton a Massachusetts shopkeeper who moved to Manhattan in 1825 sold books with groceries–and then became a book publisher. Book publishing took on a seasonality, as new publications and editions were rushed out in the fall for sale to Upstate New York and the Great Lakes Midwest–before the canal froze publishers got material into the hands of consumers for those long winter nights. One of these is Clement Moore’s first published in 1823 as “A Visit from St. Nicholas” in 1823 went up the Canal in subsequent editions as “the Night before Christmas“. More on Clement Moore later.

All this growth ultimately rested on you-know-what: money and liquidity of money. In particular there was often a lap from when the good was shipped, often through a wholesaler on commission, moved to its ultimate point of sale, then purchased, and finally paid for and received by the original manufacturer. Obvious wholesaling in particular needed its own type of financing and not all banks were willing to venture into this type of business. As late as 1815 there were only five commercial banks operating in NYC, including Hamilton’s own Bank of New York, and Burr’s old Manhattan Company. Owned by the age-old Knickerbocker elites, and used by the longstanding Knickerbocker merchants, these older banks offered little to the new agglomerations developing in the City. In the two decades following 1824, eighteen new banks secured a chartered from the New York State Legislature (including today’s Chemical Bank).

Alongside this lending nexus, another type of bank–a bank which specialized in the purchase and sale of debt issued first by the Erie Canal Corporation, and then by other related canal and infrastructure companies. Several of the Erie Canal notables, especially Thomas Eddy, William Bayard Jr., and DeWitt Clinton his-self, created a savings bank (1819) where working class could make deposits, which could then be aggregated to purchase canal debt. Marketed as the “Bank for the Poor”, it soon attracted thirty-thousand depositors. This encouraged thrift of the working class (albeit with a somewhat uncertain risk attached) and created a banking sector willing and able to purchase and sell government debt. Attractive to foreign investors, the canal debt was eventually sold off and the risk was assumed by interests outside the nation. The Bank was enormously successful and was bought out by the Buffalo Savings Bank in 1982, becoming Goldome. Goldome failed in the savings and loan crisis and today, I believe, is part of the M&T system. In any case that bank was NYC first mutual savings bank.

Still another type of bank that was incorporated in NYC was the “investment bank”. Yet another Boston emigre, Nathaniel Prime, who first settled in around 1795. Over the next few years, he married well, sold stocks, and became a private banker. Drawing upon his New England ties he developed an investor network to develop his capital base for his new bank. He then bought government debt, broke it into smaller units, and sold it to the retail investor. His firm, Prime, King and Ward soon became the nation’s largest such bond purchaser and a network of prominent foreign banks and clients as purchasers of its debt. They too sold Erie Canal debt, and then took on debt issued by canal projects in many other states across the nation. Prime, King and Ward collapsed in 1847, speculating in commodities, but in the meantime the company was a key vehicle for America’s early DTIS financing.

All this debt churning through the various city banks and lending institutions invited a more organized trading and selling institution. Building on the 1792 framework that established the Tontine Coffee House Stock Exchange, several dozen bankers sold Nathaniel Prime on the idea to form a “New York Stock Exchange”, in 1817, and serving as its first president. The New York Stock Exchange still operated out of the Tontine Coffee House, but feasting on first Erie Canal debt, then canal debt in general, the Stock Exchange over the next decades grew in influence and prominence into a national economic institution–albeit a volatile and frequently viewed as manipulated speculation, that in the Gilded Age innovated into options trading. The Stock Exchange was the frosting on the cake for New York City.  Wall Street, with some roots tracing back to pre-Revolution days, physically took off with new, formidable, expensive architectural wonders after the 1825 construction of the Branch Bank of the (Second United States), and two years later, the New York Stock Exchange moved to Wall Street.

As early as 1830, the City overtook its principal American urban financial competitor, Philadelphia, as the nation’s financial center. At the same time, the City held the assets of more insurance firms than any other urban center in the United States. More than anything, that financial juggernaut rested on Erie Canal debt.

 

 

 

Death to the New York Articles/Federalist Policy System and Rise of NYC’s First “Modern” Policy System

The Articles/Federalist Policy System, in my view, formally ended in 1821, with the removal of the New York State Council of Appointments. In that year a new state Constitution empowered the New York City Council, called the (all-too) Common Council, to elect the city’s mayor. In 1834, the mayor became directly elected by the voter. The 1819-21 period were a rather tumultuous and conflicted time in which system change was evident throughout the former northern colonies. Maine some might say broke away from Massachusetts and became an independent state in 1820, and Boston became a city (up to that point it was a town) and acquired a great deal more autonomy from the state legislature. In 1822.  At the end of that year, one of its greatest mayors, Josiah Quincy was elected–a huge new-style city-building and urban renewal followed over the next five years.

In New York City, a new policy system developed during this period, and the period that followed reflected the city’s growth explosion caused by many new agglomerations, transportation innovations and the new DTIS infrastructure, the waterfront, and Erie Canal and the network of feeder canals that followed. During this post-1821 period we can see increased priority given to what we label as “Inward MED”, such as the City’s search for water commencing with seriousness in 1823, and the City’s incorporation in 1823 of the New York Gas & Light Company. Inward DTIS MED began in 1829 with the first Omnibus. We shall also see the emergence of urban “progressive-style” First and Second Wing community development, and the rise of Third Wing workingman’s unions. Each coexisted with an earlier-formed political powerhouse we know today as Tammany Hall, an older institution which took its own distinctive path during this period. Presiding over this mélange was a semi-competitive two party competition that reflected a bifurcated Privatist business elite, each with its own ED/MED/CD styles and priorities. In essence a distinctive New York City Privatism, remarkably different than its neighbors Philadelphia and Boston was taking shape in what was fast becoming a an urban “world-city” behemoth.