Concepts Applied to Early Republic-Gilded Age Big City Development: Pre Policy System Cut of Chapter 4 Rise of the Industrial City

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Chapter 4: The Rise of the Industrial City

 

I apologize. The devil made me do it. But it has to be done. This chapter outlines the fetal development of American economic development. I’m not forgetting the wonderful beginnings revealed in the previous chapter, but the arrival of a brand new industrial economy and city, flooded with teeming hordes of immigrant populations, not to mention a new federal government arising out of the Civil War, this is a chapter of new beginnings. The birth consumed nearly twenty years, actually more, before the new beginnings fully appeared and were ready to be slapped on their urban butt. This chapter observes a good deal of that birthing process and tries to select out a few themes of future consequence. There are moments when it is not clear what we are seeing, or we wish to turn our head and look away. In between painful screams, however, it is like watching cement dry.

For the most part we restrict this chapter’s focus to the post-Civil War (1890) period. Specifically, the chapter will dwell upon three critical topics: the rise of the industrial economy/jurisdictional economic base, the slow enhancement of sub-state governmental policy system/governmental capacity, and the physical growth of the industrial city which promoted much of the initial economic development activity. Economic development, as we know it today, did not formally exist during these years—in fact, it is from this primeval womb that we would assume our present-day shape. But in these years, especially in the late seventies and eighties, our first truly contemporary EDOs would emerge, and several very critical pillars of our profession were institutionalized. Most importantly, the firms, sectors, and industries of our modern economy were founded and the clock started ticking on their profit life cycle. There is considerable irony that these ticking clocks were attached to profit cycle bombs that would explode in the same decades a hundred years later, destroying in their explosion the Big Cities whose rise this chapter describes.

 

It was a difficult time and it is not easy to glean lessons from its confusing sets of pushes and pulls, glories and shame, advances and declines. These were years of pure change. I believe the changes in these years dwarfed anything associated with the Internet, technology and even globalism that hit us in the late twentieth century, so dramatic, novel, disrupting, and transformational to the individual and to the institutions of life, business and politics they were. They were years of growth—important to us as economic developers. The growth in population, GNP, and jurisdictional economic bases were incredible. They were, on the whole, prosperous years—a prosperity that fostered strong middle class/managerial elite as well as rich robber barons.

 

The rising tide of Prosperity, apparently, did lot lift all boats in that it left the American and immigrant working class and African-American and white/immigrant subsistence farmers in such desperate shape that unions, populism, and social revolution were important drivers of potential and actual change. They also were the years in which a political/economic regional hegemony of Northern and Midwestern Civil War victors institutionalized itself into political and economic control of the nation—rendering, at least the perception, if not the actual reality, that the other regions (South and the several West) were little more than its colony.

 

Sector Shifts-Profit Cycles, and Agglomeration and National Markets

 

Markusen: Oligarchy and the Industry Profit Cycle

Markusen’s profit cycle model[1] captures and provides explanation and context to changes in the jurisdiction’s economic base—one of three key drivers of American state/sub-state economic development. Her model also includes oligopoly (industry concentration) which is useful in our analysis of changes in business elites over time. Markusen’s model overlaps economic development strategy, tools, and programs as well.

 

Big Cities formed their industrial economic base during the post-Civil War period—and the profit cycle of their industries and sectors commenced more or less simultaneously. As her profit cycle matures and oligarchy happens, jurisdictions react, and change in the mix and content of business elites in their policy process occurs. In time, these sectors and industries will mature, stagnate and decline—introducing the specter of regional decline and inter-regional competition. Each stage of the profit cycle is characterized by a distinctive location concentration of its firms. Older mature less profitable firms and sectors are typically located in places that prove unattractive to young, innovative hugely profitable firms. Later commentators would attribute this to conservative lenders and a jurisdictional base supportive of mature firms, and hesitant or intolerant of new sectors. In later chapters the spatial implications of the profit cycle will be more developed. Suffice it to say, as Gilded Age manufacturing spun off new industries, these industries often located in newly settled geographies or younger cities.

 

Markusen asserts profitability (and employment) in any industry/sector proceeds over time through a cycle which stretches from industry birth, to maturity, and inevitably to decline. This is the time bomb to which we earlier referred. In each stage of this profit cycle there occur specific dynamics which affect the level of profitability (and employment levels) of each firm within that sector. These shared industry-wide dynamics do not inevitably determine the decisions and behavior of each firm in that sector—but they affect its decisions and behavior. Firms in an industry in any given stage of the profit cycle may share identical realities and dynamics–but they do not have to make identical decisions on how to react to these dynamics. The passage of any individual firm in a given sector through the cycle can be significantly altered by corporate strategy and decisions.

 

Her profit life cycle follows five sequential stages. While sector market dynamics can be volatile in the short-intermediate term, over the long haul each sector will roll from one stage to the next.

 

• Stage 1–Zero Profit: [Birth of sector-industry/firms–Experimentation]: This is a stage of experimentation, proto-types and Schumpeterian-style innovation. Firms in embryonic sectors might be housed in a department of an existing firm or an entrepreneur tinkering in his garage. Innovation can occur simultaneously across a number of cities. Production output is low and financing non-existent. Innovation may be knowledge intensive, and may need to wait for a technological-process leap to be discovered. This stage can last for decades. Firms and industries can be locked into this stage until new sectors and technologies emerge or demand materializes.
• Stage 2—Superprofit [Innovation]: Commercialization and scaling up to meet substantial demand often require congruence from several sector innovations. The first computer model originated in the 1880’s. “Once a new product or service is successfully innovated (commercialized), it becomes a new sector”. Stage two is the “stage of dramatic growth in which profits rise well above the economy-wide level”. These are the famous “gazelles” whose entrepreneurs are the clients of much of twenty-first century economic development. During this stage agglomeration (or clustering) is most likely to occur. Late in this stage “the potential for oligopoly and … greater labor productivity through mechanization (productivity) increase … levels and rates of change in output, employment and investment slow.
• Stage 3–Normal Profit [Competition]: “Eventually the entry of new firms into the market and the expansion of existing ones result in the chipping away of superprofits until an average rate of return results. Output is growing, production rates are slowing with more intensive price competition. Markets approach saturation, production costs are increasing; cost minimization is paramount”. As Stage 3 continues there is further destabilization, or the firm through acquisition or new markets/product uses finds new paths to growth. A corporate strategy of industry consolidation through acquisition, leading to oligopoly within the industry, is likely to begin in this stage. Jurisdictions hosting the victor in an industry consolidation become “headquarters” and will capture jobs and acquire a edge in competitive hierarchies. Others will be branch cities.
• Stage 4–Normal-Plus-Minus Profit [Maturity]: “In the long run the innovative drive of capitalist economies ensures the obsolescence of most products, if not sectors“. Destabilizing forces include: increasing concentration, predatory competition, commoditization, substitute products, process innovation, and market saturation. Once reaching Stage 4 oligarchy permits greater-than-normal profits. In this stage, however, cost minimization goes on steroids. Plants close, are bought out, or move to lower wage locations–firms are very mobile at this stage. Business retention and cost minimization strategies are required. Firms can persist for a surprisingly long time, or conversely, the firm can succumb quickly.
• Stage 5–Negative Profit [Decline]: “In the final stage corporate producers will be taking absolute losses on production and trying to liquidate a plant as fast as possible“. Firms and sectors at this stage are the “walking dead” of capitalism. Economic developers can attempt to prop such firms up artificially with loans and/other cost reduction strategies, but debt accumulates to the point that no further investment is likely or possible. The product is mature or obsolete.

 

Stage 4 is especially critical—firms/industries are vulnerable, but as long as significant industry concentration, a substitute product, or undue competition does not occur, firms can persist for some time. In due course, either oligarchy will form or obsolescence and product substitutions will develop thereby moving industry/firm to the next stage. Stage 4 corporate strategy can involve government largesse, regulation/deregulation, tax avoidance, or other benefits. Productivity enhancement lowering costs is, however, the major exception, and this can often reduce employment. Unions in this stage can easily become a barrier to a firm in its quest to minimize costs to compete/maintain profits. With oligarchy firms are located in several cities and logistics and differential market demand can exert impact of branch location. Age of facilities can impede productivity enhancements. Sub-contracting can be a viable cost-reducing initiative.

 

Oligarchies can minimize these pressures or delay them for some period of time. Fewer producers of goods restrict production volumes, raising prices and profits. As oligarchy forms corporate strategy tends toward protecting market share, product differentiation, and intensive marketing/branding. Some oligarchies will emphasize greater research and development, but mostly innovation and new capacity investment in a mature sector will be minimal.

 

You call it Cluster, I call it Agglomeration: Forming the Jurisdictional Economic Base

During the Gilded Age the American economy gradually shifted from an overwhelmingly agricultural economy to an increasingly industrial economy. It wasn’t until 1920, however, that a majority (51%) of the workforce were no longer employed in agriculture. In the pre-1900 period most Americans are still down on the farm. From the get-go, different cities developed distinctive sector/industry configurations. Sectors such as manufacturing, finance, transportation, communication, power and energy, and basic materials expanded, as well as agriculture whose production increased until 1900. But manufacturing sectors were the real gazelles of the era, the Stage 1 and 2 sectors. Manufacturing firms, in particular, evidenced a pronounce tendency to cluster in certain metropolitan areas disproportionately, a phenomenon known as agglomeration.

 

Post Civil War Big Cities formed a core agglomeration for multiple reasons. First, the war itself, army and war products, prompted a number of existing firms to grow and competitors to locate nearby. Secondly, the war and its immediate aftermath were periods of great railroad expansion and then consolidation—both had serious effects of jurisdictional economic bases. Thirdly innovative entrepreneurs, availability of cheap (but often skilled) immigrant labor, and the attraction efforts of city-builders created a fair share of sector differentiation. Finally, early sector oligarchies diffused innovation and technology into cities where bought out or obsolete firms had originally formed.

 

The Civil War itself set things in motion. Huge profits, inflated prices and government contracts spread disproportionate to some sectors. With the closing of the Mississippi to the Northern farm produce, Midwestern agricultural exports moved along new routes. Chicago, and Buffalo, benefited enormously. Farm implements were in great demand. Pittsburgh, Troy and Philadelphia developed metal work specialties for cannon, rifles, locomotives and metal to convent wooden ships to ironclads. Philadelphia erected 180 new factories in three years—becoming in the process the nation’s leader in manufacturing. With cotton unavailable, New England textiles switched to wool (uniforms and blankets), and the newly invented sewing machine prompted shoe factories to spring up in these New England textile centers. New Haven saw six factories built for firearms and locks. Pittsburgh built foundries for iron and steel needed for all these goods. The federally-owned Springfield (MA) armory and its St. Louis drug laboratory both attracted smaller firms to open[2].

 

The impact of Western transcontinental railroads on city formation is a well-worn tale (in case it isn’t the reader will find it in another chapter)—but railroads formed cities in the East as well. Railroad access to Ohio and points west largely occurred during and after the Civil War. These were the years that trunk lines, the backbone of our rail system, were forged by ilk like Vanderbilt and J. Edgar Thompson and John W. Garrett. Eastern cities in every state “bought” railroads to run through their cities. “Nearly three hundred New York State municipalities extended such aid to railroads before 1875”. Rochester got three lines to run through its city limits, selling three separate $ 1 million dollar bonds, to close the deals. Buffalo paid $ 1 million to get an additional line[3]. “Chicago’s period of vigorous railroad promotion ended in the sixties; St. Louis, after a late start, endeavored in the seventies to recoup lost ground. Toledo and Milwaukee had to take the initiative in building lines as did St. Paul …. “Cincinnati and Louisville competed to extend lines to Chattanooga and Nashville, then to Atlanta and Birmingham—doing their imitation of Sherman’s March to the Sea. Following in their wake were existing firms seeking expansion into new markets.[4]

 

Other factors affecting the dispersal/agglomeration of manufacturing sectors was entrepreneur serendipity—an innovating entrepreneur launched the start up in a particular city simply because that is where he lived–and the sector developed initially in that city. Rochester, New York provided an excellent example. The Erie Canal triggered a serious flour processing sector in Rochester, and during the post-Civil War period Rochester capturing more than its fair share of clothing, shoe, brewing and woodworking facilities grew to 100,000 by 1885. In 1880, however, a largely self-taught local 26 year old Rochester Savings Bank bookkeeper, George Eastman, quit his day job and opened up the Eastman Dry Plate and Film Company. In 1885 the former bank teller got his first patent for a roll-holder device (so cameras could be smaller and cheaper) and sold his first camera, the Kodak, in 1888. He pioneered advertising slogans—his being “you click the button, we do the rest”. By 1927, Eastman-Kodak was the largest firm in that industry sector.

 

Oligarchy assumed great importance in agglomeration around the turn of the century, but some examples did occur in the 1890’s. “The typewriter brought life to Ilion, New York, and new vigor to Syracuse; telephone factories clustered for a time at Boston and Chicago, but soon spread out; the cash register placed Dayton on the industrial map. … Bicycle companies sprang up in a host of towns … but shortly after 1899 when the American Bicycle Company absorbed forty-eight of them; production was centered in ten plants at Springfield Illinois and Hartford, Connecticut”.[5]

 

Finally, agglomeration was not restricted to our Big Cities only. Second and third tier cities also developed strong core agglomerations as well.

 

But not all cities followed the diversified pattern of the giant metropolises. Often drawing on local technology, nearby resources, or the production of an agricultural hinterland, many smaller cities specialized in certain kinds of manufacturing—rubber in Akron, glass in Toledo, cash registers in Dayton, electrical products in Schenectady, fur hats in Danbury, brassware in Waterbury, silverware and jewelry in Providence, collars and cuffs in Troy, leather gloves in Gloversville, brewing in Milwaukee, flour milling in Minneapolis, farm machinery in Racine, meat packing in Kansas City and Omaha, cotton goods in Fall River and New Bedford, shoes in Lynn, Haverhill and Brockton, steel in Youngstown, Johnstown, Birmingham and Gary. Many of these cities also became regional marketing and financial centers, for industrial activity of any kind generally stimulated subsidiary industries …[6]

Manufacturing often shared the limelight with other sectors. While most cities developed dominant manufacturing sectors, others, however, clustered around finance or hinterland assets. Finance sectors constituted New York City’s core; it developed into the nation’s financial capital. Des Moines, Iowa[7] and Hartford developed into America’s insurance capitals. By 1880 there were 6500 plus banks with national, state or private charters and several cities became banking-finance centers after the passage of the National Banking Act of 1864. These regional banking centers, however, were dependent on the investment and money capital banks headquartered in New York City. Finance, and transportation manifested an early and pronounced industry tendency to form an oligarchy—an oligarchy which permitted some metropolitan decentralization of firms, but which centralized economic power and leadership in a very few headquarters cities.

 

Transportation was yet another sector around which individual cities built their economic base. Being a transportation hub often also meant that other industries/sectors would locate in the metropolitan area as well. Buffalo, for instance, became the transshipment capital of the Great Lakes, the nation’s second largest port and a top railroad hub. Its pioneering innovation of grain mills allowed for the storage of Midwestern agricultural produce which arrived by ship, to be stored until picked up by railroads for shipment to Eastern cities. Chicago, St. Louis, New Orleans, and, of course, New York City lived off their port facilities and the transportation nexus connecting to them.

 

Another pattern was cities whose economic base developed around natural resources/extraction and processing. Eastern coal-mining cities of Hazelton, Scranton and Wilkes-Barre Pennsylvania and coal/oil/gas towns surrounding Pittsburgh/ Toledo are examples. In later decades, oil and gas will transform the cities of Texas (and other southwestern states) into national economic powerhouses. Absentee ownership, innovation in logistics, technological change, and unstable pricing of their product were key factors affecting their economic development strategy.

 

Corporate Structure, National Markets and Concentration: Changing Business Elites

One thing for certain, economic change during the Gilded Age profoundly transformed business elites and jurisdictional policy-making systems. It seems more natural to focus on the incredible shifts in jurisdictional economic bases, and to put to the side the rise and fall of business elites and their “managerial” workforce—the disproportionately powerful element of the Early Republic economic decision-making policy system. Our Chapter 1 policy model posits economic development as a policy area tends to be a “closed” policy system with business participation constant, dominant, and in the nineteenth century conducted principally by privately-governed EDOs. Shifts in business elite has to be critical in that context. As important is the recognition that “business elites” is a composite label; the changes during the Gilded Age, gave rise to new forms of business elites. Accordingly, we can trace, from the beginning so to speak, the arrival of new forms of business, organization the corporation, and the business elites it fostered.

 

Early Republic business elites in Eastern port cities were well-established wealthy cosmopolitan commercial/financial businessmen, landed aristocracy, and a few emerging manufacturing owners. Perhaps more than any other period in our history, they were a true business community. Business elites in newly settled cities, on the other hand, were entrepreneurial city-builders, less wealthy perhaps, but economically and politically more powerful in their smaller jurisdictions. In any case, the general merchant elite of the colonial era had long since given way to specialized firms, each doing one thing (such as transportation, logistics, insurance, construction, law, banking, retail) in one sector only. Whether wealthy Eastern shipper or frontier tavern owner, the predominant pre-industrial organizational structure operated a single-unit (operated exclusively in one sector only), family-owned or controlled firm. These family business men/women owned and managed their firm and produced for, or serviced a market which by today’s standards was “local”: a city and maybe its hinterland at the most.

 

Before the appearance of the multiunit firm, owners managed and managers owned. Even when partnerships began to incorporate, their capital stock stayed in the hands of a few individuals or families. The corporations remained single-unit enterprises which rarely hired more than two or three managers. The traditional capitalist firm can … be properly termed a personal enterprise.[8]

 

After the 1840’s[9], access through new transportation systems to new regional markets, emergence of a new industry, manufacturing, with its rural and immigrant factory labor force, assumed prominence in the local economic base. The Early Republic traditional business “system” and “community” changed. By the 1880’s a new community decision-making system was fast coming into place.

 

Where workers and owners may once have shared common experiences of community, schools, churches, civic groups, now barriers arose: the wealthy left congested residential areas for secluded, clean and fresh suburban areas, they sent their children to exclusive schools, their wives to expensive resorts … summer homes and trips abroad, and their families to newly built elegant churches where they could hear Sunday sermons about the virtue of wealth, the sorrows of poverty. And more and more, as the industrial worker took on a distinctly ‘foreign’ cast … the wealthy came to seem a homogeneous group: white, Anglo-Saxon, Protestant and Republican ….. We have to reckon, then, with the fact and the perception of a widening class rift.[10]

 

Changes in class structure and attitude were reinforced by changes in business structure and governance. “The rise of modern business enterprise brought a new definition of the relationship between ownership and management and therefore a new type of capitalism to the American economy”.[11] Business became larger in size, operated across several jurisdictions and states. Firms no longer concentrated within a single sector, but overlapped several. “Multiunit business enterprise replaced [the small traditional single-unit enterprise] when administrative coordination permitted greater productivity, lower costs, and higher profits than coordination by market mechanisms”.[12]

 

Importantly the ownership of multiunit firms depended on a new managerial class to operate their far-flung and specialized sub-units. Where the small single-unit firm was tied to local markets, owners could manage and own simultaneously—not so in the new capitalism. “Thus the existence of a managerial hierarchy is a defining characteristic of the modern business enterprise”[13] Managers became separated from ownership which, over time, withdrew from day to day affairs and decisions. Owners bought and sold firms; managers operated them and made them profitable. Business elites included both owners and managers, but the world view of each was quite different. And the pace of these changes was uneven, varying greatly among different sectors and industries.

 

Business Community in the Industrial City

The world view of each, quite different, yet over-lapping in key areas, was radically different and more segmented than that of the Early Republic. Using managers to access regional and national markets, the firm was able to rise above limitations by a the local market demand. Travel and the need to acknowledge other markets diffused the formerly exclusive attention business elites could attach to one community. These changes would carry over into the municipal (and state) economic development policy processes. The rate/effect of such change was uneven, varying by sector and industry. “Enlarged markets were essential …. Therefore, modern business enterprise first appeared to grow, and continued to flourish in those sectors and industries characterized by new and advancing technology and by expanding markets.[14]

 

Through “management” the modern corporation took on a “life of its own”. Managers of a corporation made capital mobility possible. Managers, however, were not all of the same ilk; they reflected the internal diversity of the corporation they managed. Salesmen competed with production managers, CFO’s with Public Relations—managers followed career paths based on differing expertise, training, experience and performance—not solely on family or inherited wealth. Their way of thinking, even value priorities, reflected their professional and occupational training and experience as well as new opportunities. “With the coming of a modern business enterprise, the businessman for the first time could conceive of a lifetime career involving a climb up the hierarchical ladder”.[15]

 

Managers focused on to how best to grow the firm, protect its sources of supplies/resources, make it more efficient, discover and seize advantage from new markets/products, and render the corporation more profitable. History will focus on the owners as “robber barons”, but it was the managers who won the race for corporate control. By the early twentieth century managers, not owners would be the driving force of the new capitalism—that however, is a story for Chapter 5.

 

After 1850, the railroads developed into our “first modern business enterprise”[16]. Transportation, because of its inherent characteristics, moved quickly thru stages and evolved into a Markusen oligarchy. “The evolution of the nation’s first modern business enterprise [railroads]—as well as the first modern managerial class—fall into two distinct chronological periods …. The first period extended from the beginning of the railroad boom in the late 1840’s to the coming of the economic depression of the 1870’s. It was a period of almost continuous growth of the network … and a period of impressive organizational innovation …. The second period of American railroad history, extending from the Depression of the 1870’s to the prosperous first years of the new century, was one of competition and consolidation [oligarchy-formation]”[17].

 

The story of the great “robber barons” is mostly a tale of the Great Railroad Cartels. The first cartel was assembled in 1874 at Saratoga Springs, New York by the Presidents of three major trunk line railroads. Others followed. From these cartels one can trace the rise of the western state Populist Movement and in later years, the Progressive Movement. These railroad cartels, epitomized by, the Northern Securities [Railroad] Company [Trust] of James J. Hill and Edward Harriman, prompted Teddy Roosevelt to begin his career as “trust-buster” in 1904. Strikes, monopolies, and rate-setting have accordingly dominated the history books. What is often less noticed is the owners and managers of other industries and sectors suffered from railroad concentration as did the jurisdictions in which they operated. Sectors and industries mattered in how one viewed the effects of railroad concentration. Managers, and owners, were not all in the same boat.

Managerial capitalism in sectors other than rail, sectors such as iron, coal, oil gas, steel, and durable and non durable manufacturing, production and distribution of perishable products—and most importantly, and “Middle Management” (salesmen, accountants/bookkeepers, supervisors, department heads) each danced to their own music.  Middle management and professionals became the yeomen of the Progressive Movement, of scientific management, the drivers for structural reforms in American local government, advocates for municipal home rule, civil service, budgeting, and planning. Middle managers cast their middle class votes against political machines and they resisted central city annexation.

 

Top managers formed and led the boards of trade, real estate exchanges, and merchant associations. Resisting railroad cartels they created port authorities. They fought unions. Top managers advocated for the Chicago Exposition and future “City Beautiful”, not to mention city manager form of government. Top managers provided the inspiration and muscle to launch our first jurisdictional economic development organizations and initiatives. And the owners? They became our new “corporate elite”, the members of the Civic Reform Clubs, the pre-1900 chambers of commerce, and the municipal research bureaus. In these years, three critically important segments of the business community came to life from the primeval soup of the Gilded Age: owners, the top management, and the middle management of the new corporations which formed the core of the jurisdictional economic base.

 

In this dynamic atmosphere it was also easy to miss the rise of yet another segment of the business community—composed of firms firmly anchored in the jurisdiction (Local Firms). Headquarters firms, modern corporate retail (catalog/department stores/franchises/specialty retail), banks, newspapers, hospitals, utilities, universities, and the always infamous real estate-based firms also joined the merchant associations and in later years, the chambers. Almost invisible are the thousands of small business, the mom and pops that ethnic groups formed, which provided personal and convenience services, enhancing societal mobility and jurisdictional quality of life. While sharing a private business perspective, local firms were not monolithic in cultures, work experiences, or policy priorities and were probably more inward-looking than their capital mobile managerial counterparts. They viewed local politics differently and political machines represented opportunity in exchange for tolerating a “wee bit of honest graft and seizing opportunities”. In these early years, this fourth segment of the business community also flourished.

 

Their “golden years” of the these segments, the first decades of the twentieth century, lay ahead in Chapters 4 and 5. But during the Gilded Age these business elite groupings forged identity/ mentality and acquired some measure of prosperity and wealth. Wealth accumulation fueled residential and commercial movement to the Big City periphery which will be described later in the chapter.

 

Macro-Economic Factors affect the Jurisdictional Policy System

Several obvious impacts on a municipal/metropolitan economic base should be noted. There is from this point on, a distinction between headquarters and branch firms and the business cycle. The presence of a headquarter firm in an economic base would be a plus under normal conditions. Ownership was more likely to be present, and potentially involved in the municipal/metropolitan economic development/political policy process—whatever that might mean. An argument can be made that the presence of a number of headquarters within the economic base would also generate a greater professional presence as well (lawyers, auditors, accountants, architects, and banking)—and the “most top” of top managers would be involved. Headquarter firms were an important component of the Gilded Age jurisdictional economic base and policy system.

 

The vulnerability of branch firms to swings in the business cycle—not to mention future sector shifts—will be an important driver of sub-state economic development. Branch is “manager” territory, and managers are more mobile and transitory. The effect on the local policy system is likely to be negative with managers being more inward looking and career mobile—less inclined to participate in community affairs. Also, the raw dependence of branch firms on access to final markets (transportation costs/technology, the customer) and supplier firms as well as normal market demand shifts, not to mention the vagaries of mergers and acquisitions, impart fragility to an economic base which requires constant attention by economic developers. Retention as a strategy rises in importance. So does attraction as a counter to profit life-cycle and oligarchic vulnerability

 

Business cycle probably entered our modern lexicon in the 1930’s Great Depression. But the arrival of the industrial city also meant that the macro economy became subject to chronic swings in economic activity (the business cycle) following from more or less predictable factor dynamics. “At some point the forces producing expansion play out and the cycle reaches its peak [boom]; thereafter the economy enters a contraction phase [recession/depression]. When the trough of the contraction is reached the economy is ready to turn around and enter an expansion phase [recovery]”[18]. Because urban economic agglomeration characterized our Big Cities the effects of the cycle could be magnified depending on the industry/sector cluster within the individual Big City economic base. Over time, the value of a “diversified economic base” came to be appreciated as this ameliorated to some extent the pernicious consequences of lean years.

 

The business cycle affect on a jurisdictional economic base reflects the composition of its industries/sectors (some being more counter-cyclical than others, and some growing/declining at different points in the cycle). As one might expect, the business cycle dynamic can hugely affect the workings of the jurisdictional economic development policy process, and even the entire policy system (other policy areas) as well. Taxes and citizen/worker prosperity, level of unemployment, and local purchasing power are constrained in lean years. Boom years are another matter entirely. It is my assumption that lean years in the business cycle place added stress and increase priority afforded to economic development as a policy area compared to other policy areas.

 

The rate of economic growth did not follow a “steady uniform pace”. The most rapid period of growth immediately followed the Civil War, another boom occurred between 1897 and 1907. Major depressions, or Panics, occurred in 1873-1878, 1882-1885, and 1892-1894[19]. Say it another way, in the thirty-five years following the Civil War to the turn of the century, booms held sway only eleven years, and panic about ten or eleven as well. Throughout this period, a long-term decline in average prices “masked real growth” and during the 1870’s wholesale prices fell by one-third, falling to pre-Civil War levels by 1879. In the fifteen years that followed 1879, wholesale prices declined by another third. Wholesale prices did not return to Civil War highs until 1910.

 

Unemployment reached 10% in five years of the 1870’s and six years of the 1890’s[20]. Ignoring the temptation to use the word “inequality”, disinflation (1) almost certainly increased social/political tensions and (2) did NOT negatively affect production output—which is why this era is not thought of as economically stagnant. No doubt both population growth/mobility and the huge number of stage 1 or 2 manufacturing firms played some role. In short, the era contained a serious streak of disinflation. Disinflation put a cap on wages and income and added to the natural stress of a business cycle.

 

As the reader plods through the endless chapters that follow, it might be wise to keep in mind the business cycle affects jurisdictional economic development policy outputs materially. Trend dynamics of the macro (national/international) economic system also play an enormous role, such as opening a closed economic development policy system, or, in boom, prosperous years, closing it. Agenda-setting, as well as other phases of the policy cycle are also affected. Cities experiencing chronic decline would due to secular trends open their policy systems—until considerable fatalism saturates the city fabric.

 

Growth and Physical Landscape of the Industrial City

 

In this section, the history emphasizes physical growth and development of the industrial city’s (Big Cities) physical landscape during the Gilded Age. This introductory theme introduces the reader to a neglected, but vitally important element of urban growth—its birth. Today the metropolitan area simply exists; for many readers they were born more than a hundred years from when it first formed. It seems natural that a young economic developer (and many older ones) might think it always existed this way. It didn’t, of course. Cities were created—by people—literally. Economists and urban geographers can talk about more abstract forces such as central place theory, but this history prefers to observe people behavior whenever we can. We regret we can only discuss them in a very cursory fashion.

 

Our presentation of growth of the industrial city and its physical landscape follows three sub-themes: (1) population growth from both farm-to-city and immigration, (2) movement to the city periphery propelled by innovations in transportation, and (3) the consequent formation of the characteristic elements of the industrial city’s physical landscape: the CBD, neighborhoods, and suburbs. During these years transportation modes changed radically and relatively often. A perhaps simplistic, but hopefully suggestive, observation is that regardless of  poverty, inequality, and strife, this was a period of constant physical expansion of the Big City. For economic development this meant infrastructure, and increased goal-complexity to satisfy quite divergent needs and demands. Big City economic development goals reflected the heterogeneity of populations and industry sectors.

 

In contemporary America we have gotten out of the habit of thinking in growth terms about the central cities of North and Midwest, but grow they did during the Gilded Age—and to many it seemed not only explosive, but almost uncontrollable, limitless growth. For the most part these cities didn’t stop growing until the 1930’s Depression. In that both the population and the industrial city were “new”, loyalty and civic pride were “works in progress” and fluidity and change were constant. It is in the Gilded Age that the Big City urban hierarchies’ evolved and inter-city competition was as much defensive as offensive. No doubt, economic developers will anticipate this translates into something akin to business attraction and retention strategies—but this will be dealt with in Chapter 4.

 

 

Growth of the Industrial City: A Descriptive Overview

Let’s not waste time by proving the obvious; in 1860 there were 31.5 million Americans; in 1900 there were 76.2 million (nearly 142%). As far as immigration goes, no surprise, lots of immigrants piled into the entry ports of America. Between 1850 and1860 nearly 2.6 million entered, almost doubling between 1880 and 1890 (to nearly 5 million in that decade) and 3.7 million in the 1890’s[21]. From 1850 to 1900, the number of people living in incorporated municipalities greater than 2,500 rose from 6.6 million in 1850 to 44.6 million in 1900.—from nearly 20% of the population to almost 46%.[22]

 

Say it another way; in 1860 slightly over 6.1 million Americans lived in urban areas; by 1870 that figure was slightly less than 10 million—a growth of nearly 60% during the decade of the Civil War. In 1880 a little over 28% of the American populace lived in cities; by 1890 35%; and, by 1900, almost 40%., more than 30 million lived in American cities—a 300% increase in thirty years. So if Americans as a whole increased by 142% during the expanded Gilded Age, urban America grew by 300%. Things had to change in the city under such pressures; something had to give. Cities expanded outward—they pushed out their periphery and across their city boundaries.

 

To wonder which city grew the “mostest” is to miss a point important to supporting my notion of regional hegemony. By 1890 the only confederate city remaining in the top twenty-five  cities was New Orleans, and it had dropped from 6^th (1860) to 12^th (1890)[23]. Also, in 1860 only one city west of the Mississippi was in the top twenty-five (San Francisco, 15^th). By 1890 San Francisco (rising to 8^th) was joined only by Omaha (21^st). Twenty-two of the top twenty-five most populated cities in 1890 were located in Mohl’s “industrial heartland”—what I call the Northeast-Midwest regional hegemony.

 

Innovation and Transportation

The colonial and Early Republic city was a “walking city”. A walking (ok, biking) city is a modern city planner’s heaven: dense (an estimated 170 people per acre in 1840), compacted into diverse multi-class, tightly packed neighborhoods (as late as 1850 Philadelphia extended out only two miles)—with no cars or parking. But there were downsides to this heaven on earth. There was horse (and people) “do-do”, dust and mud, and surprisingly lots of congestion in the city center and waterfront areas. The separation of work from residence had commenced before the Civil War, and it left in its wake a physical mess with a labyrinth of unpaved streets and alleys with all sorts of illogical and undesirable mixed uses tossed into some noxious salad of no particular physical description or aesthetic beauty. “This pattern of mixed land usage in the pre-industrial city ‘produced an offensive stew of factories, furnaces and warehouses jumbled across a tangle of streets, alleys, canals and railroads”.

 

The constant harping about cities using neatly platted “grids” for street layout so that evil real estate developers could make more profit obscures their worst fault that all sorts of “paths and alleys” that followed the grid, turned most cities into mazes filled with unpredictable and not always pleasant surprises as one moved about. The huge pressure caused by the population increases described above, crammed residential units into every seemingly uninhabitable nook and cranny available. Someday someone would suggest zoning, and this untenable mess to which the industrial city had become, made that proposition quite acceptable. In the ”Gilded Age meantime” moving out into newly developed neighborhoods was the best answer.   Needless to say, the hope, common to all classes, was to find decent homes to live–and this is what transportation innovation and infrastructure made possible. From the start, the innovating mode of transportation was the proverbial razor; the housing and subdivisions were the razor blade where the real money was made. The transportation mogul owned both.

 

The horse-drawn omnibus first appeared in Big Cities during the 1830’s[24]. The omnibus, a covered wagon with seats (sort of an early Volkswagen bus) operated on a fixed route, carried 12-20 passengers driven by two horses (sorry Mayor De Blasio), and was somewhat affordable. “By the 1850’s, omnibus service had become a regular feature of urban life in New York, Boston, Brooklyn, Philadelphia, Washington, Baltimore, Pittsburgh, Chicago and [the ever-alluring “Omnibus of Desire” found] in New Orleans”[25]. The omnibus facilitated residential movement, benefiting the middle and upper classes, to the city periphery. Separation of classes and the ceaseless push to move to periphery areas had commenced. Left behind were the beat up, old working class and immigrant neighborhoods–the ethnic wards of the new political machines.

 

Of more impact than the omnibus in the valuable and time-honored task of separating the rich from poor was the commuter railroad. The commuter railroad (a rail line which made stops in the central city and to nearby suburbs) appeared simultaneously with the omnibus, but was even more expensive. For example, “By mid-century”, about 20 percent of Boston’s business people used commuter railroads for the 10 to 15 mile daily journey to work”.[26] Among other factors (such as the Massachusetts legislature’s refusal to allow Boston to annex) commuter rail is why suburbanization hit Boston harder than most . Between the omnibus and commuter railroad, the drive to the city periphery and suburb had started with considerable seriousness much earlier than usually thought .

 

“(T)he development of the street or horse railway represented the most significant technological advance in urban transit in the mid-19^th century”.[27] Hailed as revolutionary, the horse car railway (which from my perspective was a slightly more affordable omnibus on iron rails—still used horsepower) took over city transportation. By the 1880’s, 525 horse car lines were operating in 300 American cities extending the city periphery as far as five miles out—obviously into the suburbs. By the 1870’s, after successful experimentation in San Francisco by Andrew S. Hallidie (1873), the steam-powered cable car was quickly adopted by Big Cities across the nation. Some 626 miles of cable car track had been put in operation in over 20 American cities by the mid 1890’s.

 

In 1888, Frank Sprague (an associate of Edison) successfully converted Richmond’s horse car lines to electricity, and we formally entered into the age of the streetcar. By 1902, 97% of urban transit mileage had been electrified and two billion riders rode on streetcars that year. In the meantime the first subway construction began; Boston opened the first, today’s infamous “T”, in 1897, followed by New York and Philadelphia (1908)—the last just in time for Henry Ford’s first 1908 Model T. The irony is delicious! Within twenty-five years three major transportation innovations were installed in our Big Cities, digging up streets and pavements each time, finishing up with a tangle of overhead wires, and a bewildering morass of pipes and wires underground.[28]

 

Transportation infrastructure, combined with water/sewer, street lights, electrification, and telephone infrastructures that had also been installed, suggest some interesting questions. Obviously, physical growth requires infrastructure, but it is not as obvious who, using what structures and powers put the stuff in, on, and over the ground. The answers to those questions were one of the most controversial and persistent issues confronted by Gilded (later Progressive) Age policy systems.

 

The History and Structures of Gilded Age Infrastructure

Water (distribution) infrastructure was the earliest (Early Republic) to be addressed. Cities have been confronting that need since ancient times; access to water is a fundamental urban prerequisite. As the American industrial city rapidly expanded, however, the need developed into a crisis. Water to drink and wash was one thing; water to manufacture and put out fires was another. Gilded Age cities exhausted nearby water sources and finding available water meant going many miles downstream, and incredible complexity/expense in getting it to the city. New York City had to go thirty miles out to the Croton reservoirs. Yellow Fever and Typhoid epidemics, by the 1890’s, also meant that filtration and sewers were needed. Water-related infrastructure, therefore, was installed in two bursts, immediately after the Civil War into the early 1870’s, and then after the 1890’s.

 

Up until the Gilded Age most municipal water systems were private—and very much unloved by consumers. Service, quality and cost were the chief concerns. After the Civil War most municipalities incrementally gravitated toward publically-owned water systems. Combined with the construction of the first municipal park systems (NYC Central Park, Philadelphia’s Fairmont Park, and Chicago’s park district’s acquisition of land), the impact upon city debt obligations was huge. City waterworks construction in Milwaukee, Pittsburgh, Baltimore and Cleveland, and street improvements and sewer/water in Boston, led to skyrocketing municipal debt levels. “Between 1868 and 1873, the net bonded debt of New York City tripled, and between 1867 and 1871 the bonded indebtedness of Chicago likewise increased three-fold; Boston experienced a tripling of its municipal debt during the years 1868 and 1874; Cincinnati bonded obligations rose five-fold between 1868 and 1876; Cleveland’s net debt soared 1,200 per cent during the decade 1867 to 1877 … Combined debt to twenty cities having 100,000 or more population increased 176 percent from 1866 to 1876”[29]. Municipal debt structures imploded in the 1873 Panic, a Panic that continued through 1879.

 

Bankruptcies, serious reductions in taxable properties and sustained tax revenue reductions followed (Chicago’s for instance fell by one-third). Pittsburgh defaulted (1877) and Memphis defaulted twice (1873 and 1878) and became the poster child of municipal collapse. The state repealed the city charter and ran the city as a state taxing district (shall we call this “Little Mac”). For the next decade especially (the 1880’s) most Big Cities (and little cities as well) operated under the threat of possible bankruptcy. High levels of municipal indebtedness, caused by municipal ownership of key infrastructure strained municipal fiscal stability and provided a backdrop for further ventures into municipal ownership of infrastructure. By then, though, the trend to municipal ownership of water-related infrastructure was set in place.  “By 1897 only 9 of the 50 largest cities, and only 42 of the 142 cities with a population of between 30,000 and 100,000 had privately-owned waterworks. In 1909 70 per cent of the cities over 30,000 owned their own plants”.[30] According to Griffith, the reason behind municipal ownership was not cheap rates, but the necessity of having sufficient water supply for fire protection and the need to reliably filter water to avoid disease. A disastrous fire or a horrible epidemic was usually all it took to overcome any fear of tax increases.

 

The other side of the argument regarding investments in water infrastructure is that Americans, in comparison to Europe and Germany its most prosperous industrial economy, demonstrated unequivocally that Americans enjoyed significantly greater access to water (although it was more dirty) than Europe. The argument could be made that American cities overbuild their water infrastructure and water was so plentiful that the flush toilet prospered, and few cities ever introduced meters, levying a flat rate instead. “Far from failing to provide [water] services, the municipalities of the United States offered a level of water supply and sewerage that ensured American city dwellers, especially middle class residents with the latest bathroom fixtures, the highest standard of living in the world”.[31] This abundance of water that made steroidal expansion of the peripheries beyond municipal borders possible.

 

Streets and bridges followed the policy route witness in water-related infrastructure. “(T)he area of paved streets in the largest cities of the United States was much greater than in European cities of comparable population … Chicago [for example] could claim more than three times the paved area of Berlin”.[32] The iconic landmark of the period, the Brooklyn Bridge, at its start, was managed by a private company backed by municipal funds; midway it was taken over by the cities of Brooklyn and New York and transferred into an independent commission with a board appointed by the mayors and comptrollers of the two cities. By the turn of the century, streets and bridges were municipal (and state) concerns and the result was similar to that associated with water-related infrastructure: higher indebtedness and operating costs, more miles paved than Europeans, and, in general, poorer quality of maintenance and quality, but more rapid use of new technologies.

 

Gas and electricity were tied into street lighting. Street lighting was related to crime reduction and cities often had to be prodded into providing it. CBD business would often be forced enter into contracts with a street lighting company. With electricity in the 1890’s, street lighting got complicated. Size of city was an important factor as scale reduced cost of service. Smaller cities faced prohibitive costs which inhibited private firms from effectively competing and so smaller cities tended to build municipal power generation facilities, especially for street lighting. Larger cities usually had energy service provided by private companies. Until 1895 only two large cities had municipally owned gas and electric plants (Chicago and Pittsburgh). In that year, however, Detroit, under Mayor Pingree started construction on its municipally owned plant. Public ownership of utilities after that became a major Progressive issue (and will be discussed in the next chapter). The telephone between 1876 to 1893 was a Bell Telephone patent monopoly. Bell licensed local firms and made enormous profit. When patents expired in 1893, over 1,000 independent telephone companies, financed mostly by local capital, sprang up over the next four years. Rates declined by nearly 50% and telephone use dramatically increased.[33] The telephone inherently was interstate, federally regulated, not subject to municipal franchise.

 

Transportation infrastructure was especially prone to privatization through franchises. Different routes could be franchised to different firms. Most Big Cities had a frankly incredible number of competing routes: Philadelphia had 39, New York City 19, Pittsburgh 24, St. Louis 19, San Francisco 16, and even small cities like Grand Rapids had 4.[34] As earlier alluded to, street car lines were loss-leaders, or “the razor”;the money in the form of profits for transportation companies and taxes for municipalities came from the residential and commercial development built alongside of at the end of the line. By this time population pressures from ever-increasing immigration pushed out the city peripheries, and real estate development was a gold mine. As the middle class moved to the periphery, an unanticipated new sector arose to meet its demands for recreation: amusement parks. So trolley companies built amusement parks as well. Only during the early twentieth century Progressive era did municipal ownership of street cars become a widespread municipal policy issue.

The franchise represented an early form of privatization; or, the franchise could be regarded as an early form of utility regulation. The franchise could be exclusive or competitive, tending to the former over the years. The franchise was for a term of years, could be renegotiated, and new regulations and rates instituted. Extra provisions, such as fire hydrants or paving of street, upgrade of pipes were common. Books could be inspected, stock issuance regulated (there was a major issue of stock speculation, and bribery of public officials). Rates and their burden on the urban poor and working class were only one of many very visible issues associated with franchises; safety and (in earlier years) animal cruelty were also issues. Cities received annual payments, similar to today’s payment in lieu of taxes. Property was assessed at negotiated levels. Given machine-dominated legislatures, franchise companies found many claimants for whatever profits they made.

 

Complexity of Infrastructure Policy-Making: Experimentation in Privatization

Our previous discussion describing Gilded Age capacity-building of municipal policy systems sensitized readers that policy outputs are shaped and limited by the capacity of the overall policy system. Our preceding brief reviews of the physical city’s expansion and the choice between municipal ownership or privatized franchise revealed the alternative structural solutions to the crisis of infrastructure which strikes at the heart of economic development policy in a period of rapid growth. One additional discussion is useful before moving on. Gilded Age infrastructure policy-making occurred in an environment of rapid and sustained population growth and constant infrastructure innovation—the former generating the need for immediate program responses, and the latter creating a complex decision-making  calculus. Both tested the capacity of the Gilded Age municipal policy system.

 

Gilded Age cities usually issued franchises/privatization to private firms to install and manage the transportation systems; this was mostly true for electricity/energy and telephones. Over time, the privatized alternative evolved into something today called utility regulation. Street lights, and water distribution were chiefly taken on directly by municipalities. Streets and bridges became public matters in these years–or remained unpaved and filthy. Why the difference? In the Gilded Age, I suggest, the critical difference was constant and disruptive technology changes, mostly in transportation and communication. Water distribution “technology” change was more incremental in character, and water distribution systems (as well as streets and bridges), once installed, were expected to satisfy demand for long periods. Not so the other infrastructures.

 

The Gilded Age decision to subcontract infrastructure to private franchises has been a consistently controversial aspect of the Age; it also generated a great deal of concern at the time. The politics associated with municipal ownership of infrastructure will be discussed in the next chapter, but in the following paragraphs, I argue that most transportation/communication infrastructure certainly, were so complex as to make franchise the preferable option, whatever “equity” risk it may have created. The privatization of infrastructure, the foremost economic development-related issue/strategy of the Gilded Age, was not an inherently bad, or improper decision at the time. In that infrastructure over the century following will consistently involve privatization concerns (the Internet, for example), one can sense that Gilded Age physical infrastructure was our first experience with infrastructure as innovation and infrastructure inherently involving public/private structures and partnerships.

 

Understanding this was a Privatist Age, admittedly with a Progressive counterpunch brewing, and that infrastructure and economic development were mostly driven by businessman organizations and mayors. Since increasing taxes were the “third rail” of Gilded Age politics, and that infrastructure as it went through neighborhoods and wards would be subject to legislature/machine demands, making inherently expensive infrastructure, yet more expensive and vulnerable to scandal meant that infrastructure in its various forms involved considerable political risk—despite resident demands for the benefits and services provided by the infrastructure.

 

Services further complicate infrastructure policy-making, in that once installed, a service has to be indefinitely provided to all neighborhoods and even adjacent unincorporated/incorporated areas. The larger the geography, the lower the rates, and the higher the debt level generated. Someone has to pump and filter water, someone has to generate and maintain distribution of electricity, and someone has to ensure trains run on time. Putting the pipe in the ground is only the first step.  Also, the varied functions involved required that anybody attempting to install and manage infrastructure had better know what they are doing—academics call this expertise—and have access to long-term financing/debt issuance. Under these constraints, municipal ownership of these infrastructures was far from a foregone conclusion. Indeed, one municipality’s efforts to own the gas plant which powered its street lights, degenerated into the patronage base for Philadelphia’s Gas Trust Gang under McManes. Ironically, to break up that political machine, the infamous gas plant was returned to private ownership in 1894.

 

The complexity of municipal infrastructure policy-making hit city policy systems decades before the Gilded Age. The omnibus, for example, hit the streets in the 1830’s and 1840’s. So did water (and later sewers). The heritage of these early decisions set precedent and also yielded some experience to decision-makers. The reality that these energy, communication, and transportation infrastructure was developed by private inventors and innovators such as Edison or Sprague. Edison’s story is well known, but Sprague’s has been forgotten.

 

Sprague’s story illustrates the inherent complexity of infrastructure, the consequences of private ownership of innovation, and the hindsight failure to value the disruption of chronic innovation. Sprague, after successfully installing his experimental twelve mile electric street car line in 1887 Richmond, had a bonanza on his hands that sent Sprague down a road which crossed over hundreds of cities. In Sprague’s words: “When the Richmond contract was signed, we had only a blueprint of such a machine and some rough experimental apparatus. The hundred and one details that were essential to success were as yet undetermined. Fortunately for the future of electric railways, the difficulties ahead could not be foreseen or the contract would not have been signed”. Sprague went on to make his fortune through the sale/installation of his transportation equipment and system. Within five years of opening the Richmond line, 850 systems were in operation, with lines totaling 10,000 miles.[35] From our municipal policy perspective, cities were not free to “own” innovative infrastructure—they had to purchase it from its innovating entrepreneur.

 

In short, municipal ownership, franchise/regulated utility, and private ownership were the alternatives available. We have painted a picture that however desirable municipal ownership might be in hindsight, cities were fiscally stressed, technological innovations/expertise were firmly lodged in private ownership/patent protection, innovation was constant, disruptive and expensive, and infrastructure involved not merely installation but indefinite service delivery associated with bureaucracies, higher taxes, and increased opportunities for machine political intrusion. Franchise or regulated industry is a not unreasonable decision by not fully formed municipal policy systems. This is not to say franchises didn’t have their failings.

 

The horror stories happened in every city, I’m sure. The first street railway franchises were apparently made by New York City in 1851 and 1852. Fares were set a five cents and the first boilerplate for a franchise agreement was drafted. It was vague and incomplete and was improved upon by each new city entering into a franchise over the next fifty years. The term of agreement for these early franchises were fifty to one hundred years; Albany would grant a franchise for one thousand years, which exceeded Buffalo’s whose term was nine hundred and ninety-nine years. Gas lighting started in 1816 Baltimore, and by the 1820’s cities issued franchises to private firms for that. When electrification arrived in the 1880’s, cities redrafted gas/street light franchises to accommodate electrification. Even the Brooklyn Bridge cable streetcar railway, originally owned and managed by New York City and Brooklyn, was transformed into a franchise in 1889[36]. Cities were saved from these franchises when, in the 1890’s and after, the franchise companies consolidated (or went bankrupt) to achieve efficiencies of scale and to take advantage of new, more expensive innovation. Whatever the corruption and inefficiency, franchises involved, the trade off was the urban population got some of the best infrastructure the world had to offer in the Gilded Age.

Neighborhoods

The push to the city periphery by industry and middle/upper classes fostered new neighborhoods and housing. Residential class segregation became a simple fact of American urban life. Housing, more expensive in the newly-created neighborhoods, required an ability to pay the price, which now included a daily round-trip streetcar ride—about a dime. Neighborhoods became class enclaves, as well as ethnic ghettos. Some immigrant neighborhoods were settled almost exclusively by a single ethnic group, most by the latter Gilded Age, were mixtures, micro-melting pots. Within these more or less culturally cohesive neighborhoods schools, churches, ethnic small businesses, and social/cultural institutions served as foundations for future social, economic, and political change. Sub-municipal geographic entities (neighborhoods) engendered new opportunities for economic development. Neighborhood-level economic development suggested new goals and programs suitable to its limited area. An advantage of neighborhoods to Gilded Age proto-economic developers was that it permitted a focus on “people”, redefining economic development so that it could help groups of people confront the industrial age and its problematic, but opportunity-filled industrial city.

 

Some needed help more than others. That was unmistakably evident just observing the housing in which they lived. Neighborhoods, located chiefly (but not always) in older and central areas of the industrial cities, were adjacent to the emerging CBD and downtown or sprang up on and between transportation lines. Social Darwinism, popular in this age certainly played its role, but the never-ceasing horde of impoverished immigrants, clustered so densely, was sufficient to destroy whatever glimmer of innovation the housing industry could muster to improve life in immigrant neighborhoods. The apartment house, row housing and tenement housing were overwhelmed, transformed into human and residential disasters. Residue from these slums (crime, disease, fire, unemployment and guilty consciences) and the pure human misery within them, fueled proposals for reform and change. From those pressures several “wings” or movements would spring up within our slowly-forming profession. We will pick up these wings in the course of Chapters 4 and 5.

 

the Birth of the CBD

The central business district (CBD, downtown) was an offspring of the Gilded Age; it served as the terminus for each transportation innovation. Financial, advertising, newspapers, office, entertainment, and retail gravitated to this strategic, but eldest, most decrepit, and least expensive area of the city—knocking down the city’s worst physical deterioration in the process. The confusing labyrinth of streets and alleys were replaced by grandiose rail stations (think Grand Central Station), and, as industry concentrated, headquarters facilities also located in these emerging business centers. The CBD concentrated the raw economic power of the Gilded Age–including affluent owners and managers. While our image of downtown is that of our largest Eastern cities, CBDs developed in cities of all sizes.

 

The CBD developed into a magnet for workers and shoppers alike. It became the visible heart of the new industrial city. The CBD served as the  “commons” for all neighborhoods, and, like the flag, the symbol of civic pride and optimism. Retail was the traffic generator. New innovations in retail, first the chain and then the department store, created vitality and community spirit. The first Wal-Mart style corporation, the Great Atlantic & Pacific Tea Company (A&P to the oldsters) started in 1864 New York and spread across the nation. Woolworth and “5&10” cent stores (sort of Five Below or Dollar General) opened in 1879 Lancaster PA. Grocery stores and mail-order stores opened up. The first American franchise, Singer sewing machine stores started in 1851; General Motors car dealers in 1898. But it was the department store that “anchored” the Gilded Age’s downtown CBD as the retail shopping district of the metropolitan area.

 

Lord & Taylor and Macy’s in New York City expanded their original dry-goods stores adding new departments to form the nucleus of the future department store. L&T officially launched New York’s first department store at Broadway and 20^th in 1870^;  the strip around L&T quickly acquired the moniker of “the Ladies Mile” when other retail shops settled nearby. Macy’s fixed price innovation and its reliance on mass advertising (which financed newspaper growth) soon made that store the premier department store of the era (sorry Gimbels). New York City was not alone in spawning department stores; each major city grew its own. Marshall Fields, its origins also in a dry goods store, created Chicago’s first department store in a Richardson-designed seven story building between Quincy and Adams streets in 1887.

 

Comparable, locally-owned department stores sprang up in the large central cities in short order—as did banks, hotels, all sorts of office buildings and hordes of specialized retail and entertainment (theaters) and personal service stores. Secondary business districts formed along the streetcar routes, and one block in from these main drags were the new multifamily apartment buildings and a host of retail and service stores. Streetcar routes became commercial spokes radiating to the city periphery–where ample room permitted manufacturing firms to build more modern, land consuming facilities—laced with railroad sidings and worker housing.

 

Without much fanfare the oldest residential neighborhoods, factories and warehouses were torn down one by one. “In Pittsburgh some 428 buildings were constructed in the CBD between 1888 and 1893 and another 356 between 1894 and 1906.  The building boom in downtown Pittsburgh typified the experience of industrial cities across the nation.”[37] Railroad terminals (Grand Central Terminal was built in stages between 1899 and 1913) as the railroad system reached its apogee. “The Loop” (which  was coined to describe Chicago’s downtown after the 1895-1897 elevated railway) in Chicago was born. Public buildings, museums and cultural institutions filled in what few empty lots remained. By 1900 the CBD was in its robust glory, a center of hustle and bustle, of memories and traditions.

 

The innovation that made the CBD famous, however, and that created the never to be forgotten skyline of the modern industrial city, was the skyscraper. New York, not Chicago drew first blood. Otis innovated his first elevator-driven building in 1853 Yonkers, and commercialized it as an exhibit in the 1854 New York World’s Fair[38]. At 488 Broadway in 1857, he installed his first elevator. Four years later the first steam-powered elevator for a new department store (E. W. Haughtwhat) became the first known public use elevator. New York City (in the 1870’s), using traditional masonry construction, constructed both the Western Union Building and the New York Tribune Building (each reaching 260 feet). But elevators and masonry construction alone did not a skyscraper make.

 

The first “true” skyscraper, the ten story Home Insurance Building (1885), using an internal steel skeleton and light masonry “curtain” walls, was built by William LeBaron Jenney—in Chicago.

 

Jenny’s innovative achievement touched off a wave of late 19^th century skyscraper construction in Chicago in the new architectural style—a style that emphasized efficiency and economy and has come to be called the ‘Chicago School of Architecture” …. Such Chicago architects as Louis Sullivan and Daniel H. Burnham ‘covered the whole business district with a new architecture and changed the entire face of a great modern city’.[39]

 

New York would catch up and surpass the Chicago skyscraper—but not in the nineteenth century. The skyscraper meant that for the first time, the city could be built “up”, not just out.

 

Suburbs

Arguably there are few more controversial topics than suburbanization.[40] Too many suburbs are responsible for the decline of Eastern central cities; consequently they have been a multi-decade open sore within several professions and disciplines relevant to economic development. For many to this day, suburban development can be reduced to one word: sprawl. In that atmosphere, the reader ought to understand the approach we adopt as we deal with suburbs. This history will reference the issues which make this topic so controversial, and it will describe/assess the effects on cities and the profession. But suburbs, like the poor, have always been with us from the very beginning. Suburbs did not begin with Levittown in 1947; in some form they have been with us through our history. In fact, suburbanization may be considered the single most important twentieth century transformation in our urban landscape. Suburbs, to me, reflect a poly-nucleated metropolitan reality.

 

In this section, I will present a brief outline of American suburban history through 1900; secondly, in the course of that history several key suburban-related concepts, such as annexation, suburban autonomy and residential succession, will be broached; thirdly, make the point that suburbs are not identical and are a legitimate element of our metropolitan landscape. The sum total of each of these conversations is that suburbs exist, are more than just sprawl and enclaves of the rich, and deserve to be treated on their own terms if we are understand economic development policy systems.

 

Nineteenth Century Suburbs

Henry C. Binford[41] suggests nineteenth century suburban development occurred in three overlapping, but distinct, phases: (1) 1789-1837-43 during which suburbs were a “booming fringe economy—a zone of manufacturers and commercial activity—related to the city, but not requiring contact”; (2) 1837-1850 when omnibus/rail commuter lines pushed into urban fringes and suburbanites built bridges/roads to connect to the central city, thereby integrating the fringe areas with central city economic and population flow; (3) 1843-1900 a period when the fringe area evolved into suburbs by accommodating commuter residence preference, making housing construction its prime industry sector. Dolores Hayden agrees that “The periphery of the city in this era (pre-Civil War) was not the country. The edge was neither rural nor urban. It formed a distinctive gateway between city and country. Entrepreneurs in this zone ran industries that required extensive space … and more noxious ones…. Residents might have entertained bucolic fantasies about moving to the countryside, but they entered a zone of ‘improvement enterprise and the fringe economy”[42].

 

Post-Civil War suburbs pushed further out from central cities than ever due to transportation  innovations which upper classes could well afford. The affluent enclave characterized Gilded Age suburbs. Bernadette Hanlon estimates affluent suburbs to be about 10-12% of current inner-ring suburbs[43] suggesting a solid core of longstanding, stable suburban communities.. After the Civil War (thru World War II) suburbanization expanded to include middle class as well as wealthy—both “escaping” to a pastoral wonderland. Some pre-World War II suburbs were an expression of garden city-bourgeois utopias[44]

 

As garden city residential escapes, exclusivity and order, not growth, were prioritized and permeated DNA of elite/affluent suburban enclaves. Economic development per se was not valued. These, now aged suburbs are still fairly vigorous–and they still pursue exclusivity rather than growth. Llewellyn Park (1857), New Jersey is an example; it is still an unincorporated gated residential community; Glencoe Illinois 1869, (Ferris Bueller’s Day Off and Sixteen Candles were filmed there) is another. Its village manager government includes no EDO which is also similar to Chevy Chase, Maryland (1918) whose town government includes no EDO. Suburban elite enclaves then are the first jurisdictional type we can say with some confidence afford low priority to economic development in their policy system.

 

Nineteenth century suburbs, therefore, did exist. The same cast of characters that dominated Big Cities was also prominent in post-Civil War Eastern suburbs; speculators, do-it-yourselfers, boosters, railroads-street car operators and attraction marketing types appear. The example of Henry Whitney of Boston[45] will suffice to outline the mechanics of these pre-1900 suburban developments[46].

 

The Push to the Periphery: Crossing City Limits

Whitney (in the 1880’s) owned Boston’s West End Street Railway and its subsidiary, the West End Land Company—the perfect set of vehicles to accomplish suburbanization. By 1886, Whitney owned most of Brookline (George Romney’s home—and residence of many a high-income Harvard-MIT professor). His market was the rich and wealthy. Frederick Law Olmsted prepared Brookline’s landscape plan. Order and security necessary to preserve property values was achieved and maintained by “restrictive covenants”—enforced against the Irish, of course, because at that time there were few blacks on hand in Boston. In any case, Whitney needed little marketing, contenting himself with selling land to small-scale developers who actually built the homes to order[47].

 

 

The existing upper middle and upper class residents understood (restrictive covenants) as a consolidation of elite Brookline. Both they and aspirant new residents recognized it would be a social and ethnic rampart, secure against invasion by Boston’s poor Irish immigrants.[48]

 

While Whitney’s Brookline goings-on were occurring, a second, non-Whitney initiative was also happening on the other side of Boston’s tracks (so to speak) in Roxbury (annexed 1868), West Roxbury (annexed in 1873) and Dorchester (annexed in 1870). These subdivisions were meant for a different audience—one not alluded to in our opening paragraph. These were working class neighborhoods that developed only after being annexed by the City of Boston. They are examples of our earlier mentioned movement to the city periphery. Interestingly, restrictive covenants were also characteristic of these working class suburbs–covenants were sensitive to the class structure of its clientele, not its ethnicity. [49]

 

Instead of elegant brick built houses and apartment blocks, there were modest wooden single family detached cottages along with two and three family houses. Instead of Olmsted’s elegant centerpiece boulevard there was a myriad pattern of small developments offering lots and residences of varying sizes and graded by price. Roughly 22,500 dwellings were built in these three suburbs between 1870 and 1900, yet no one developer was responsible for more than 3 per cent of them. There was no equivalent of Henry Whitney.[50]

 

The point is that subdivisions on city peripheries also included working class neighborhoods. Gilded Age housing, its size, quality of construction and physical layout of the subdivision reflected their different clienteles. Subsequent generations of city dwellers would be able to “move up” to suburban housing as they acquired some wealth. This formalized into a pattern of residential housing succession. Housing succession is not, however, a Gilded Age phenomenon. In Chapter 5, however, I will return to this topic with relish and more detail.

 

Annexation and Suburban Autonomy

Annexation, no matter what period of history, has always been the first and the most effective counter to suburbanization. Northern and Midwestern Big Cities annexed intensively during the Gilded Age, not quite as robustly as Oklahoma City or Dallas in later years, but sufficiently robust to chase their populations. There were exceptions of course. Remember Brookline Massachusetts in the previous section; it refused to be annexed as early as 1874. But then again, Chicago’s largest annexation in 1889 netted 125 sq miles and over 225,000 new tax payers—not too shabby. New York used another device, borough consolidation in 1898 and the five boroughs become our proverbial “New York, New York”. The courts and even state legislatures were approachable. So at first, central cities could chase their foot-loose population through annexation. But in their own good time, Gilded Age suburbanites increasingly rejected central city annexation attempts, demonstrating an independent frame of mind that today is dubbed “suburban autonomy”.

 

Every big city had residential suburbs before the Civil War. Every big city also changed its boundaries dramatically in the course of the nineteenth century, sometimes absorbing empty space, sometimes annexing neighboring communities. The nine United States cities that contained more than 100,000 in 1860 fell clearly into two categories with regard to their histories of suburban growth and annexation…. Two cities (New York and Baltimore) contained large amounts of territory from an earlier date and thus had ample room for many years of residential expansion within their own boundaries. The other group of seven (Philadelphia, Brooklyn, Boston, New Orleans, Cincinnati, St Louis and Chicago) … annexed some of their first residential suburbs but found their overtures resisted by others. Proposals for annexation usually found strong support in cities, but generated heated controversies in the suburbs …. In general, the more prosperous and mature a suburb … the less its likelihood of being annexed.[51]

 

Why the push-back? Richardson Dilworth[52] presents a reasonable rationale for the noticeable rise in suburban autonomy in the later years of the era—he blames it mostly on political machines in the central city. But Dilworth interweaves machines with another intriguing factor, relevant to an economic developer, the need for life-sustaining infrastructure—water especially. Suburban reaction against the machines revolved about the latter’s potential impact on the politics and finance of infrastructure.

 

An intimate relationship between central city infrastructural development and political corruption generated the [nineteenth century] motivation for suburban autonomy.  New public works projects in [central] cities made millions of dollars available to politicians who used that money to build their power and enrich themselves …. For instance, political ‘bosses’ … Tweed in New York, William Bumsted in Jersey City, and James Smith Jr. in Newark—put themselves personally in charge of the agency that had responsibility for public works. One result was that large infrastructure projects in [central] cities were often accompanied by well-publicized political scandals. As cities then attempted to expand their borders through by annexing outlying communities, they met resistance from suburbanites who did not want to be taxed at exorbitant levels to support what they viewed as venal political organizations.[53]

 

In Dilworth’s mind, suburbs manifested their desire for autonomy through resisting annexation and eventually incorporating in order to protect the fiscal soundness, quality and accountability of managing their own core urban infrastructures. Ironically, as Dilworth observes, the pioneering experience and expertise of the central cities in developing and managing (water) infrastructures lowered the cost of infrastructure installation and operation for the suburbs, making the infrastructure affordable to the smaller suburban communities. The easy availability of expertise, the cost effectiveness of providing their own infrastructures allowed many suburbs to escape perceived machine corruption and inefficiency through suburban incorporation. Further, this infrastructure installed in the late nineteenth and early twentieth century made possible the very earliest manufacturing, warehousing, retail and office decentralization to suburban sites in the pre-World War I period. Infrastructure meant a suburb could take a stab at building its own economic base.  Dilworth also admits that other motivations beside antipathy toward the machine were also at play:

 

For instance, nativism may have motivated the suburbanite ‘Yankee middle class’ to prefer municipal autonomy in order to remain free of the city’s ‘Celtic machines’. But suburbanites also wanted adequate water and sewerage…. Suburban officials were able to provide public works … they were able to do so only because technological advances based on experience from public works in the cities, had made infrastructure systems affordable for smaller communities…. Disregarding questions of economies of scale, it makes no difference whether an area is served by one or several sewage systems ….[54]

 

If Dilworth is essentially correct, economic developers can appreciate that their nineteenth century counterparts in inner-ring suburban public works departments played a serious role in facilitating the incorporation and autonomy of early suburbs. An additional lesson is that infrastructure can be a means to an end—i.e. serve not so obvious purposes and goals.

 

So in summary, formation of metropolitan areas (central cities and suburbs) is an early feature associated with the industrial city—not a post-World War II distortion inflicted upon central cities. The existence of metropolitan areas was noticed at the time. The federal Bureau of the Census acknowledged in 1880  the existence of suburbs by demarcating the New York “metropolitan district” composed of central city and suburbs. The Bureau did not provide statistics for these districts until 1910 when it reported that twenty-five metropolitan districts existed and 10% of the population[55] lived in suburbs[56].

You Got to Be Kidding: Cities Push Back from Dillon’s Law

In the nineteenth century, the reader would do well to simply assume that most state governments were a basket of policy and moral perversions, largely dysfunctional, with inherent policy biases and distortions. The reader should also feel free to toss in remote, unaccountable, lazy and corrupt as well. Perhaps we exaggerate?[57] In any case, relations between states and their creatures were far from perfect, always complicated, and frequently Dillon’s law was invoked to accomplish all sorts of irritating, personalistic, partisan, not really very necessary and time-consuming “got to get the state’s permission” type of legislation—i.e. the states left to their own devices liked to micro manage (opportunity for honest graft). These matters were even worse in Western territories because previous to statehood they were “creatures” of the federal government–administered by territorial legislatures, the Congress—or both.

 

In this stifling and shameful atmosphere both the business community and much of the general community sought “home rule” by obtaining a new “municipal charter”[58] from the state legislature. Home rule is state legislation permitting an expanded set of powers and structures to a local government and brings those (and potentially other) powers under the control of the municipality’s citizens. The most typical provision in home rule legislation in this period was to permit the local government to adopt a preferred form of government, a new electoral system, and administrative powers such as budgeting, civil service, and taxing authority. Home rule legislation in this era was “package” legislation including the form of government allowed but also unicameral city councils, nonpartisan and at large electoral systems, a merit or civil service system, fiscal, budgetary, and  revenue raising powers and some service delivery and housekeeping powers as well.

 

1875 Missouri became the first state to adopt home rule for cities (in their case, over 100,000); California followed in 1879 and other states such as Minnesota and Washington followed soon after that. The municipal home rule revolution had commenced. By the 1890’s most states were under serious and sustained pressure to adopt some form of home rule legislation which applied principally to our Big Cities. To develop home rule proposals and advocate for reform legislation, chambers, business groups and good government citizens formed local municipal leagues. City level municipal leagues spread across the nation and most cities of any size would have had formed some type of a municipal league or advocacy group by the late 1880’s. To facilitate state adoption and to achieve some level of standardization from city to city within and across states, a national organization quickly formed. The individual municipal leagues, with allied state and national municipal reformers, came together in 1894 Philadelphia[59] to form the National Municipal League (NML), today’s National Civic League.

 

If one wants to do great things, like revitalizing a city or building one, one needs great power. How does one forge a political-administrative structure, in a political system characterized by separation of powers, checks and balances, gift provisions, and Dillon’s Law, sufficient to these great purposes? In this environment, the simplest of tasks could challenge traditional relationships, such as those between the weak, but strengthening public sector and the private sector, or that could overcome the limits imposed by states on debt, finance, and taxes. The earlier structural solutions, Chapter 2’s joint stock, mixed enterprise corporations had not ended well—although they proved reasonably effective in putting into place the transportation infrastructure (and banks, insurance corporations, and start up manufacturing firms). The 1862 federal venture into transcontinental railroads, yet another form of “mixed enterprise”, toppled President Grant and dragged him through the 1872 “Credit Mobilier” scandal[60].

 

So over the next three decades, cities experimented in devising an administrative structure that could cope with the demands and odd tasks demanded of them by voters and simple logistical need. Solutions were often ad hoc, and non-theoretical, many failed or were overturned by courts, and experimentation continued well into the twentieth century. Activity, such as public regulation of private actors, was more political, than administrative, and will be considered when we discuss the Progressive Era in the next two chapters. Some experiment originated from demands launched by new groups in city politics, unions in particular.

 

By the late 1870’s union-backed candidates were winning elections to all levels of government, and captured the mayor’s office in cities like Scranton, Utica, Birmingham and Toledo. In a dramatic departure from the politics associated with businessman mayors, issues which pressed for government ownership of parts of the urban infrastructure (utilities and regional transportation systems) were not uncommon. In 1881, the Mechanics Assembly of San Francisco pressed for  gas, water, and street-sweeping and in 1886, no less than Henry George himself was invited to run for New York City’s mayor on a platform of public ownership of that city’s mass transit.[61] Most of these more “radical” demands carried over into decades beyond this chapter’s focus, but In 1894, New York City voters approved in referendum the City’s ownership and operation of a subway (and in the same year Detroit voters approved a street railway, in 1902 Seattle voters approved a bond issue for a municipal owned power plant, and in the same year Chicago voters approved four to one for that city to own its mass transit system.[62]

 

Far more typical, however, is that municipalities desiring to freeze water  followed a predetermined process. Before we begin, think of your life without a refrigerator. How do you keep stuff cold? Ice. Ice cut from frozen bodies of water and stored below ground in very cold caves or ice houses. Affordable ice was a public necessity and that is what encouraged municipalities of all stripes and persuasions to enter into and compete with private firms in the ice market. City governments do this all the time today—public Wi-Fi for example. In the 1870’s and 80’s this needed to survive the Dillon’s Law process. By this point an extra feature had been added. Literally Dillon’s Law required the state legislature to approve legislation enabling a lower unit of government to enter into an action. By the 1880’s a second step, judicial review, entered the picture and the state court, Supreme Court usually, could review the state legislature’s enabling legislation to make a determination if the legislature’s action was constitutional or not. In this manner, the state court system became a player in urban and economic development evolution. If the state court was literal, i.e. it followed a “strict construction” of the state constitution, change would be difficult indeed. The reader, no doubt, might dimly perceive that Mistoffelees and political culture have entered the premises.

 

Enter “the saga of municipal ice sector involvement”. In most cases when municipalities entered into the ice industry, no court action followed. In general, however, it did as happened when the socialist mayor of Schenectady started that city’s ice business (1911) fulfilling his election pledge to “save the babies of the working class”. The city attorney reasoned that existing legislation empowered the city to store and transport water (water lines, etc) and ice was, after all, only frozen water. So hiring workers striking from General Electric, he started cutting ice and storing it. In the summer he gave it free to needy families—that was before a state court, on July 4^th,  decided it was not legal. So that night the city set up a non-profit and  continued its ice business. Private ice companies struck back and harassed their new competitor. They got needed financing by selling “ice at cost” buttons and finished the summer. Next winter the river did not freeze and the whole endeavor melted away. Courts throughout the nation, when asked, blocked municipalities from the ice business.

 

In 1915, Harvard University’s Municipal Research Bureau (the Policy World if you cared to note) reported that it found many municipalities had entered the ice business and that it resulted in lower cost ice to the consumer. By 1919 Cleveland owned and managed a cold storage plant, and many municipalities in the Privatist, but hot and humid South did so as well. In 1919, however, one state supreme court, Missouri, in Kansas City v. Orear overturned an approved municipal bond referendum to build and construct a municipal ice plant. It was not, the courts held, a legitimate public purpose “and not even the sovereign Legislature, much less a municipal corporation, can, by fiat, make that public which is in fact private”. The year after, the state of Missouri approved a constitutional referendum/amendment permitting municipalities to engage in the ice business. Ten years later (1929) the owners of the Denton Texas Home Ice Company thought they could stop Denton Texas from starting its own municipal ice business; that state court, however, said the city could do it—and the Texas Supreme Court upheld the lower court decision allowing the municipality to proceed with its ice business.[63] Get the point?

 

Dillon’s Law and state judicial review became the de facto process by which nearly every major economic development innovation or change went through—and goes through to the present day. The bias, at least initially, was that court’s followed a strict construction and enforced older interpretations and precedent (including gift clauses) of the state constitutions—continuing the traditions and values of the first settlers and preserving values of the founding fathers. Then, on a state by state basis, subject to subsequent legal activity, the court would continue to review and decide whether or not the action was constitutional and would make determinations which shaped the content and the process by which these economic development innovations would be permitted. In many cases, over time, the court could even reverse early decisions, but often doing so preserving as much of the traditional judicial precedent as possible. So tax exempt bond issuance, tax increment financing, eminent domain associated with urban renewal, eminent domain, municipal ability to lend to private firms and own property to benefit private firms (industrial parks), economic development zones, annexation etc. went through this maze and obstacle course. In this manner, the fifty state SSS, described in our opening chapter, came into being.

 

That is why in economic development “a rose is not a rose”. What is a rose in one state, is a peach in another, and outright forbidden in a third.

 

 

The Rise of Business EDOs

This subtlety and nuance begs larger questions: Who and What are Chambers/Civic Clubs? From what primeval soup did they emerge? The answers have great importance to this history because these organizations, whatever their political role, also served as economic development organizations as well. This is especially true of chambers, boards of trade, which during the Gilded Age assumed the role as the jurisdictions primary/lead, multi-strategy EDO. In so doing they became the first, hence oldest private participant in the jurisdictional economic development policy process found in our contemporary economic development scene. Chambers are also the first ring of our infamous “onionization” process.

 

Chambers of Commerce

Chambers of Commerce had been around, in Europe as early as the 16th century[64]. They spread to America early in the colonial era[65], but colonial/Early Republic chambers crashed and burned on a regular basis. Most Early Republic chambers failed by the end of the Civil War; only a few remained in cities such as Boston, Chicago, Buffalo, Pittsburgh and New York. A new-style chamber[66] became commonplace after the Civil War. Old-style chambers (ignore Boston) stayed away from public affairs and served as mediators of business disputes and purely commercial/trade and production matters. New-style chambers, however, assumed a wider scope of action, a larger world view, and assumed responsibility and leadership for key municipal affairs. Most Northeast/ Midwest Big (and small) City chambers of commerce were established throughout the Gilded Age[67]. In 1868, in Philadelphia, thirty-three chambers and boards of exchange (including the New York City Chamber) established the National Board of Trade[68]. By 1890, a report prepared by Scranton Board to Trade to the National Board of Trade had uncovered 1,171 relevant chamber/boards of trade in existence at that time[69].

 

One reason the new-style chamber caught the attention of political folk is the business leadership that had coalesced behind them. Gilded Age chambers were restricted to the largest firms/old money in the jurisdictional economic base. Kenneth M. Sturges describes the new style chamber produced “a new organization conducted by the best type of citizens and businessmen, and interested not only in the upbuilding of commerce, but also in the betterment of community life.”[70] The example was set by the New York City Chamber, its membership limited to the top 1000 corporations. In 1896, for example, its Board of Directors held eleven millionaires out of twelve directors. Included as its Vice-President was J.P. Morgan: directors were John Jacob Astor, John D. Rockefeller, and Cornelius Vanderbilt.[71]

 

[Chambers/Boards of Trade] issued a growing body of resolutions to the city councils and mayors’ office and organized a string of committees to draft municipal legislation or lobby for change in municipal policy. Realizing superior municipal services and commercial prosperity were intrinsically linked, the chambers and boards applied their traditional booster spirit to the cause of good government and became potent forces ….[72]

 

Chamber after chamber, the jurisdiction’s “one per cent” formed the nucleus of the Chamber[73]. Chamber Secretaries, while very prestigious, were more facilitators for the Great Men of Business than independent powers. If staff were needed, the big boys would second staff from their own corporations. Campaigns, initiatives and budgets were consensually determined so sufficient resources to purposes required were available. The Gilded Age’s most prestigious chamber, which thought of itself as national in scope of interest and action, was the New York City Chamber. States formed state-level chambers, Utah may have been first in 1879 (it published a guide, “the Resources and Attractions of the State of Utah”), Louisiana had rudiments of a state organization in 1889, Maine in 1889, Massachusetts and Connecticut in 1890, New York in 1891, Virginia 1892 and Ohio in 1893[74]. By the turn of the century were the undisputed primary business organization in the nation—embedded in the largest, and many second third tier cities, they were equally conceded (by me) to be the undisputed primary actor in Big City economic development policy-making.

 

Gilded Age Chamber Initiatives

First, a thorough discussion of chamber economic development initiatives, strategies, and tools will be presented in Chapter 4. At this point, discussion will be limited to major “city-wide” initiatives relevant to city growth, the city’s economic base, and the physical expansion of the city conducted in several Big Cities during these years.

 

Chambers/Boards of Trade very early on became vociferous opponents of the railroad “robber barons”. It is not hard to understand why. Just about every sector of industry was the victim of freight discrimination, excessive rates, the need to pay bribes, rate pooling, and to complete the picture, stock manipulation. Cities, as we have already described paid enormous subsidies to attract railroads to their cities—but that doesn’t mean they enjoyed doing it. It was the cost of growth, pure and simple. In 1879 the National Board of Trade voted 42-3 for national regulation of railroads. The Chicago Board of Trade had harsh words for railroads, but when the New York City Chamber of Commerce formed a Committee on Railroad Transportation in 1878 and called its director Cornelius Vanderbilt to task (he admitted to the committee that “we [his railroad] have been actuated by selfish motives”) the worm had indeed turned[75].

 

The New York State legislature responding to the New York City Chamber, approved anti-railroad legislation and established the state railroad commission in 1882. Many states followed its example in i887, with active and public support from hundreds of chambers across the nation, Congress passed the Interstate Commerce Commission. No claim is made that the traditionally cited populist and farmer outcries were not also responsible for its passage—only that chambers played a vital, and powerful role in what easily was the most critical urban transportation issue of its day. The National Board of Trade also took “progressive” positions for regulation of food and drugs (responding to the Yellow Fever epidemic of 1878). Also as early as 1883, the New York Chamber advocated for state preservation of the Adirondack Forest and Niagara Falls.[76] Positions such as these are not traditionally associated with chambers today—and there may be a reason for these positions then, but not today. As was argued earlier, “the business community” is not monolithic. Chambers at this time are dominated by what will later be called “the corporate elite”—the largest and most powerful corporations in America. This will change. The corporate elite in the first decades of the twentieth century, will move on to “other climes”, leaving the chamber leadership to other business segments. Chambers in the Gilded Age are indeed private actors, but these chambers are different than other chamber leaderships to follow.

 

Another example drawn from the New York City Chamber further demonstrates its locally-applied power, vitality, and the commitment to city growth and prosperity: the role of that chamber in the 1890’s approval and installation of the New York City rapid transit system. London in 1890 opened its underground, electrically-powered subway. Abram Hewitt, former chamber president and former NYC mayor tacked the task of building this system in his city. He got nowhere for over three years. In 1894 the Chamber assumed leadership, formed a committee, and formulated a plan which required public financing (and private). Deciding that the city government would frustrate the project, the Chamber secured from it authorization to form an independent (self-perpetuating) Subway Commission with six of the eight members being chamber leaders (including the chamber president). The Tammany legislature attempted to gain control over the Commission, but the Chamber successfully resisted.

 

The Chamber Committee drafted and submitted a bill to the New York State legislature in 1894 and it was approved and signed by the governor in three months. The state legislature required approval by popular referendum, however. The referendum endorsed the chamber plan; the Subway Commission issued the public bonds and sub-contracted construction management and contract issuance to the Chamber itself. In October, 1897 the line opened for business[77]. We must be careful concerning the lessons drawn from this New York City example. The power and capacity of the 1890’s New York City Chamber of Commerce was not typical of Big City chambers in general. But chambers across the North and Midwest tackled, certainly provided advocacy, critical leadership, planning and resources for  significant infrastructure projects and path-breaking initiatives.

 

The Philadelphia Board of Trade stopped dead its tracks a proposal for an elevated loop rail system through the CBD; it successfully pressed the city government to form a “Docks Department” to dredge the harbor and modernize its facilities to render it more competitive. The chamber campaigned to establish water and sewer lines into the CBD. In the 1890’s it arbitrated a solution on where to locate/build the Reading Rail terminal and lobbied to construct a beltline railway. In Newark, the Chamber successfully lobbied to construct a park system and opposed plans for a new reservoir, It secured approval of a Park Commission and the chamber president became its first president. pressed for construction of sewers, urged enhanced building codes on wooden residential structures, and continuously battled street railways over excessive charges and bad service.

 

The Cleveland Board of Trade reincorporated as the Cleveland Chamber, becoming in the process the city’s most powerful proponent for modernization, infrastructure and city growth. In 1897 in its annual report, Cleveland’s Chamber Secretary reported that “nearly all of the important propositions for [public] improvements were submitted to the Chamber for consideration and approval [and] with rare exceptions the legislative representatives, city officials, and members of the chamber labored unitedly”. Apparently Columbus followed Cleveland’s aggressive chamber lead, that the claim was “The Board of Trade is Columbus”. In Indianapolis, the Board of Trade under the presidency of Eli Lilly (pharmaceutical company) drafted and secured a new charter for the city, framed and secured passage for a park commission, and hired engineers to examine the city’s sewer system and develop proposals. The Minneapolis Board of Trade and the Chamber combined efforts to overturn an adverse city council decision not to establish a park commission by going directly to the state legislature for authorization.[78]

 

Leaving Chicago for another chapter, there are plenty more examples; it seems clear that chambers/boards of trade during the late Gilded Ages were aggressive promoters and developers of infrastructure and public improvements—and at least as far as economic development-related policy-making, arguably the dominant player. To provide one last confirmation and to bookend the New York City Chamber’s aggressive involvement in city policy-making, this section concludes with Boston. In 1896 Mayor Josiah Quincy set up a city hall “Merchants Municipal Committee”. Composed of the heads of the city’s six major business organizations, the Merchants Committee over the next four years submitted recommendations to the mayor, drafted legislation to the state legislature, drafted a tax reform, arbitrated differences between railroads and the city/track relocation and terminal location. In September 1897, the Tremont Street Subway (the first section of the “T”’s Green Line opened for business, one month before the New York City line—earning Boston’s bragging rights to house the nation’s first subway. Boston, anticipating the later Yankees-Red Sox rivalry, had been in a race with the New York City to build the first subway[79]. Henry Whitney, owner of Boston’s West End Street Railway Company had beaten his rival Abram Hewitt.

 

Civic Reform Clubs

The alter-ego of chambers in the early Gilded Age, the “dark side of their force” was undoubtably the civic reform or good government clubs which flourished from the 1870’s and increased in strength through the era. Perhaps, the earliest of these semi-formal elite-based “political clubs” was the Boston Commercial Club founded in 1868. Civic Reform Clubs were founded in city after city from the 1870’s onward, including Philadelphia’s Citizens Reform Association (1871); the Citizens Association of Chicago (1874; the Commercial Club of Chicago (1877); the Baltimore Reform League (1885); the New Orleans Committee of 100 (1885), the Citizens Association of Boston (1887).

 

These early clubs were populated by “generally wealthy , well-educated business or professional types, men of the Mugwump persuasion were galvanized by the independent Republican movement of the 1872 presidential election and the reform candidacy of Democrat Grover Cleveland [later] in 1884. … Most of the men involved were elitist and patrician in social outlook, Protestant in religion,, and old-stock Anglo-Saxon or Yankee in family background”.[80] While most were certainly members and leaders in their city’s newly forming chambers of commerce, these Mugwump city reformers formed the reform clubs for largely, but not exclusively political reasons.

 

Intensely opposed to the new immigrant and ethnic “machines”, and frankly extremely uncomfortable with the social and cultural threat of immigrant newcomers to their sense of what has since been labeled “the American way”. Hofstadter wrote in The Age of Reform[81] “… they found themselves checked, hampered and overridden by the agents of new corporations, the corrupters of legislatures, the buyers of franchises, the allies of political bosses”. The first post-Civil War urban reformers (I’m tempted to use terms like neo-conservatives or “old money”) wasted little time in challenging the immigrants, their machines (and big business) that upset the old order.

 

The first substantial urban machine of the era was, of course, New York City’s Tweed Ring run out of Tammany Hall. The Tweed Ring offended a number of New Yorkers on many different levels and Thomas Nast cartoons, a constant barrage of New York Times articles, and the Union League Club’s expose report, prompted the calling of a public meeting at Cooper Hall in early September 1871. With the upcoming November elections in mind, a “Committee of Seventy” composed of city business and lots of Mugwumps and led by Samuel Tilden, was formed to put those crooks in jail. The chairman of the Cooper Hall meeting, William F. Havemeyer (a former 1840’s mayor and a Mugwump) stood for mayor and was elected.

 

His administration, in the midst of a very severe panic or recession, cut drastically public funds for relief programs for the city’s poor. He also stopped infrastructure and public improvement programs which created jobs. He imposed an honest, efficient, free market-oriented, low tax administration (not too dissimilar from that of Herbert Hoover sixty years later). Havemeyer pushed a new city charter through the state legislature which created several independent boards and commissions (which will be discussed shortly), and dispersed key policy-making authority into the Board of Estimate (which controlled budgeting, financing, taxing and bond-issuance).

 

In so doing, he weakened substantially his own power and that of the New York City mayor’s office. Simultaneously, it weakened the city legislatures dominated by the machine. The policy-making coherence of New York’s City government was badly impaired in the aftermath. Havemeyer’s administration provides a sense of early, Mugwump era, business reform and its confused impact on the city’s policy-making process. Fortunately, for the other Big Cities, they could sit back, watch and learn from New York’s City’s Mugwump experiment. After two years in office, Havemeyer, the Mugwump reformers, the Committee of Seventy were swept out of office. Tilden, who went on to greater glories, was another matter. Tammany, in very short order, minus Tweed who was convicted, jailed and shortly after died, formed a new style-ethnic controlled machine under Irishman ‘Honest John Kelly’ and journeyed forward into its Golden Years.

 

The Civic Reform Clubs that followed were less “Mugwump” and more sophisticated in their approach to reconstructing the urban policy system. Their membership tended to be more representative of the various wings of their city’s business and professional community. Recognizing the need to strengthen mayoral power as potentially the most effective means to counter the decentralized control of the city legislatures by the machine and its control ward elections. This, of necessity, meant new city charters which could only be granted by the state legislature. The burden imposed by Dillon’s Law, of having to convince the state legislature for every structural and many policy/budget/tax/administration changes, added a new dimension to urban reform: home rule or the delegation by the state legislature of broad and sometimes sweeping authority to the city to change its own government. The quest to obtain municipal home rule legislation from the state legislature reshaped the drive to change municipal governance.

 

Mohl claims that by 1890 eighty good government associations had been established. These were supplemented by thirty city civil service reform associations, followed in 1881 by the National Civil Service Reform League. Magazine editors such as E. L. Godkin (the Nation) and George William Curtis (Harper’s Weekly) were chairs of such groups[82] entered the fray. By the  mid-1880’s, certainly the 1890’s, Gilded Age Mugwumps were only one of many groupings concerned with city governance. The Municipal League eventually took over the reform effort and by the late 1890’s reform had changed character and had evolved into what we will, in Chapter 5, label the “structural reformers”. Structural reformers will prove to be one of the most significant forces in our history of state and sub-state economic development policy. They deserve to be attended to, and described, separately from our present concern with the Gilded Age formation of a municipal policy system.

 

Real Estate Boards

Real Estate Exchanges[83] were common throughout the United States and they pretty much did what their name implies. Real estate boards were, and are, industry trade associations, composed of individuals and firms engaged in real estate transactions, property ownership and sub-division development-redevelopment. Their membership also extended to all sectors (for instance banking, construction and insurance) relevant to real estate development, they eventually assumed responsibility for issue advocacy and legislation desired by their membership. Since in most states, the state governments retained considerable authority over city matters, state-wide real estate associations were also established at the state level. Allegedly, the first state-wide Real Estate Board was set up in New York in 1896. I am uncertain as to which city’s real estate exchange developed first—probably New York City.

 

The earliest evidence of a residential and commercial body having influence on city agencies and codes, was probably the National Board of Fire Underwriters founded in 1866. Its purpose was to fix uniform rates nationwide and act as a lobby for and against state-level legislation. The national board also worked hard to push localities into more stringent building codes and to develop well-trained and equipped fire departments. The symmetry of logic between strong fire codes and city governments is fairly self-evident. In 1871 Chicago burned down. The fire destroyed an estimated 15,000 buildings (3 ½ square miles), and drove sixty-eight insurance companies into bankruptcy. The Boston fire of 1872 destroyed 750 buildings and sixty-five acres of its CBD[84]. As early as 1857 (San Francisco) individual cities had formed their own boards of fire insurance. In the course of their efforts to prevent fires, insurance firms naturally, through city regulation, imposed constraints on home builders (mostly a pretty heterogeneous lot of small builders), banks and the like. By 1892 electrical codes were fairly commonplace as well. Each of these codes, however, accepted and necessary reached into the pockets of real estate-related businesses. The more stringent the codes, the more expensive. That’s why New York City was probably the first to form a Real Estate Exchange. Amendments to New York City’s building law in 1885 and 1892 added four new members to the City’s Board of Examiners: one being the Real Estate Owners and Builders Association and the other the New York Real Estate Exchange.[85]

 

The Greater Boston Real Estate Board (Real Estate and Auction Board) claims to be the nation’s oldest–formed as it was in 1889—metropolitan real estate exchange. The GBREB’s first chairman, Frederic H. Vaux, played a critical role in introducing the electric trolley to Boston. Originally GBREB signed up 100 members (versus 7,000 today) “including the best known real estate men in the city”. Their activities and membership grew quickly and in 1903 “at the bequest of the chamber of commerce, the exchange took part in high level conferences regarding reforms under consideration by the Boston city government”. By the 1920’s, GBREB was deeply involved working with planners in the formulation and implementation of the new zoning and building code ordinances.

 

We have no reason to question that most municipal and metropolitan real estate boards followed some version of the GBREB’s evolution–at least until World War II.[86] The Boston Exchange, by virtue of its specificity focus and intense and consistent involvement, its professional membership, and its pivotal intermediary role to private financing and insurance supported a near monopoly over the city’s residential/commercial expansion. As discussed, the Big City grew beyond its periphery during this era. It did so because transportation innovation propelled real estate development, making it a gazelle of the Gilded Age. The transformation of the CBD was essentially a real estate-driven activity dominated mostly by private real estate organizations like real estate exchanges and property owners associations.

 

Functions, which today are viewed as inherently public (bus, street car, subway lines, bridges, electric power stations, and water/sewer plants). In the Gilded Age privately-owned and managed public franchises or utility-style corporation–in close alliance, if not partnership with the municipal administration and real estate exchanges. These firms fit the image associated with the infamous growth coalition of future years. The obvious reality is these firms translated population growth into private profit. While individually, these real estate firms may have been members of the chamber of commerce, they could not control or easily manage chamber policy positions or decision-making and the likelihood is that the latter could do little to influence their actions as well.

 

In the Gilded Age, Exchanges were neither responsive to, nor sympathetic with larger political or partisan issues. They preferred to stick to their own real estate “knitting”. In this more Privatist age, Real Estate Exchanges participated heavily in what today would be physical economic development matters including CBD, neighborhood and commercial development and redevelopment. Much of their growth and prosperity resulted from “streetcar chasing” or following the street car routes out toward city peripheries and beyond. To repeat some observations the reader should remember that in the late 1880’s stretching past World War I, the CBD and periphery expansion were the engines of Big City economic growth and industrialization. New industrial districts, new subdivisions of working and middle class neighborhoods, commercial development of streetcar routes—annexation and eventually suburbanization all were critical to municipal economic development and heavily involved with Exchange membership. Real Estate Exchanges therefore extended their tentacles into hinterland cities well beyond the confines of the larger central city. They became metropolitan-wide players in the jurisdictional policy systems.

 

This centrality to city growth remained largely unchanged through World War II, if not the 1970’s. These metropolitan-wide real estate exchanges, therefore, played a very serious role in local public policy—and would form a national association (eventually becoming the Urban Land Association and the National Association of Real Estate Bureaus). Real Estate Boards and national associations such as the National Realtors Board and Urban Land Association would play a major role in the evolution of economic development during the 1920’s thru 1950.

 

The Rise of Bureaucracies

Although, I discuss city bureaucrats last in a series of Gilded Age policy actors, it is very unclear they are last in their impact over the municipal policy process—or our history. Economic development owes a great deal to the independent park commissions of the Age, but that will not be apparent until Chapter 5. Also, the formation of city bureaucracies relevant to economic development, while not widespread across Big Cities, did begin in New York City and Philadelphia during these years—but that also will be not be known to the reader until Chapter 4. In any case, this section will focus on two city bureaucracies which were key elements of the Gilded Age municipal policy system: the comptroller and independent commissions.

 

The city comptroller played a role not dissimilar from that of a chief operating officer (COO), or even a city manager of later years. He certainly was the city’s chief financial officer. The comptroller was central to development of the budget, usually possessed control (sign off) on city contracts and expenditures, conducted the city’s financial affairs and bookkeeping, a sometimes auditor of departments and commissions, city’s agent in the sale of bonds, and responsible for city’s credit rating. The comptroller was probably more important than the mayor in tax abatements and city incentives. He was also usually ex officio on most boards and commissions along with the mayor and corporation council. The comptroller in most cities was independently elected, often not in the same years as mayor (Philadelphia, Brooklyn, St. Louis, New York City, for example); or the comptroller was appointed by the mayor (Boston, Baltimore and Chicago). “During the last three decades of the nineteenth century, downtown businessmen, not ward politicos, occupied the post of comptroller, just as they did the office of mayor.”[87]

 

 “Few comptrollers of major cities were supine servants of party leaders, or mindless flunkies of the mayor or council. Most had some previous political experience… partisan loyalty to the dominant political faction was not a chief criterion for attaining the post … the emphasis on integrity, financial acumen, and favorable ties with the banking community also strongly influenced the choice of comptroller”[88]. The professionalism and the autonomy of the comptroller’s office are evidenced by the process which followed the death of bureaucrat New York City Deputy Comptroller Richard A. Storrs. Storrs served in that position from 1856 to 1896 when he died. His estate upon death totaled only $15,000—he had a reputation for honesty, early opposition to Tweed and an effective protector of city funds. In any event Ashbel Fitch, the comptroller, received a nomination for Storrs’s replacement from Richard Croker, the famed Tammany boss. Fitch instead called a meeting of twelve presidents of New York City’s leading banks and insurance companies, and they nominated a candidate whom Fitch then appointed[89]. The comptroller’s was not a policy-making position, but it clearly was preeminent in the policy implementation stage. The comptroller was certainly the key liaison on the day to day interrelationships between the chamber and other business organizations, the independent commissions, and the last bastion of hope against municipal legislatures.

 

Gilded Age municipal commissions could be regarded as an experiment, or another example of hybrid, quasi-public organization. Like now discredited, Early Republic corporate charters before them they were arguably clumsy attempts to make both policy-making and public powers accessible to private elites. Commissions were indisputably government agencies. Commissions were governed by their board of directors, whose appointments were determined by mayor and council. The comptroller and mayor usually served as ex officio, and their activities were included within the comptroller’s fiscal, expenditure, bond issuance and audit authority. According to Teaford, selection for these board positions was heavily influenced by chambers, and reserved for “persons of standing and character”. Some boards were self-perpetuating, as their members would fill any vacant position. Many important commissions had independent funding and taxing powers. Teaford calls these independent boards, bureaus and commissions as a third element [after executive and legislative] in [Gilded Age] city government.[90]

 

Among the earliest example of autonomous municipal bureaucracies were police bureaus. As early as the 1860’s police bureaus appointed by state governors were found in New York City, Brooklyn, St Louis, Baltimore and Cleveland, and by the 1880’s Boston and Cincinnati enjoyed state appointed boards. Public health, libraries, schools, and sinking bond commissions were overwhelming candidates for being set up as an independent commission/board. The motivation for forming a board was usually to separate politics for administration, i.e. keep the legislature out—but specialization of expertise in a critical function, public health for example was also important. Between 1870 and 1885, corporate charters permitted boards and these were the golden years of their formation.[91] That they declined after the passage of the 1883 Civil Service Act strongly suggests their transitional role between the Jeffersonian-Jacksonian city government and a strong mayor government.

 

The commission most interesting from an economic development perspective was, of all boards, the park commission. A hint why park commissions are of importance to our history is reveal when Boss Tweed “injected city government” into the construction of Central Park an ongoing project of a New York City Park Commission. Disruptive at the time to the construction, it spurred our soon-to-be-friend Frederick Law Olmsted Senior into launching an independent parks movement, complete with parks commissions and review boards across the nation. In city after city for the next several decades, Big Cities established parks commissions and entered into major projects, such as Boston’s Emerald Necklace. As shall be discussed in future chapters, this movement provided occupations, training, experience, and expertise to a new developing profession of great future importance to economic development: planning. Another economic development-related policy area was public works which Griffith believes “were among the most numerous”. His observation that between 1870 and 1890, it was “medium-sized and smaller cities” that were most “remarkable for the frequency with which such boards of public works appeared in these new charters”—Tennessee and Wisconsin “well nigh universal in medium-sized cities”[92]. As shall be discovered, this is the age of infrastructure installation and public works bureaus handled that vital economic development function—we suspect with chamber involvement and perhaps assistance.

 

Finally, the reader might ask if Big Cities reasonably portray what goes on in second and third tier cities. With some frustration, it must be acknowledged that research on these cities can be sparse, and their sheer number inhibits our ability to deal with them responsibly. One smaller city example, Manchester New Hampshire, suggests that as far as trends such as strengthening the mayor’s office and the propensity to use boards and commissions previous to twentieth century, their experience is similar. In City Politics, Banfield and Wilson observe

 

During the nineteenth century, when reformers were anxious to keep certain functions out of the hands of party machines, the practice was to create a large number of entirely independent boards and commissions—sometimes twenty or thirty. Most of these eventually became city departments under the mayor and council, but today (1963) many are still loosely tied or not tied at all to the city government proper. The distribution of authority in Manchester, New Hampshire [1880 population 32,600 and 1900 population nearly 57,000] is typical of what exists in many small cities. Manchester [in 1963] has twenty-one boards and commissions loosely tied to city government …[93]

 

 

 

Wrap-Up and Segueway

This chapter outlined the foundations and preconditions pertinent to modern economic development. These included: growth of the industrial city through immigration and industrialization, Gilded Age jurisdictional policy system capacity-building, the physical evolution of the metropolitan area, the nationalization of the American economy, and oligarchy and the profit cycle of industries and sectors. These are the shoulders upon which twentieth century economic development would stand.

 

[1] Ann Markusen, Profit Cycles, Oligopoly, and Regional Development (Cambridge, The MIT Press, 1985)

[2] McKelvey, pp. 21-22

[3] McKelvey, pp. 24-25

[4] McKelvey, p. 25

 

[5] Blake McKelvey, the Urbanization of America, op. cit. p. 42.

[6] Raymond Mohl, the New City, op. cit. p. 60.

[7] The Equitable Life Insurance Company, which did not “invent” commercial insurance by any means, developed the new low-cost tontine (money goes to the last survivor) insurance in the 1870’s

[8] Alfred D. Chandler Jr., the Visible Hand: the Managerial Revolution in American Business (Cambridge, Mass, The Belknap Press of Harvard University, 1977) p. 9.

[9] Alfred D. Chandler Jr., The Visible Hand: the Managerial Revolution in American Business (Cambridge, Mass, The Belknap Press of Harvard University, 1977)

[10] Alan Trachtenberg, The Incorporation of America: Culture and Society in the Gilded Age (New York, Hili and Wang, 2007), p. 79.

[11] Alfred D. Chandler Jr., the Visible Hand, op. cit. p. 9.

[12] Alfred D. Chandler Jr., the Visible Hand, op. cit. p. 6.

[13] Alfred D. Chandler Jr., the Visible Hand, op. cit. pp. 6-7.

[14] Alfred D. Chandler Jr., the Visible Hand, op. cit. p. 8.

[15] Alfred D. Chandler Jr., the Visible Hand, op. cit. p. 9.

[16] Alfred D. Chandler Jr., the Visible Hand, op. cit. p. 9.

[17] Alfred D. Chandler Jr., the Visible Hand, op. cit., p. 88: See Chapter 3 “The Railroads: The First Modern Business Enterprises, 1850s-1860’s, Chapter 4 “Railroad Cooperation and Competition, 1870’s-1880’s, (the Great Cartels), and Chapter 5 “System-Building, 1880’s-1890’s.

[18] Ralph Gray and John M. Peterson, Economic development of the United States (revised edition, 1974) (Homewood, IL, Richard D. Irwin, Inc, 1974), pp. 306-310 (quote p. 307).

[19] Ralph Gray and John M. Peterson, Economic development of the United States, op.cit, pp. 271-273. NBER identified thirteen cyclical declines from the Civil War to World War I. Only in seven of these declines did the decline last a full year.

[20] Ralph Gray and John M. Peterson, Economic development of the United States, op.cit,, pp. 273

[21] The golden decade of immigration was 1900-1910 with nearly 6.3 million immigrants (before falling to 2.5 million during the decade of World War I). Post 1920 Immigration reformed virtually shut the door.

[22] Charles N. Glaab and A. Theodore Brown, A History of Urban America (3^rd Edition) ((New York, Macmillan Publishing Co, 1983), p. 112.

[23] There had been three in 1860 (Charleston and Richmond—plus New Orleans, of course).

[24] They originated in France and first appeared in 1829 New York City. Philadelphia opened one in 1831, Boston 1835, and Baltimore in 1844. The Omnibus overlapped with the horse-iron railway, but their greater cost and physical disruption affected the rate of increase in their use.

[25] Raymond H. Mohl, The New City, op. cit. p. 29.

[26] Raymond H. Mohl, The New City, op. cit. p. 30.

[27] Raymond H. Mohl, The New City, op. cit. p. 31.

[28] Raymond H. Mohl, The New City, op. cit. pp. 32-35. Statistics used in this paragraph are each drawn from Mohl. I could have rubbed salt into the wound by mentioning that in 1903 Wilbur and Orville successfully flew their new-fangled “powered flights” at Kitty Hawk, North Carolina—and by 1908 successfully flew 2-seated planes. Almost seems like Moore’s Law was at work for transportation innovation at his time.

 

[29] Jon C. Teaford, the Unheralded City, op. cit., p.285.

[30] Ernest S. Griffith, A History of American City Government, op. cit., p.180.

[31] Jon C. Teaford, the Unheralded City, op. cit., p.223. See Teaford, pp. 219-227 for detailed specifics and data on both comparison with Europe and individual municipal water-related infrastructure investment.

[32] Jon C. Teaford, the Unheralded City, op. cit., p.227. See pp. 226-234 for intensive discussion of technologies and specific projects of individual cities—as well as comparison with European large cities.

[33] Ernest S. Griffith, A History of American City Government, op. cit., p.184.

[34] Ernest S. Griffith, A History of American City Government, op. cit., p.183.

[35] Charles N. Glaab and A. Theodore Brown, A History of Urban America (3^rd Edition), op. cit., p. 160. The reader should be informed that each city operated many lines under independent ownership. So 850 systems does not mean 850 cities. Glaab and Brown also note one additional issue in municipal ownership of these transportation infrastructures. In 1907 New York City “in twenty-seven days there had been 5,500 accidents on street railways … 42 people were killed outright, 10 skulls fractured, 10 limbs amputated…” (p. 161).

[36] Charles N. Glaab and A. Theodore Brown, A History of Urban America (3^rd Edition), op. cit., pp. 189-192.

[37] Raymond Mohl, The New City, op. cit. p. 41.

[38] Otis didn’t invent the elevator or the elevator shaft—he invented the brake which stopped the darned thing and made it safe to ride. Alexander Miles, of Duluth, a black inventor, patented the first electric elevator in 1887.

[39] Raymond Mohl, The New City, op. cit. p. 45.

[40] Kenneth Jackson, Crabgrass Frontier; and Dolores Hayden, Building Suburbia: Green Fields and Urban Growth, 1820-2000 (New York, Vintage Books, 2003) are among the most well-received; see also Becky M. Nicolaides and Andrew Wiese (Eds), The Suburb Reader (New York, Routledge, 2006) .

[41] Henry C. Binford, The First Suburbs: Residential Communities on the Boston Periphery, 1815-1860 (Chicago, University of Chicago Press, 1985) p. 10.

[42] Dolores Hayden, Building Suburbia: Green Fields and Urban Growth, op cit., p. 22.

[43] Dolores Hayden, Building Suburbia: Green Fields and Urban Growth, op cit., p. 114. Table 8.1

[44]  Rybczynski,, Makeshift Metropolis; Thomas J. Vicino, John Rennie Short, and Bernadette Hanlon, Cities and Suburbs: New Metropolitan Realities in the United States (Routledge, 2009); Dolores Hayden, Building Suburbia: Green Fields and Urban Growth 1820-2000, NY, Pantheon Books, 2003); and Kenneth Jackson, The Crabgrass Frontier: the suburbanization of the United States (Oxford, Oxford University Press, 1985).

[45] We draw our detail from Stephen V. Ward, Selling Places: the Marketing and Promotion of Towns and Cities 1850-2000 (New York, Routledge, 1998). See especially his chapter “Mass Transit and Healthy Homes”.

[46] We could have used Samuel Eberly Gross of Chicago as another example. By 1896, Gross subdivided and sold over 44,000 lots and built 7,500 houses outside Chicago. Gross’s usual business plan consisted of speculative land purchase, installation of limited infrastructure, employment of contractors-builders, use of an early form of installment financing, alliance with rail and street car owners—and marketing and advertising which in today’s parlance promised the American Dream. He went bankrupt eventually—but not because of his real estate business; his personal life is worth reading about.

[47] By the way, Brookline, Massachusetts does have a one person Division of Economic Development within its Department of Community and Economic Development. It follows a five year economic development plan, operates a façade program, provides walking tours and kiosks, and liaisons with firms in zoning and planning. In short, economic development in these wealthy suburban enclaves was, and likely still is, planning-oriented or non-existent.

[48] Stephen V. Ward, Selling Places, op. cit. p.86.Ward, by the way is basing much of his description from that provided by Sam Bass Warner in Street Car Suburbs.

[49] Another example is Queens New York Led by its borough chamber of commerce it produced a sort of “real estate guide” a catalog of houses and associated industry complex advertising which extolled the advantages of living in Queens. This was in place previous to 1914 (see Ward, Selling Places, op. cit. p. 93). It too was annexed.

[50] Stephen V. Ward. Selling Places, op. cit. p.86. Again Ward draws from Bass’s Street Car Suburbs.

[51] Henry C Binford, The First Suburbs, op. cit. pp. 10-11. Binford claims the only overall surveys of annexation are Kenneth T. Jackson’s “Metropolitan Government versus Suburban Autonomy: Politics on the Crabgrass Frontier”, included in Kenneth T. Jackson and Stanley K. Schultz (eds) Cities in American History (New York, 1972).

[52] Richardson Dilworth, The Urban Origins of Suburban Autonomy (Cambridge, Harvard University Press, 2005)

[53] Richardson Dilworth, the Urban Origins of Suburban Autonomy, op. cit. p. 2.

[54] Richardson Dilworth, the Urban Origins of Suburban Autonomy, op. cit. p. 5.

[55] Blake McKelvey, The Urbanization of America, 1860-1915 (New Brunswick, New Jersey, Rutgers University Press, 1963) p. 51.

[56] Boston, interestingly, had 55% of its metropolitan district living in suburbs

[57] Jon C. Teaford should be consulted for a more balanced perspective. For a more cynical treatment download or stream “Blazing Saddles” or the “Best Little Whorehouse in Texas”. They are funny and closer to the truth than you might realize.

[58] Most cities already had acquired municipal charters from the state legislatures and hence home rule necessitated a revamp or a replacement of the original charter.

[59] In attendance were Theodore Roosevelt, Louis Brandeis, Frederick Law Olmsted and Mary Mumford.

[60] Chapter 4 will present some very interesting and terribly important economic development consequences which follow from the reaction to that scandal. The innovation prompted by that scandal will serve as the foundation for city-building in the American West, and  the attraction strategy for our profession.

[61] Gail Radford, The Rise of the Public Authority: State-building and Economic Development in Twentieth Century America (Chicago, University of Chicago Press, 2013), p. 74. I follow much of Dr. Radford’s Chapter 3 in this discussion.

[62] Gail Radford, The Rise of the Public Authority, op. cit., p. 74. The activities associated with social reform mayors during the Progressive Era will be further detailed in the next chapter.

[63] This entire case study was taken from Gail Radford, chapter 3, in her The Rise of Public Authority, op. cit., pp. 78-82. We are indebted to her for this excellent research. I confess, however, that she did not intend it to demonstrate the development of a state SSS—her purpose, as in part was ours, was to demonstrate how public authorities engaged in some form of economic development found it difficult to navigate though Dillon’s Law and state judicial review.

[64] Marseilles France claims it is the first–established in 1599–followed by a second in Bruges Belgium in 1664.

[65] America’s earliest chamber, New York City, was found in 1768–although that fact is contested by Boston Chamber of Commerce which claims to be America’s first, inspired by Daniel Webster in 1825. See Chris Mead, the Other Chambers of Commerce, New Geography, November 18, 2010. Selected Big City Chambers include: Chicago 1848, Buffalo NY 1844, Cleveland OH 1848, Toledo OH 1849, Baltimore 1820, Philadelphia 1801, Albany 1823, Pittsburgh 1835, St. Louis 1836, Cincinnati 1839, Hartford 1799, and Detroit 1856.

[66] We will refer generically to the Chamber of Commerce. In some communities  they could be called the Committee of One Hundred, Businessman’s Association, Board of Trade or many other titles. Each title reflects a different historical tradition and economic function which, while interesting, is beyond the scope of this study. Boards of Trade, for instance, originated in colonial times, imported from the United Kingdom. Boards of Trade in New England were a hotbed of revolution. Ask Sam Adams, a Boston Board of Trade member; he’ll tell you some interesting stories about a tea party planned at a Board of Trade meeting.

[67] See Chris Mead, the Magicians of Main Street (Oakton, VA, the John Cruger Press, 2014). Mead’s Appendix 1 provides the founding dates of many chambers. This list goes way back to the seventeenth century. Selected cities and dates of Gilded Age founding: Salem  MA, Scranton PA (1867); Dubuque IA , Newark NJ, Providence RI (1868); Madison WI, Knoxville TN (1869); Portland OR, San Diego CA (1870); Duluth MN, Lancaster PA, Burlington VT (1872); Minneapolis MN (1876); Rochester NY, Grand Rapids MI, Springfield OH, Muncie IN (1887). There are literally a hundred or more chambers listed in this period, pp. 392-397.

[68] Proceedings of the Second Annual Meeting National Board of Trade (Richmond), 1870 (Google Books)

[69] Chris Mead, the Magicians of Main Street, op. cit, p. 129.

[70] Kenneth Montague Sturges, American Chambers of Commerce, Printed for the Department of Political Science of Williams College, 1915, p. 43.

[71] Jon C. Teaford, the Unheralded City, op. cit., p. 189.

[72] Jon C. Teaford, the Unheralded City, op. cit., p. 189.

[73] Mead expands this list of notable business leaders in leadership position in various chambers. Chris Mead, the Magicians of Main Street, p130.

[74] Chris Mead, the Magicians of Main Street, op. cit., p. 132.

[75] We are indebted to Mead for most of this description and we borrow from him a rebuttal to the Committee made by William Vanderbilt:  “The encouragement by such a body as the Chamber of Commerce to such [anti-railroad] ideas will not stop with railroad corporations, but will reach all kinds of associated capital, and will not be stopped before it reaches all property. This growing tendency to socialist principles is one of the most dangerous signs of the times…”; Chris Mead, the Magicians of Main Street, op. cit., p. 124.

[76] Chris Mead, the Magicians of Main Street, op. cit., p. 125.

[77] The case study was a composite constructed from Chris Mead, the Magicians of Main Street, op. cit., pp. 144- 145 and Jon C. Teaford, the Unheralded City, op. cit., pp. 190-191. The contemporary plaque detailing the line’s construction, a picture of which is included in Magicians of Main Street, includes the phrase “suggested by the Chamber of Commerce”.

 

[78] Jon C. Teaford, the Unheralded City, op. cit., pp. 190-192.

[79] Doug Most, the Race Underground: Boston, New York, the Incredible Rivalry that Built America’s First Subway (New York, St. Martin’s Press, 2014). P.S. The Green Line might be named for Dr. Samuel Green, former mayor, who issued an important report to the subway commission in 1895.

[80] Raymond Mohl, The New City, op. cit, p. 109. To confuse the reader, Mugwumps were Republicans who voted for Democrats (especially Grover Cleveland). Mugwumps were also usually anti-machine , chiefly from New England and New York, and several, such as Louis Brandeis and the famous cartoonist Thomas Nast became identified with Progressives.

[81] Richard Hofstadter, the Age of Reform  (New York City, Knopf, 1955); Mohl, the New City, op. cit. pp. 109-113.

[82] Raymond Mohl, The New City, op. cit, pp. 111-112.

[83] These private real estate-based trade associations had many names, but in this history we refer to them as “real estate exchanges”.

[84] Jon C. Teaford, the Unheralded City, op. cit., p. 199.

 

[85] Jon C. Teaford, the Unheralded City, op. cit., p. 203.

[86] Thomas J. Sugrue, The Origins of the Urban Crisis: Race and Inequality in Post-War Detroit (Princeton, Princeton University Press, 2005).

[87] Jon C. Teaford, the Unheralded City, op. cit., p.58.

[88] Jon C. Teaford, the Unheralded City, op. cit., pp.58-59.

[89] Jon C. Teaford, the Unheralded City, op. cit., p.61.

[90] Jon C. Teaford, the Unheralded City, op. cit., p.66.

[91] Ernest S. Griffith, A History of American City Government: the Conspicuous Failure, 1870-1900 (New York, Praeger Publishers and National Municipal League, 1938, 1974), pp. 52-53. Griffith believes there were some states that used boards and commissions more than others. The South for instance “lagged” in their use. He also noticed our aforementioned “herd” effect,  arrows in the quiver, in regards to forming public health boards and commissions. By 1873, he found between thirty and thirty-five cities had already formed public health boards

[92] Ernest S. Griffith, A History of American City Government: the Conspicuous Failure, 1870-1900 , op. cit., p 56.

[93] Edward Banfield and James Q. Wilson, City Politics, op. cit., p. 82.