In William Dean Howells’s novel, Silas Lapham observed upon returning from Civil War military service: “I found that I had got back to another world. The day of small things was past, and I don’t suppose it will ever come again in this country” (Howells, 1885, p. 26).
This chapter is all about change, the Age of Infrastructure and thinking “Big.” Topics such as urbanization, the industrial city, formation of municipal economic bases, changing urban physical landscape, municipal policy system and the Age of Infrastructure switch our attention from affairs external to cities and the “structures associated with first settlement,” to the internal dynamics and configuration of the emerging industrial urban centers that were post-Civil War and Gilded Age hallmarks. This chapter hunkers down on the Big northern and midwestern industrial cities created during the Gilded Age—our “Big Cities.” The term Big Cities is restricted to these early industrial age urban centers that were located in the Northeast, Mid-Atlantic and Midwest.
The Gilded Age was when a political/economic regional hegemony of northern and midwestern Civil War victors institutionalized themselves into political control of the nation. That the industrial city/immigration occurred mostly in the North and Midwest meant that those urban centers housed the headquarters, factories and cheap labor for the industrial revolution’s gazelle sectors. On top of a political hegemony, we add a Big Cities economic hegemony. The perception, if not the reality, that the other regions (the South and West) were little more than their colonies became widespread in those regions. The hegemony lasted for more than 100 years, until it crashed down in the 1970s.
Urbanization being the midwife of present-day contemporary economic development, the explosion in the size and economic vigor of northern and midwestern Big Cities was not mirrored across the nation. For the most part it was confined to the top cities of the hegemony, cities labeled throughout this history as “Big Cities.” From the perspective of economic development, a distinct and oft-times separate “style-path” developed in these big industrial cities. Over time that style-path crystallized into a “wing” of American economic development—a wing with its own history (legacy), strategies, tools and programs that were profoundly affected by their policy systems, jurisdictional economic bases and political cultures.
While cities in other regions often copied and imitated the Big City structures and strategies, they usually employed them in a different context, with different goals in mind. We will pick up that theme in Chapters 7 and 8. This chapter, and the two that follow, tell the Big City tale: a story of one wing in American economic development; a tale that not only set the tone for American economic development, but a wing that also dominated it for over a century—and still tries to in the twenty-first century.
SECTORS, PROFIT CYCLES, AGGLOMERATION, OLIGOPOLY AND NATIONAL MARKETS
This section focuses on the transition from a colonial/Early Republic to an industrial jurisdictional economic base. That transition period is important to our ED history in that, by its end in the 1880s or so, the first major EDO of our contemporary ED system—the chamber of commerce—appeared in most cities, regardless of size. Chambers and their ED strategies and programs dominated American ED through World War II. These transition years were the formative years of the chamber. If one believes in the “wave” model of American ED, then the origins of the first wave occur in this section.
Our overall position in this section is that, while aggregate statistics amply demonstrate the rise of industrial production and virtually every indicator confirms these as “growth” years, that characterization is misleading. Seen from the bottom up (jurisdictional economic base) they were best described as turbulent, complex, fragile and riven by constant disruption from a never-ending parade of new sectors, aggressively competing urban centers and an opportunistic shift from dominance in regional markets to national ones. In many ways, the central role of one sector, railroads, represented the greatest threat and opportunity for jurisdictional economic bases.
Otherwise, using our Chapter 1 model, the rise of so many new sectors and industries that grew from stage 1 to stage 3 in a generation or less; the constant pressure to merge or expand; to survive in a flood of aggressive competitors; to produce a product at a competitive price in a deflationary period with serious if periodic bouts of unemployment; and the almost absolute dependence on an increasingly concentrated railroad transportation system that could make or break the entire jurisdictional economic base. These suggest that defensiveness and insecurity triggered an instinctual sensitivity to capturing new sectors and attracting new firms, and concern with existing companies.
To the individual jurisdiction the emerging competitive urban hierarchy offered opportunities for greatness and profit or ghost town and bankruptcy. Grow or be left behind. At the same time the profit cycle means that existing firms were never static; the perils of concentration, commoditization and access to technology, markets and finance counterbalanced the availability of cheap but often skilled labor. By the end of the century the first gazelles of American industrialization were showing signs of late stage 3 and early stage 4 maturity. For those such as the steel industry that could impose “Pittsburgh Plus” pricing, the continental colonies subsidized Big City production—others turned to their Big City jurisdictions to ask for help.
Economic growth did not follow a “steady uniform pace.” Rapid growth followed the Civil War; another boom occurred between 1897 and 1907. Major depressions, or Panics, occurred in 1873-78, 1882-85 and 1892-94. In the 35 years following the Civil War to the turn of the century, booms held sway for 11 years, panics about 10 or 11. Throughout this period, a long-term decline in average prices “masked real growth.” During the 1870s wholesale prices fell by one-third, reaching pre-Civil War levels by 1879. In the 15 years that followed, wholesale prices declined by another third and did not return to Civil War highs until 1910. Unemployment reached 10 percent for five years in the 1870s and six years in the 1890s (Gray and Peterson, 1974, pp. 271–3). The era witnessed a serious streak of deflation that put caps on wages/income. Deflation (1) almost certainly increased social/political tensions and (2) yet did not negatively affect production output—which is why this era is thought of as economically robust. Population growth/mobility and the huge number of stage 1 or 2 manufacturing firms played some role.
The turbulence and complexity is compounded by this history’s policy-making approach: Who makes ED policy during these years matters. Business elites, certainly in the nineteenth century, are the central players in ED policy-making. When we start the transition, small family-owned local/regional business partnerships dominate the jurisdictional economic base; when we finish the era, behemoth nationwide corporations, railroads and investment banks dominate a continental economy. A revolution occurred in business structures that separated owners from management. A professional corporate management elite came into existence. Ancillary professions (law, finance, accounting/audit, engineering and architecture/construction) developed.
With each increase in corporate size and scale of market, the jurisdictional business community/elites became ever more complex, less tied to any one jurisdiction and more guided by growth, profitability and a quest for efficiency that was compared in its rigor to science. In such a world, business elites were fragmented, mobile, career-focused— and were drawn from firms that were family owned (local moms and pops), to department store chains, branch or headquarters, real estate or manufacturing—or business-driven professionals that serve in national corporations. Despite this diversity, much of our present-day understanding of this period is subsumed in a few broadstroke expressions such as “boosterism.”
In the transition-era real world, however, jurisdictional business elites were as diversified and in flux as the businesses they worked for or owned. There were many opportunities for Progressive input into Privatist EDOs and jurisdictional policymaking. It would not be surprising that separate EDOs would develop to serve the interests of distinctive segments of the jurisdiction’s business community. That will be discussed in the next chapter, but in this section some insight is offered as to why and how these transformations played out at the jurisdictional level.
Agglomeration: Forming the Jurisdictional Economic Base
After 1800 the American economy slowly shifted from agriculture to an increasingly industrial base. Most associate industrialism with manufacturing; nearly every Big City developed some level of manufacturing during the Early Republic, and manufacturing firms were highly prized targets of state and local ED. From the get-go, however, each city developed distinctive combinations of sectors and industries. Most Big Cities also developed an agglomeration, a disproportionate number of firms in a single industry sector. Agglomerations in these years were young, vibrant and stage 2 affairs—centers of employment around a nexus of suppliers.
The early industrial powerhouses, however, were those sectors closely related to transportation. Railroads provided markets for steel, coal, iron and numerous metalbending firms. Railroads required capital and financing—and that spurred everything from banks to local stock markets. Shipping across markets spawned insurance and logistics firms (warehousing, stockyards and grain silos). The war stimulated great railroad expansion and its aftermath, consolidation—both had serious effects on jurisdictional economic base as some locations were more central than others. Market areas of firms with access to transportation expanded greatly.
The Civil War itself set growth in motion. Huge profits, inflated prices and government contracts spread disproportionately to some sectors. With the closing of the Mississippi to 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 metalwork specialties for cannon, rifles, locomotives and metal to convert 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 (for uniforms and blankets), and the newly invented sewing machine prompted shoe factories to spring up in these New England textile centers.
Safe locations near key resources spurred army and war goods production by existing firms, while inviting competitors to locate nearby: New Haven attracted six firearms and locks factories; Pittsburgh benefited from new iron and steel foundries for war-related goods. The federally owned Springfield (Massachusetts) armory and its St. Louis drugs laboratory both attracted smaller firms to open (McKelvey, 1963, pp. 21–2).
The dispersal/agglomeration of manufacturing sectors was often serendipitous: an innovating entrepreneur launched the startup 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 major flour-processing sector in Rochester, whose workers in turn supported clothing, shoemaking, brewing and woodworking facilities. Its population grew to 100,000 by 1885. In 1880 George Eastman—a local, largely self-taught, 26-year-old Rochester Savings Bank bookkeeper with a bright idea—quit his day job and opened 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); he sold his first camera, the Kodak, in 1888. Eastman 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.
Manufacturing oligarchies started in the 1890s.
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. (McKelvey, 1963, p. 42) Finally, agglomeration was not restricted to our Big Cities. Second- and third-tier cities also developed strong core agglomerations.
[d]rawing 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. (Mohl, 1985, p. 60)
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 (Equitable Life Insurance Company) and Hartford developed into America’s insurance capitals. By 1880 there were 6500 plus banks with national, state or private charters. Several cities became regional banking/finance centers after the passage of the National Banking Act of 1864. Regional banking centers, however, were dependent on the investment and money capital banks headquartered in New York City. Both finance and transportation manifested an early and pronounced tendency to form an oligarchy—compatible with metropolitan decentralization of branch offices, but which centralized economic power and leadership in a very few headquarter cities.
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/gas transformed the cities of Texas (and other southwestern states) into national economic powerhouses. Absentee ownership, innovation in logistics, technological change and unstable pricing of their products were key factors affecting these natural resource-based jurisdictions.
One last thought. By 1890 the only Confederate city remaining in the top 25 cities was New Orleans, and it had dropped from 6th (1860) to 12th (1890); 22 of the nation’s 25 most populated cities in 1890 were located in the “industrial heartland”— the Northeast–Midwest regional hegemony. If one’s perspective is the nation as a whole, then the reader might keep in mind that other regions do not mirror this industrial age growth—or its physical/demographic landscape, or its economic development.
Ron W. Coan 