Big City economic development

The last chapter set the stage for economic development described in this chapter. Three main topics constitute core concerns of this chapter: (1) presenting chamber-style ED; (2) introducing port authorities; and (3) presenting a case study of a little-known municipal/state ED program (selling frozen water) and its struggle with Dillon’s Law (see Chapter 3). The time period stretches from post-Civil War through the first decade of the twentieth century. The backdrop to these topics is that sub-state ED was in full flower as a legitimate policy area and potentially developing profession. Chamber-style ED dominates both—and will continue to do so for the next 50 years or so. Dominate, however, does not imply exclusiveness; there is a lot more going on besides chambers. While this history does not subscribe to the so-called ED wave model, others do. This chapter challenges the simplicity and broad-stroke nature of that model. Chambers are much more complicated, and performed valuable services/functions for their jurisdictions. But, it must be admitted, if you distrust capitalism and the private sector, then this chapter is not for you. This period of American history has a distinctly Privatist bent—even Progressives appear as Privatist in these years. Partially, the prevalence of hybrid machine/businessman policy systems sucked much of the air from Progressive community development. Machines, intended or not, were CD-like in focus and outputs, and their failings moved many a moderate Progressive into Privatist EDOs and opposition to machines. Moreover, as this chapter’s last topic will reveal, the struggle against Dillon’s Law was structural in nature (home rule)—an initiative that good Progressives and Privatists could join in a common struggle. Community development will be discussed in the next chapter, but here ED lies on the fringes of jurisdictional policy-making.

One reason beyond machines that the period is Privatist in tone and practice is the flux and constant change, or growth and innovation if one prefers, that underlies much of ED in this chapter. Jurisdictional economic bases in the Big Cities have certainly developed and are maturing in these years, but new cities are emerging from earlier city-building. If capital is indeed mobile, it had plenty of opportunities to choose from. Economic development is highly sensitive to the fluid, competitive urban hierarchy— and the era’s ED practice, tools and programs focus on growth amid a competitive environment. Lost in plain sight is that this is the period of growth for our Big Cities—this is ED in a growth environment. Surprisingly, much of ED’s concern in this atmosphere is coping with, keeping up with, growth—streetcars and infrastructure, electrification, industrial parks, foreign trade: and a restive workforce consumes much attention by EDOs. Today we tend to focus on attraction as a dominant activity in this period, but it was secondary and surprisingly defensive in nature. Big Cities feared other Big Cities, and what looks like attraction includes strong doses of retention. Chambers were boosters, but no more so than most twenty-first-century state-level governmental EDOs.

The structure of American industry, and its overall economy, is concentrating in the hands of fewer corporations and business elites (oligopoly). In this era those corporate elites still function from the local level and will begin to make the shift to Washington only in 1912. Through most of this period chambers serve only the biggest of the big boys—leaving plenty of room for competing jurisdictional-level Privatist EDOs for others to join (boards of trade for instance). That will begin to change in the first decade of the twentieth century: chambers will change and modern port authorities will come into fashion, solving to a great degree the problem of hybrid EDOs that saturated our previous chapters. The port authority model will evolve over future chapters, morphing into housing and urban renewal redevelopment agencies, and into our present-day industrial development agencies and tax-exempt bond-issuers.

As the reader will discover, many (if not most) of the important strategies, tools and programs associated with contemporary ED will be developed by chambers in this period. Chambers were the prime or lead agencies of the Big (and small) City jurisdictions, Indeed, chambers will sweep across the nation. Municipal government, as will be discussed, plays a secondary role—if that. There are reasons for this—and it is not a capitalist conspiracy. Capitalists are fighting hard to convert local government into a modern and efficient driver of policy and policy implementation. Local (and state) government’s problem is what we label a lack of capacity to govern. Policy system change will follow in the next chapter.

Meanwhile we turn to chamber-style ED, the meat and potatoes of American economic development at the turn of the twentieth century. The story begins with a personal tale of one company that opened my eyes to the constancy of chambers and their pioneering innovations on behalf of ED.

BEYOND BOOSTERISM: CHAMBER-STYLE ECONOMIC DEVELOPMENT

Post-Civil War Chambers: The “Denny Tag” Story

While I pondered weak and weary, having completed a chapter, my mind wandered. Trying to postpone more hard work, I gazed about my cluttered desk. Off in the corner was my trusty old 15-inch metal ruler. My mother had given me the ruler sometime before I was 10 years old. She had been given the ruler by her dad as a child. How long had he owned it, who knows? The metal ruler was at least 100 years old—probably slightly older. I had wonderful memories of the ruler. In my childhood it made a great sword; the thin metal and the sharp edges drew blood and made me a fearsome swordsman. It also shot rubber bands with paper clips attached. Anyway, bored, I read the advertising on the ruler and wandered into a random but eye-opening research project.

The ruler was made by the Denny Tag Company from West Chester PA. The company advertised on the ruler that it was “America’s largest plant devoted exclusively to the manufacture of tags.¹ Searching on Google, I chanced upon a history of the company (Jones, 1988). Denny Tag manufactured tags and pin labels. Founded in 1884 Philadelphia by two brothers who had developed their own tag-making machinery, by 1886 they employed 10 workers and allegedly was the second oldest tag manufacturer in the nation.

In 1888 the owners of Denny Tag investigated the neighboring suburb of West Chester as a possible location for a larger plant. So the Denny Tag brothers met with the West Chester Board of Trade, announcing that if West Chester had a suitable location the company might relocate. Denny Tag then employed 20 and wished to expand to 40 workers. According to Jones, this was music to the Board of Trade’s ears: “The creation of forty jobs in West Chester would lead to a population increase of 150–200 people, and they would spend their salaries in West Chester.” No job creation then; instead it appears that increased population was the goal du jour of economic development, but multiplier effects were already in style. The company suggested it had $2000 available, but needed $7000 to make relocation possible.

West Chester “investors” quickly met at the Board of Trade’s bequest, assembling commitments for $20,000 in return for positions on Denny Tag’s board of directors. The Board of Trade found a West Chester site (an old school) and added to the “investors’” monies ten years of relief from borough taxes.² The West Chester Board of Trade made the offer. Denny Tag accepted the incentives and moved into its new suburban location two weeks later. Within four years (1892) Denny Tag grew to become the second largest tag manufacturer in the nation; factory capacity exceeded 500,000 tags per day. They expanded to other cities and developed new product lines (my ruler was made in Pittsburgh).³

What first impressed me was that in 1888 Denny Tag detailed a Privatist, chamberstyle economic development that probably typified pre-World War I Big Cities. What also struck me, as I thought more deeply, was that by 1888 an economic development deal—identical to many I had worked on in my late twentieth-century career—was already being cut by economic developers of that year. I could have negotiated the same deal today in my public sector, quasi-government EDO. Almost escaping my attention was that a suburb had “stolen” a central city manufacturer with incentives such as loans, sites and tax abatements— even small, suburban chambers were deeply involved in 1880s’ economic development. Had anything in economic development practice really changed over the last 135 years?⁴

American Chambers of Commerce

Chambers of commerce had been around in Europe since the sixteenth century.⁵ Colonial/Early Republic chambers crashed and burned on a regular basis. Most Early Republic chambers failed by Civil War’s end; but a few remained in Boston, Chicago, Buffalo, Pittsburgh and New York. Old-style chambers (ignore Boston) stayed away from public affairs and served as mediators of business disputes. A new-style chamber emerged after the Civil War.⁶ These held a larger world view and assumed leadership in municipal and economic affairs. Most Big (and small) City chambers were established during the Gilded Age. In 1868, at Philadelphia, 33 chambers/boards of exchange established the National Board of Trade.⁷ An 1890 report, prepared by the Scranton Board of Trade (Pennsylvania) for the National Board of Trade, uncovered 1171 chambers/boards of trade in existence (Mead, 2014, pp. 392–7).

Gilded Age chamber leadership was restricted to the largest firms and the oldest money. Kenneth Sturges (1915, p. 43) describes the new style chamber as “a new organization conducted by the best type of citizens and businessmen … interested not only in the upbuilding of commerce, but also in the betterment of community life.” The example was set by the New York City Chamber, its membership limited to the top 1000 corporations. In 1896, for example, its 12-person board of directors held 11 millionaires; its vice-president was J.P. Morgan, and directors included John Jacob Astor, John D. Rockefeller and Cornelius Vanderbilt (Teaford, 1984, p. 189). The jurisdiction’s “1 percent” formed the nucleus of each Big City chamber (Mead, 2014, p. 130). Chamber secretaries (the only staff), while high status, were more facilitators for the Great Men of Business than independent powers. If staff were needed, the big boys would “second” staff from their corporations.

With the richest and most powerful on their boards, Gilded Age chambers stepped up to the plate. When the NYC chamber picked up a dead issue, it pushed back Tammany, got the state legislature in proper order, oversaw the Subway Commission and fiscally monitored subway construction. This was a big deal issue, and the chamber saw it through successfully. Activities comparable can be easily found in other cities as well.

[Chambers] 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 … chambers and boards applied their traditional booster spirit to the cause of good government. (Teaford, 1984, p. 189)

Lost in the fog of history, chamber boards early on became vociferous opponents of the railroad robber barons. It’s not hard to understand why. Almost every sector of industry was victimized by railroad freight discrimination, excessive rates, bribes, rate pooling and stock manipulation. Cities paid enormous bribes to attract railroads—but that didn’t mean they enjoyed it. 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 it was the New York City Chamber of Commerce that formed a

Committee on Railroad Transportation in 1878 to call its director, Cornelius Vanderbilt, to task: he admitted to the committee that “we [his railroad] have been actuated by selfish motives” (Mead, 2014, p. 124)—the worm had indeed turned. The New York State legislature responding to the New York City Chamber approved anti-railroad legislation and established a state railroad commission in 1882. Many states followed its example. In 1887, with populist and farmer outcry as well as support for its passage from hundreds of chambers, Congress passed the Interstate Commerce Commission.

The National Board of Trade also took “progressive” positions on 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 (Mead, 2014, p. 125). Positions such as these are not traditionally associated with chambers today. Newark’s 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. The chamber  pressed for the construction of sewers; urged enhanced building codes on wooden residential structures; and continuously battled street railways over excessive charges and bad service. In Boston, in the midst of subway construction (1895–96), newly elected Mayor Josiah Quincy set up a city hall Merchants Municipal Committee. Composed of the heads of the city’s six major business organizations, over the next four years the committee submitted recommendations to the mayor; drafted legislation to the state legislature; drafted a tax reform; and arbitrated differences between railroads and the city/track relocation and terminal location (Most, 2014).

The Cleveland Board of Trade, reincorporated as the Cleveland Chamber, became the city’s most powerful proponent for municipal capacity-building, infrastructure and city growth. In 1897 in its annual report, the Cleveland 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.” Columbus’s aggressive chamber lead proclaimed: “The Board of Trade is Columbus.” The Indianapolis Board of Trade, under the presidency of Eli Lilly, drafted and secured a new charter for the city; framed and secured passage for a park commission; and hired engineers to examine and develop proposals for the city’s sewer system. The Minneapolis Board of Trade and 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 (Teaford, 1984, pp. 190–92).

The Gilded Age’s most prestigious chamber, the NYC Chamber, thought itself the national chamber. States formed state-level chambers: Utah may have been first in 1879, publishing The Resources and Attractions of the State of Utah; Louisiana and Maine’s state organization were formed in 1889; Massachusetts/Connecticut in 1890; New York in 1891; Virginia in 1892; and Ohio in 1893 (Mead, 2014, p. 132).

By the turn of the century chambers were the undisputed primary business organization and lead EDO in the Gilded Age ED jurisdictional policy system— embedded in the first as well as the second- and third-tier cities. But did other business organizations practice economic development also?