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Despite the inability of the state to collect much of the debt owed by the Federal Government for services rendered and material bought
65 See next chapter.
66 Cincinnati Semi-Weekly Gazette, Aug. 8, 1871.
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during the war, the state auditor stated in 1871 that "There are few states, if any, in the Union whose finances are in as sound and healthy a condition as those of Kentucky, and whose taxes are so small." 66
With all her economic progress and its problems, there was no ques- tion more interesting or important to the state than railroads. The Kentucky Yeoman declared: "School-houses follow the railroad, and ignorance flees before it. With intelligence comes virtue, and with virtue happiness." 67 The development of the state's railroads gives an index into her whole economic progress, and for this reason the two great lines of railways around which all others hinged are dealt with at considerable length in the following chapter.
66 From auditor's report, quoted in Georgetown Weekly Times, June 21, 1871. 67 Sept. 26, 1871.
CHAPTER LXV
COMMERCIAL RELATIONS BETWEEN THE OHIO VALLEY AND THE SOUTH-1865-1872
I
LINES OF TRADE
During the early days of transportation in the Mississippi Valley the general direction of trade ran north and south. This was so from necessity as long as commerce was carried on the river system. Under these conditions New Orleans grew to be the great export metropolis for the whole interior region. Along with her prosperity induced by this traffic, went the commercial well-being of the whole South, encouraged and aided by the same cause. But this export trade in time came to be of much less importance and worthy of less interest than a large and growing commerce confined to the limits of these general regions. When Eli Whitney invented the cotton gin he made possible the future develop- ment of the South along its peculiar lines. Within a few decades the people had turned their interests and energy almost wholly to the rais- ing of cotton, largely neglecting the necessary food products. A great agricultural region was here producing much less food than it consumed.
Just the opposite conditions prevailed in the Ohio Valley and to the north and west. Around 1825 this region was growing corn for sale at twelve cents a bushel and wheat selling for relatively little more. The elements were present in this situation for the growth of a traffic with the South that should carry with it great potentialities along many lines. The South soon saw the possibilities. She could now devote her sole energies to cotton culture and continue as long as she could main- tain her commercial connections with the Northwest. There grew up not only commercial attachments between these two regions; but there also came strong political alliances, as were clearly shown in many elec- tions. In the early period, rivers and canals were the highways of this traffic.
With the coming of the railways, a tendency, begun by the Erie Canal, was greatly accelerated. The trunk lines now began to drain the products of the Northwest direct to the Atlantic seaboard. The great lines of traffic were thus beginning to run east and west. This carried with it tremendous possibilities, both commercial and political. The Northwest began to find that its existence was bound up with the South less than formerly. It was weaned away from the South suffi- ciently to prevent it from leaving the Union and joining the Southern Confederacy in the Civil war.
But these later trade developments interfered very little with the old inter-regional trade, in which the South was little less dependent upon the Northwest for food products than the latter was still dependent upon the South for a market. The Eastern markets were very im- portant, but the Southern markets were still of commanding concern.1 Both regions equally recognized their inter-dependence. The South was
1 Our export trade to Europe in food products did not assume large propor- tions until much later (in the eighteen-hundred-eighties).
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particularly aggressive. She saw more than commerce in the situation; she saw votes she so sorely needed in the sectional political struggle. When the trade going to the East threatened to disrupt this dream, the South began a counter-move in the construction of north and south lines. John C. Calhoun saw the great advantage of connecting the South Atlantic seaboard with the Ohio Valley, by a railroad to run from Charleston to Cincinnati. The interest of the South Atlantic states con- tinued in this project through many vicissitudes down until the Civil war when more weighty problems engaged their attention. Other pro- jected lines were more successful. The first land granted in aid of railway construction went to the Illinois Central and to the Mobile and Ohio railways, both of which had connected with the Gulf of Mexico by 1861. By the same time the Louisville and Nashville Railroad had pierced the South. Through the use of this road to Nashville and other connec- tions on by way of Chattanooga and Atlanta the Atlantic seaboard was reached at Savannah.
The Civil war not only did not destroy this sectional inter-dependence, but by breaking the connections, showed how fundamentally necessary it was to the continued economic well-being of both. The insurmount- able difficulties that were encountered by the Federal Government during the struggle not to absolutely prohibit commerce but to control it, gives eloquent proof of the enduring character of the economic situation. The Federal Government was so firm a believer in the absolute necessity of this commerce that it never completely prohibited it. The private trader was so thoroughly convinced of its necessity that he paid little attention to the multifarious and complicated acts of Congress, presi- dential proclamations, treasury rules, and interpretative orders of com- manders in the field, which attempted to place certain restrictions upon this trade.2
With the end of the war, came the full rights of re-establishing trade relations with all parts of the country. The productive forces, which had for the past four years been turned toward war, were now vigorously directed into peaceful pursuits. New life seems to have taken hold of the people as they set about rebuilding. A sense of years of losses entailed by the war was an added impetus toward speeding all processes. The war had given people new ideas and feelings. A restlessness had grown up among them which must find an outlet. The experience of seeing and doing things on a broader scale gave them a broader out- look. The commanders of soldiers became organizers of business and industries on a larger scale. Their experiences as army commanders gave them organizing ability and ambitions for bigger conquests in the industrial and commercial world.
Building up new transportation facilities held out a challenge to be met. During the period of the Civil war, there was a very small mile- age of railways built. Much use had been made of the rivers in troop movements as well as in commerce. So, when the war was over, the rivers remained as a very important factor in moving commerce. The old steamboat lines on the Ohio and Mississippi rivers were kept run- ning and new lines were being added. A line running to the very frontier advertised itself thus: "Ho, For the Gold Mines Ho, The Montana & Idaho Transportation Co., for Ft. Benton and all points in the Gold Mining Districts." 3 By the end of the decade (1870) the commerce carried on the Ohio River still amounted to $900,000,000 annually.+
2 For a wider discussion of these problems, see E. M. Coulter, "Commercial Intercourse with the Confederacy, 1861-1865," in Mississippi Valley Historical Re- view, March, 1919; also by the same author, "Effects of Secession upon the Com- merce of the Mississippi Valley," Ibid., Dec., 1916.
3 Cincinnati Commercial, April 27, 1867.
4 Scribner's Monthly, December, 1874, Vol. 9, 136.
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But the heyday of river trade had been reached in 1860, the banner year for the steamboat business.5 The traffic thereafter was due largely to the war and the re-adjustments following it. The greater amount left on the rivers was made up of bulky materials, especially coal. By the last half of the decade a revolution was well on the road to con- summation, a movement not produced by the war but rather delayed by it. But the war had a telling effect on the whole situation. The change, although not caused by the struggle, was vastly different from what it might have been had there been no war. Railroads had now definitely come to take the place of rivers. New lines of railway could be built anywhere. Courses of traffic might be induced or existing ten- dencies recognized. River towns had owed their sole prosperity to the fact that they were favorably situated, gradually decayed. New centers grew into importance wholly apart from trade routes and tendencies that had existed before the war. Railways were now to either make or mar many cities.
Not only had the railway caused a profound change in the internal trade situation in the Mississippi Valley, but the South, itself, was vastly different from what it had been before the war. Its whole economic system had been changed. The large plantations with their peculiar wants were gone; the fact that the slave had been changed into a free man was making for a different kind of trade. Wealth was greatly dispersed. The small country cross-roads store was taking the place of the plantation supply house. Business methods must now be changed. Prior to the war merchants and planters came to the central cities to buy, and they did business generally on a year's basis of credit.6 A few cities had come to be the distributing centers for the whole South. New Orleans had been the great metropolis in the final retail distribu- tion to the plantations for much of the South. Most of the finer goods had come from the North down the valley to be distributed from that city. Of her up-river traffic, at least seventy-five per cent had been shipped down. Only coffee and other tropical products and heavy wares had entered New Orleans from the sea.7
St. Louis, Cincinnati, and Louisville had been the main distributors for the trade entering the South from the interior. They had under- stood the wants of that trade, and had catered especially to them.8 The Northern cities had had little if any of this trade owing to these peculiar conditions. They had especially feared sending their goods into the South and waiting a year for payment .? One of the very first effects of the railway was to dissipate the hold these three cities had had upon that region. No longer could a few cities by their favorable river loca- tion hold almost exclusively great areas within the grasp of their com- merce. The only qualification now was proper railway connections; so the more northern cities now began to seek out this trade. Another very important influence that made the competition for the commerce of the South more keen among the northern cities was the new method of selling goods. The commercial traveler sprang into being, and carry- ing his samples to the door of the humblest establishment, brought his
5 William F. Switzler, Report on the Internal Commerce of the United States, 1888, 49 Cong., 2 Sess., H. R. Ex. Doc. 7, Pt. 2, 121.
6 Joseph Nimmo, Jr., Report on the Internal Commerce of the United States, 1881, 46 Cong., 3 Sess., H. R. Ex. Doc. 7, Pt. 2, Appendix No. 6, 168.
7 Norman Walker, "Commerce of the Mississippi River from Memphis to the Gulf of Mexico," in Wm. F. Switzler, Report on the Internal Commerce of the United States, 1888, 205, 215.
8 Joseph Nimmo, Jr., First Annual Report on the Internal Commerce of the United States, 1876, 44 Cong., 2 Sess., H. R. Ex. Doc. 46, Pt. 2, 77.
8 Nimmo, Report on the Internal Commerce of the United States, 1881, Appendix 6, 168; Ibid., Appendix 24, 78.
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business house into competition with the commercial establishments in the most favorably situated cities.
The South offered a virgin region for the extension of trade. She was, indeed, not wealthy after having gone through a devastating war, but she still raised valuable crops which must find markets, and she still had to be supplied with many kinds of commodities. Her potentiali- ties were great, and these were evident to those seeking the southern trade.10 The mental attitude of the Southerner was propitious. The war was being forgotten as fast as possible by the business men. In their business dealings and discussions, they resented the mentioning of the past unpleasantness.11 Realizing that they had great commercial possibilities, they welcomed the establishment of trade relations. But they felt that aid from the North must be secured in building their rail- ways to make connections with the outside world; and for this aid they worked vigorously.12
The South was not simply lying idly by waiting for Northern traders to come down and establish relations. The spirit of sectional unity and the desire to dominate certain trade movements was not dead. Great commercial conventions attended by representatives from throughout the Mississippi Valley were held. Every movement that looked toward the betterment of the valley transportation and trade was considered. Rail- ways, river improvements, immigration, and a hundred other subjects were discussed. In 1869, there were four such conventions held.13 The South still hoped to be the outlet for the valley especially for grain and the heavier articles. It still considered the Mississippi River the cheapest and best highway for the export trade of the valley. De Bow wrote in 1868, "If we succeed in securing the outlet and negotiation of this vast commerce, it will bring us Capital, votes in Congress, diplomatic treaties. We shall vote with the Northwestern Millions, and they who have refused to sanction negro suffrage among themselves will not suffer it to be im- posed upon us. We look, then, to the Mississippi as our mighty liberator and deliverer, and will back him against all the icebergs from Mackinack to Alaska, and all the frost-bitten Canadians who scheme to drain him into the St. Lawrence." 14 That the South was having some success in this movement is implied in this report of the Milwaukee Chamber of Commerce : "Your committee would take this occasion to say further that there is already a stronger combination at work for the purpose of diverting the business of the Upper Mississippi to the East and Europe, via New Orleans, and they are actually now shipping our wheat, flour and corn in that direction, and unless something is done to cheapen the expense of transport from the lake ports to tide water, that much of the business that now goes to support our railroad, our warehouses, our shipping on the lakes-will be taken from us. * * *" 15
The far-reaching changes brought about by the shifting of trade routes from rivers to railways and the metamorphosis of the South itself, thus caused an entirely different trade situation in the Mississippi Valley. The railways laid the South open to the commercial inroads of many Northern cities to compete with the few border cities who had dominated heretofore. But that part of the South lying south of the Ohio and east of the Mississippi rivers came to be peculiarly dominated by two cities, Louisville and Cincinnati. And this was so because of their peculiar situation both by river and railroad. Here their bitterest rivalries took
10 Ibid., Appendix 6, 170; Cincinnati Commercial, Dec. 8, 1868.
11 Ibid., Oct. 20, 1869; Sept. 30, 1870.
12 Cincinnati Commercial, Oct. 18, 1867, passim.
13 Cincinnati Semi-Weekly Gasette, May 28, 1869; American Annual Cyclopaedia,
and Register of Important Events, 1869, 114, 117. 14 De Bow's Review, New Series, Vol. 5, January-June, 1868, 442.
15 De Bow's Review, New Series, Vol. 5. January-June, 1868, 442.
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place. In fact the commercial life of this region revolved around the moves and machinations of these two cities. The commercial history of the Ohio Valley for the decade after the Civil war is the history of Kentucky and her chief city, Louisville, in their rivalry with Cincinnati, and an important phase of the commercial history of the lower South is a recounting of the interaction of these forces in the Ohio Valley.
II
LOUISVILLE AND HER RAILROAD CONNECTIONS
The region subject to the immediate rivalry between Louisville and Cincinnati was Kentucky. But the cupidity of these two cities could not be confined to so restricted an area. Their commercial growth and their consequent ambitions for more, soon caused the fight to be carried far to the south. Outside of that part of the state directly south of Cincinnati, the commercial transactions were centered in Louisville, largely because of her very favorable railway connections. This city had con- sciously grown up with the purpose always in mind of dominating the trade of the state with as great a portion of all other trade of the Ohio and Mississippi valleys as possible; but the State of Kentucky was al- ways considered to be her territory by pre-emption. When Cincinnati attempted to gain a bigger portion of the Kentucky trade and, indeed, secure the trade of the South, she found a vigilant and relentless rival in Louisville. Thus it came about that for a decade or more following the Civil war, the commercial situation in this region was linked insep- arably with the rivalry of two cities. Neither would make a move with- out reference to its bearing on the other; and every movement made by one was sure to be checkmated by the other. This rivalry was more bitter than generous, and often it was so petty and puerile as to become ridiculous. But, however amusing it may have been at times, it was always serious; for this was a battle for an immense trade.
Louisville commercially was Kentucky commercially. All Kentuckians were proud of her, and gloried in her prosperity. Even in her troublous times to come, some never lost faith in her future.1 The city had had a consistent but not spectacular growth. From 1820 to 1870 she grew by decades, from 4,000 to 10,000 to 21,000 to 43,000 to 68,000 to 100,000.2 She was able to re-adjust her trade during the war and conform to war times. Her property assessments increased from $37,000,000 in 1860 to $51,000,000 in 1865.3 So when the war was over she was ready to enter into the fight with a determination to hold and extend her Kentucky commerce and to regain and increase her Southern trade.
The "Falls City," as she liked to be called, was well fitted to engage in this struggle. Before the war she had traded almost exclusively with the South. She believed her destiny as a commercial city lay with that region, and so she made no efforts to cultivate trade relations north of the Ohio River. During this period her commerce was almost ex-
1 When the movement was on foot in the West to move. the national capital from the seaboard, a Kentuckian suggested Louisville: "If the time should ever come in the history of our future when the flag of our Capitol is removed from the banks of the Potomac, I believe that there is no place within the bounds of the Mississippi Valley that would be more suitable for it than to have it floating above the roofs of the Falls City." Cincinnati Commercial, Dec. 1, 1870.
2 E. A. Ferguson, Founding of the Cincinnati Southern Railway (Cincinnati, 1905), 6. A comparison of Louisville's population with other cities is also given here.
3 History of the Ohio Falls Cities and their Counties, with Biographical Sketches (Cleveland, 1882), Vol. 1, 222-231 ; Merchants' Magazine and Commercial Review (Hunt's), Vol. 56, 330. Of course some of the increase must be attributed to the cheaper money in which it was valued.
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clusively carried on by steamboats. It was by nature a distributive trade. Many of the constituents of her commerce came from the North and East, and she became merely the great distributing point to the south- ward. In this business her methods were her own; she had little com- petition from Northern cities.4 During this period she had largely sup- plied the South with hardware, farm implements, blue grass seeds, dry goods, and clothing, and groceries.5
With the end of the war at hand, there came the necessity for many readjustments. Commercial connections must be re-established with the South, but now on a different basis. The value of the rivers was going fast, and with it was going the distinctive distributive commerce that had been the almost exclusive business of Louisville. The active com- petition of Northern cities was an entirely new factor. The railways soon began to dissipate her monopoly on the Southern trade; and numer- ous smaller centers for distribution sprang up. Her river commerce soon became of little importance in extending or even holding her Southern markets.6 It became immediately necessary for the city to foster rail- way connections with the South, and incidentally to do this with as little advantage to her rivals as possible. Another important problem was to thoroughly reconstruct her own economic organization. The railways had made large centers depending upon distributive commerce for pros- perity an impossibility.6a Such prosperity at best was precarious. In- stead of a distributive trade it now became necessary- to build up a productive commerce, a more solid and lasting basis for continued pros- perity. More people would share in it and it would not be so intimately bound up with the necessity for a wide market. She increased her manufactories and imported less for distribution, more than doubling the former from 1860 to 1870.7 In 1867 she had 419 establishments for making form utilities to add to the prosperity already enjoyed in making her place utilities.8 By 1869 an important change in her com- merce had been worked. The value of her exports was almost double her imports.9 Her productive forces had brought about the change. But distributive forces had to continue unabated in order to make her pro- ductive forces possible. During September of 1869 the sales of six of her leading dry goods merchants amounted to an average of $200,000 each.10 Her pork packing gradually decreased during the decade, due mainly to the rise of the packing centers in the Northwest where corn for feeding hogs was much cheaper.11 Louisville was the market for almost the entire crop of Kentucky tobacco. Out of 66,000 hogsheads raised in 1861, 50,000 went to Louisville.12 She manufactured much of this tobacco, while the remainder was disposed of to buyers who came from all parts of the world. Her system of warehousing and selling was different from that pursued by other cities. It was considered the most equitable of any system used, and for this reason it appealed
4 Cincinnati was in effect a southern city.
5 She also stood pre-eminent in supplying many other minor necessities. Joseph Nimmo, Jr., Report on the Internal Commerce of the United States, 1881, Appen- dix 6, pp. 137, 138.
6 Scribner's Monthly, December, 1874, Vol. 9, 137.
6& The railways had not yet begun the practice of building up great distributive centers by manipulating the rates on car-load and less-than-car-load lots.
7 Henry A. Dudley, "Commerce of the Ohio River and of the Bridges which Cross It, from Pittsburg to Cairo," being Appendix, Part IV, in Wm. F. Switzler, Report on the Internal Commerce of the United States, 1886, 49 Cong., 2 Sess., H. R. Ex. Doc. 7, Part 2, 473.
8 Merchants' Magazine and Commercial Review (Hunt's), Vol. 56, 1867, p. 331.
9 Cincinnati Commercial, Aug. 25, 1869.
10 Ibid., Oct. 18.
11 Joseph Nimmo, Jr., Report on the Internal Commerce of the United States, 1881, Appendix 6, 162, 163; Cincinnati Daily Gazette, Jan. 5, 1865.
12 Scribner's Monthly, December, 1874, Vol. 9, 138.
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to buyer and seller alike. When it is taken into consideration that the tobacco crop was worth more to Kentucky than the combined value of all other crops, the importance of this industry to the city and to the state becomes evident.13
The greatest need of Louisville and her most pressing problem was to establish adequate railway connections with those regions with which she desired to trade. She expected to regain through railroads the favorable trade position which she had held by nature as long as the rivers were the determining factor in commercial relations. But the movement for a railway connection with the South had not been delayed until the rivers had begun to lose much of their importance. It had been evident in the early '50s that a railway connection would greatly strengthen Louisville's position. It would also make that city in truth the gateway to the South. It would establish the only connection west of the Alleghenies, between the network of railways north of the Ohio and the Southern system. This was, indeed, a move of undreamed importance to the city. Pursuant to this idea, work was begun on a railway in 1851 to run from Louisville to Nashville, a distance of 185 miles. The Falls City immediately identified herself with the project by voting a subscription on June 17, 1851 of $1,000,000.14 The main line was finished and opened for through business on November 1, 1859. It had been promoted by Louisville people, was largely owned by Louis- ville people, and it was popularly known as the "Louisville Road." 15 The city regularly received cash dividends from the road, being one of the largest stock holders and wielding a corresponding influence in its management.16 It was in fact Louisville's strong arm in grasping the Southern market.
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