USA > New York > A short history of New York State > Part 28
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in the future the safety-fund system would be responsible for only the notes and not the deposits of the bankrupt institutions.
In 1851 a, state banking department was established, with a superin- tendent in charge. He had general administration over both types of banks: the "free banks," of which there were 136 in 1850; and the safety- fund banks, numbering seventy-three at the same time. The number of safety-fund banks gradually declined as their charters expired, but many reorganized under the free banking law. State bank notes became rela- tively unimportant after 1866 when the federal government drove them out of existence by levying a 10 per cent tax.
The National Banking Act of 1863 used the bond-deposit principle as the basis of note protection despite the better history of the safety-fund system. Not until the twentieth century did lawmakers take steps to pro- tect depositors as well as holders of bank notes.
Capital needs were met not only by banks but also by other agencies, such as investment houses or banks, savings banks, and insurance com- panies. Financial institutions rose up to float and to market stocks and bonds. Private banking houses competed with commercial banks in sell- ing public and private securities.
The early stock exchanges facilitated the trading in securities. The New York Stock Exchange, founded in 1817, became the major center for security transactions. It had a membership ranging from seventy-five to one hundred, and its exclusiveness led outsiders to organize a rival group in the 1830's. The Panic of 1857 effected a revolution among the mem- bership by wiping out many of the older and conservative men. The younger financiers who came to the fore found great opportunities for speculation during the Civil War.
The Exchange did not dominate new financing, since corporations either floated securities directly or through commercial and investment banks. The expansion of railroad corporations created millions of dollars of securities which needed a market for traders. After 1840 the invest- ment and speculative activity of the nation became concentrated in New York City. The invention of the telegraph, the improvements in trans- portation, and the growth of commerce contributed to this concentration. Furthermore, country banks placed more of their demand deposits in Manhattan banks, which led to the diversion of much of these reserves into the call money market. Ample supplies of call money, which were borrowed subject to return on demand, provided funds to investors, and increased the earnings of country banks. Brokers were thus able to bor- row capital at relatively low rates. Unfortunately call money was hard to collect in the event of panic, and in the Panic of 1857 some of the banks were forced to call in loans quickly in order to return demand deposits
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to country banks. The hasty liquidation of securities accentuated the depression and underlined the importance of providing a more flexible system of bank reserves.
Savings banks were intended to receive the deposits of wage earners and thus encourage thrift. The law required that the nonsalaried directors limit their investments to mortgages, public securities, or other high- grade investments. By 1859 the legislature had created seventy-five sav- ings banks and placed them under the jurisdiction of the superintendent of the Banking Department.
Various kinds of insurance were developed to meet the expanding needs of business and to provide more security for individuals. By 1815 New York had several companies specializing in marine insurance. They in- sured ships, cargoes, and the earnings of the voyage. Frequently they banded together to cover highly valuable cargoes. The Atlantic Mutual Insurance Company handled the bulk of marine insurance in 1860. Fire insurance companies prior to 1834 were joint-stock concerns specifically chartered by the legislature. As a result of the great fire in New York City in December 1835, in which many companies were ruined, there was a movement toward mutual insurance companies throughout the state. During the 1840's and 1850's life insurance companies grew rapidly. They were gradually working out sound methods of computing life ex- pectancies and were developing the system of selling policies through agencies.
In 1853 mismanagement and fraud forced legislation regulating both fire and life insurance companies. The state comptroller was to receive annual reports, and out-of-state companies were not permitted to operate within the state without depositing with the comptroller a copy of their charter, a statement of their condition, and some securities as a bond.
New York had established its industrial supremacy by the time of the Civil War. Whether one considers value of output, number of workers employed in manufacturing, or the diversity of industrial production, New York scored first. Several factors greatly aided the growth of manufactur- ing in the Empire State. New York had plenty of labor, especially of the unskilled variety. In addition, the thousands of skilled artisans and crafts- men who settled in New York introduced new industries and processes. The unrivaled transportation network meant that entrepreneurs could secure raw materials easily and could sell their products in an ever- expanding market. Furthermore, in New York more capital was available for investment than anywhere else in the United States. Finally, the dy- namic character of New Yorkers, who were pace setters in commerce, agri- culture, and transportation, naturally found expression in manufacturing. In New York, according to the census for 1855, some 214,000 workers in
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over 24,000 establishments turned out goods worth more than $317,000,000.
Manufacturing increased enormously between 1825 and 1860, although the speed of this development varied from industry to industry. Three methods of production were used, singly or in combination: handicraft production in larger shops, the domestic or putting-out system, and the factory system.
The merchant capitalist was the key figure behind the handicraft and domestic systems. He raised the money, organized production, and found markets for the output. He became the distributor of the output of the handicraft shops, which grew in size as the more energetic among the craftsmen began hiring more journeymen and apprentices.
In the domestic or putting-out system the merchant-capitalists bought wool or other raw materials, farmed them out to families to work up in their own homes, and sold the product to distant buyers. The domestic system was well adapted to the making of clothing and shoes. The skilled tailor could take work home to his wife and children to complete. Home sewing machines, developed in 1846, were used for the routine sewing. Thousands of women in both the rural and urban regions of New York carried on this type of work.
In many parts of New York woolen cloth continued to be woven on hand looms after the carding, finishing, and spinning of wool had moved to the factory. In 1849 in Washington County there was a curious com- bination of the factory and the domestic system. The small mills manu- factured cloth and flannel. They also made batches of wool into rolls on the carding machines. These rolls were taken by families to spin into yarn to use in knitting, weaving carpets, and making flannel.
In 1825 household or domestic manufacture continued to be the chief method of making goods in rural New York. In addition, many towns and cities had craftsmen, such as cobblers, blacksmiths, coopers, hatters, weav- ers, tailors, and tanners, who had taken up permanent residence. There were also neighborhood industries, notably gristmills and sawmills. Other small industries were ironworks, potash plants, distilleries, and tanneries.
After the Revolution the per-capita value of household manufactures began to decline, although the Napoleonic Wars revived the home manu- facture of textiles. After 1815 cheap factory-made textiles from Britain cut down household production in cities. The state total for woolen cloth produced in the home reached its peak in 1825, but only because the ex- pansion of the industry in the northern and western counties outweighed the losses along the Hudson and Erie Canal.
Household textile manufactures dropped nearly 50 per cent from 1825 to 1835. During the next decade household production fell more slowly, perhaps because of the Panic of 1837. But between 1845 and 1855 prac- tically all the housewives of New York State put away their spinning
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wheels as railroads penetrated the inland towns and factories arose in all parts of the state. By 1845 officials of the New York State Agricultural Society were complaining that housewives were no longer making home- spun for prizes at the state fair.
Remarkable technical advances, originating in Great Britain, were transforming production in many fields. Prior to 1840, when water power was the prevailing method of driving machinery, small mills with in- efficient undershot wheels were established on small streams such as the Oriskany and Sauquoit creeks in Oneida County. During the 1840's hy- draulic turbines began to replace the slow-moving water wheels and to make possible the erection of factories away from streams. As early as 1846 textile mills driven by steam power were erected in Utica, utilizing the coal brought up from Pennsylvania over the Chenango Canal. Steam power was introduced rather slowly because of the cost of installation and of maintenance.
The adoption of the corporate form facilitated industrial expansion, especially in the 1850's. Promoters of banks in the 1790's and thereafter had discovered the special advantages of incorporation: continuity of operations, ease of raising capital in small amounts from many investors, and limited liability. Subsequently, turnpike and bridge companies and later the manufacturers turned to the legislature for charters of incorpora- tion. The scandals attending the granting of charters led the radical Demo- crats in the 1830's to demand general laws of incorporation whereby any groups meeting the minimum requirements might secure a charter. The constitutional convention of 1846 adopted the principle: "Corporations may be formed under general laws; but shall not be created by special act, except for municipal purposes." Two years later the legislature pro- vided for general incorporation and in the next decade there was a rush by manufacturers to secure charters.
The factory system, that is, mass production with integration of processes and a heavy investment of capital, grew rapidly in New York during this period, especially for textiles-cotton, wool, silk, and hemp. New York merchants followed the lead of Bostonians in setting up tex- tile factories. Benjamin Marshall, a Scot who had made a fortune in the importing business in New York City, purchased the properties of Benja- min Walcott in Whitestown in Oneida County and produced a high qual- ity cotton cloth. In 1836 another group of New York capitalists established the Harmony Cotton Manufacturing Company at Cohoes.
Cotton factories were concentrated in Oneida, Albany, Rensselaer, and Dutchess counties. Woolen mills were scattered more widely over the state, with the largest ones in Oneida County. The silk industry made little headway despite the silk-worm craze, the backing of farm journals, and some public assistance. After 1850 Amsterdam emerged as an im-
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portant center of carpet manufacture, and its neighbor, Cohoes, saw the beginnings of the knitwear manufacture, later to become so important in the Mohawk Valley. Factories making rope out of hemp grew up in many cities and towns.
The manufacture of clothing for sale, which in the twentieth century has been the most important industry in the state, employed a larger number of workers than any other branch of manufacturing. A majority of them were immigrant women living in New York slums. Sailors were the first important customers. As the product improved in quality, mem- bers of the middle class began to buy ready-to-wear clothing, which was much cheaper than custom-made clothes. Master tailors providing both capital and managerial direction developed into clothing manufacturers. They were able to utilize labor more effectively and more cheaply by making hundreds of suits of standard sizes and shapes. New York City was the center of the industry but Rochester had several important factories.
The metallurgical industries employed approximately thirty-four thou- sand workers in 1855. Iron of excellent quality was abundant in the Cham- plain region, where many furnaces fringed the shores of the lake. Charcoal remained the only fuel for smelting until the 1830's, when new proc- esses utilizing coal came into use. Troy and New York City were the major centers for the fabrication of iron and steel. Perhaps the leading personality in the industry was Henry Burden, a Scotch engineer, who be- came superintendent of the Troy Steel and Iron Company. Burden in- vented several processes which enabled him to manufacture horseshoes in four seconds and compress puddled iron into rough bars. Troy used iron and steel in the manufacture of stoves and vehicles, while the foundries of New York City produced marine engines, locomotives, stoves, and omnibuses. The skillful metalworkers of Manhattan likewise led in the use of silver, copper, precious jewels, and gold.
Leather and leather goods factories employed over nineteen thousand workers in 1855. Farm families continued to tan some skins, but more often they took the skins to the neighborhood tannery. The large tanneries kept moving westward as the hemlock stands in the eastern Catskills were depleted. Hides were brought in from all parts of the country, and from as far as South America. In New York City the boot and shoe industry, following the example of New England, was slowly turning toward factory production. Merchant capitalists engaged contractors, who in turn hired journeymen to perform specialized operations. The availability of thou- sands of immigrant cobblers in New York City slowed down the shift of production to factories. Other leather goods industries developed in several communities-Gloversville and Johnstown, for example, became outstanding in the manufacture of gloves.
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Extensive woodworking industries were carried on in almost every corner of the state. Great quantities of lumber went into the construction of buildings in the cities. Steamboats, locomotives, and factories burned up large amounts of wood as fuel.
Wood was also used for furniture, household utensils, and farm im- plements. In New York City, German cabinetmakers turned out quality pieces as well as enormous quantities of cheap tables, chairs, beds, and chests. Duncan Phyfe, a Scot living in New York City, was the leading designer of furniture in this period. New York City also became the main center of piano production in the United States. During the 1830's Ger- man craftsmen gradually supplanted native workmen in this industry; most of them remained wage earners, but a few like Steinway set up in- dependent shops.
New York, premier in printing and publishing, was also the leader in manufacturing paper. At first, rags were the raw material for paper pro- duction, but after 1850 manufacturers found it possible to use spruce and balsam. The pulp and paper business was located chiefly in Watertown and in towns along the upper Hudson River.
The production of prepared foods and beverages exceeded in value that of any other branch of industry. As wheatgrowing declined in eastern New York, the center of flourmilling moved westward and centered in Rochester, which had twenty-one mills in 1835. The output of Rochester mills in 1851 exceeded 500,000 barrels, but in the 1850's Oswego and Buf- falo began challenging Rochester's millers. These cities milled some of the wheat coming down the Lakes, whereas Rochester relied upon the declining output of the Genesee Valley.
New York City, led by its German citizens, captured control of the re- fining of sugar. The Stuart brothers from Scotland were the first to in- troduce the use of steam, which permitted refineries to grow in size and output. In 1854 ten large refineries employed over one thousand men.
New York produced over seven million bushels of salt, or 59 per cent of the national output in 1859. The salt springs near Syracuse, once a source of power for the Onondagas, came under the jurisdiction of the state in 1795. The state leased lots to saltmakers, requiring them to pay a duty of four cents a bushel. Large castiron kettles, holding about one hundred gallons each, were used to boil out the salt. Salt manufacturers at Syracuse had several advantages over their competitors in other states: nearness to eastern markets, low capital investment, and access to wood and coal needed to keep the fires going.
Slaughterhouses were found in all the cities of New York, with the largest ones in Albany, Buffalo, and New York. The butchers relied upon livestock driven in from the countryside, but after 1850 butchers supple-
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mented local sources with cattle brought from the Midwest over the New York Central and Erie railroads.
The popularity of fermented and distilled beverages nourished an im- portant industry and employed thousands. Whatever success the temper- ance movement had in cutting down consumption among natives was more than offset by the influx of whisky-loving Irish and beer-drinking Germans. The consumption of beer rose sharply and was paralleled by a decline in the use of rum. Whisky remained a favorite drink among all classes. Albany, Troy, Hudson, and New York City had large breweries and distilleries which in 1840 accounted for one-tenth of the nation's production.
The East River yards contained the greatest concentration of ship- building activity in the United States. During the heyday of the wooden ship no city in the world could match the ships of New York for strength, speed, beauty, and comfort. Other cities in the state engaged in boat construction on a minor scale: Rochester was pre-eminent in building canal boats until about 1850, when Syracuse took the leadership, and Buffalo's builders turned out many lake schooners for the expanding lake marine.
The fact that New York yards had to import oak and pine from a dis- tance proved little hindrance. Manhattan and Brooklyn shipbuilders had the advantage of being close to the shippers and merchants. These ship- pers demanded ships of high quality and of many kinds; furthermore, their vessels needed periodic repair, which provided the yards with a good share of their annual business. Many of the ablest builders in the world gravitated to New York to find scope for their talents. The yards of New York were also advanced technically, using labor-saving devices such as steam sawmills to cut timber.
Perhaps the most famous of the shipyards which dotted the shore line below Corlear's Hook (near the present Williamsburg Bridge), was that founded by Henry Eckford, a Scot who had learned the business of building ships in Quebec. When he died in 1832, after winning a fine reputation overseas for his naval vessels, the yard came under the control of Isaac Webb, from Connecticut. His son, William H. Webb, dominated the industry between 1840 to 1860. European navies sought his ironclads while the Black Ball Line purchased his packets. Jacob Westervelt, David Brown, and Stephen Smith were builders whose ships were well regarded for their speed, performance, and stamina.
The shipbuilding industry was extremely sensitive to the ebb and flow of business trends. The slightest ripple in confidence caused merchants and shippers to defer building. The Panic of 1837 virtually ended ship- building for two years, but the opening of a new trade route, such as the
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California trade in 1850, caused a rush for many ships. Allied trades such as sailmaking and caulking prospered or declined in sympathy with the shipyards.
Shipbuilders had to be alert to changes in trade routes and to tech- nical developments. The ablest brains devoted their major energies to the design and construction of wooden ships. More than 95 per cent of the American merchant marine consisted of sailing ships as late as 1863. Their greatest achievement were the clippers, with three masts, a long hull, and concave bows. These were in demand during the 1850's for the trade with California, China, and Australia. No sailing ship ever equaled the record set by the Flying Cloud, Donald McKay's superb crea- tion, which sailed from New York around the Horn to San Francisco in eighty-nine days.
Despite such records, the superiority of steam became evident. Steam- boats had captured the passenger and much of the freight traffic on rivers and inlets long before 1825 and mariners were taking their steam- boats out on the high seas in the 1830's. The arrival of two English-built steamships within four hours in 1838 caused New Yorkers to take more interest in ocean-going steamships. Unfortunately the East River ship- builders committed themselves tenaciously to paddlewheels ill suited to the buffeting of high seas, and they failed to adopt the screw propeller which British builders had utilized on the Clyde River at an early date.
The decade of the 1850's was the high point of activity for shipbuilders in New York. The great yards were turning out a wide variety of vessels: packets for the North Atlantic shuttle, clippers for the California trade, warships for several European and Latin American navies, steamships for the Collins Line, and a host of craft for river, bay, coastal, and oceanic traffic. Over two thousand workmen, mainly native Americans, were em- ployed in the shipyards of New York City.
The economy of New York by 1860 displayed signs of approaching ma- turity. Its farmers, who had almost completed the task of transforming forest into farmland, were also well on their way toward becoming busi- nessmen. The merchants on Manhattan had earned handsome profits act- ing as middlemen between the wheat and cotton growers of the nation and the textile and steel manufacturers of England. Upstate, merchants in hundreds of communities were performing similar functions and win- ning wealth and power. Other New Yorkers had nursed into manhood impressive financial institutions, which remained, however, distinctly sub- sidiary to those of London. Equally promising for the future was New York's industrial development, which was already noted for its output and diversity. The businessmen of New York between 1825 and 1860 defi- nitely established the primacy of the Empire State in commerce, finance, and manufacturing.
Chapter 22 ¥
The Rise of the Dairy State, 1825-1860
Latterly-all the Rage for emigration, has been to the far west-to Michigan, Indiana, Illinois, etc. And of the settlers already here [Delaware County] abundance of them are in a mind to sell out and push on farther west.
-SAMUEL A. LAW, 1833
THE expanding network of turnpikes, canals, railroads, and plank roads unleashed two revolutionary forces in New York agricultural history-the "pull" of the growing urban market and the pressure of western compe- tition. The farm family of 1860 was spending an increasing amount of its time producing goods for a distant market and less for its immediate use than it had in pioneer days, and it became more dependent upon the storekeeper for goods. By 1860 practically all farm women purchased cotton and wool goods instead of making them at home.
Price fluctuations became increasingly important for the farming pop- ulation between 1825 and 1860. Prices rose from the low level of the early 1820's until the middle 1830's, and the farmers shared in the general prosperity. The growing urban population and the construction of canals, railroads, and factories stimulated the demand for raw materials and food- stuffs. After the Panic of 1837 farm prices remained low until the late 1840's, when events in Europe (the Crimean War and the repeal of the Corn Laws in England) coupled with the expansion of American rail- roads and industry pushed prices upward. Another panic in 1857 again brought prices down.
Since each farmer tended to produce whatever products would leave him the greatest margin of profits, a bewildering number of individual and local adjustments took place. Thus many farmers in the Hudson and Mohawk valleys turned to butter and cheese when the wheat midge, rust, and Hessian fly made wheat raising unprofitable in the 1830's. Cheap
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western wool after 1845 caused many upland farmers to swing over to dairying. A few farmers concentrated on special crops such as flax, hops, barley, broomcorn, and fruit. Those living near cities engaged in market gardening and milk production.
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