USA > New York > A short history of New York State > Part 61
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In 1879 F. W. Woolworth established his first five-and-ten-cent store in Utica. When this failed, he opened another in Pennsylvania. Many older retail merchants scoffed at this undertaking but changed their minds when the "five and ten" business netted its founder a fortune. The Woolworth Building near City Hall in New York City, at the time of its erection the tallest building in the world, is a monument to Wool- worth's vision and enterprise. Many other chains, such as Gristede in New York City, have been organized during the last three-quarters of a century. As a result, the old small independent stores have either been forced out of business or have been compelled to organize into groups to preserve individual ownership and operation while benefiting from the economies of chain organization. In recent years manufacturers' retail chains have appeared in increasing number. Oil and automobile and ready-made-clothing manufacturers and others have also established their own retail agencies as, for example, Bond's, the makers of men's suits.
It is difficult to exaggerate the influence of the automobile on retail trade. The automobile now makes it possible for rural dwellers to shop in larger communities where they usually have the advantages of both low prices and variety. On the other hand, the movement of people into the suburbs has led to a decentralization of business. Today several of
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the great New York City department stores have branches in suburban areas.
The supermarket now found in all sections of the state is entirely possible because of the automobile. Usually located in the outskirts of towns and cities where land is available at a rental or purchase price much less than within the more populous areas, these markets afford an abundance of parking space and more spacious quarters for the dis- play of goods. In the state in 1952 there were 1,413 food supermarkets which did a gross business of $1,300,000,000. The larger supermarkets of the state not only offer a complete line of grocery items, but also in recent years have extended their operations into such nonfood lines as drugs, toys, books, clothing, florist stocks, and hardware. They are fast becoming twentieth-century "general" stores. Many of these stores, unlike their early counterparts, are air conditioned and have lunch coun- ters, rest rooms, music, parcel checking, and counter-to-car delivery. They have also initiated the merchandizing technique of self-service, which has had a profound effect upon store arrangement and equip- ment, packaging, advertising, display of goods, store personnel, and the marketing habits of customers.
Commercial advertising, perhaps the most important device used to stimulate buying, is largely a post-Civil War development. Prior to 1865 most newspaper advertising was confined to patent medicines. Large advertisements were rare. P. T. Barnum, the showman, was one of the first to have recourse to spectacular newspaper advertising. Prior to 1880 few general, or "literary," magazines, with the exception of the Galaxy and Scribner's Monthly, would accept advertising matter. In the early 1870's Harper's Monthly was reported to have refused an offer by the Howe Sewing Machine Company of $18,000 for its back cover for a year. By 1890, however, both newspapers and magazines were carrying an increasing amount of commercial advertisements. Religious periodicals, many of which had a considerable circulation within the state, depended financially upon advertising, welcomed advertisements of all kinds, and were not overscrupulous as to their character. Unlike several of the general magazines, they accepted liquor and patent medi- cine advertisements. On the whole, the standards of advertising in the magazines was higher than those in the state's newspapers.
At first the newspapers of the state were reluctant to accept large- space advertisements, but this policy changed during the last decades of the nineteenth century. Today the newspapers of the state, particularly those published in large urban centers, carry an enormous amount of commercial advertising.
New York State has also witnessed the development of a considerable amount of outdoor advertising during the last few decades. At first this
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type of advertising was unorganized and unregulated. Bills were posted in any prominent place. Signs were painted on fences, rocks, and even buildings, often defacing scenery and private property and violating public rights. Beginning in 1891 outdoor advertising was systemized and subjected increasingly to public control. The radio and television are the most recent media of the commercial advertiser.
Prize contests, premiums, and installment buying have also been used to stimulate consumer buying. No one of these is limited to New York. The first two gained popularity during the early years of the Depression. Prizes of ocean trips, merchandise, or cash were offered to contestants who solved puzzles, wrote letters, essays, or verses or coined names or slogans. The label or boxtop of the concern's package had to accompany the entry. Studies of this method of stimulating sales show that the re- sponse is large but often temporary. Similar stimulants are so-called premiums, offered from coupons inside the packages.
Installment selling is not new. It was widely used during the 1920's and was in part responsible for the Depression of 1929. People are en- couraged to purchase goods-automobiles, furniture, household appli- ances, clothing, and other articles-even though at the time of purchase they do not have the funds with which to pay for them. Consequently they pay "something" down at the time of purchase and the remainder in installments at future specified times. For those whose income is de- rived from wages or salaries or even from a business of their own, in- stallment buying is risky. Unemployment insurance helps to alleviate the dangers of this practice.
New York in recent years has witnessed increased attention on the part of manufacturers, farmers, and merchants to the designing, packag- ing, and display of their products. As the income of the state's popula- tion increased, people became more concerned with the brands, styles, and designs of what they purchased. Advertising, shifts in population, and changes in the consumer's buying habits were also contributing factors. Families who migrated from the country to a city apartment with limited storage space tended to buy more canned goods and packaged foods. Similarly, with the decline in home manufactures people bought more ready-to-wear clothing. With the decline in the number of domestic servants came an increasing interest in labor-saving household appli- ances. Change in styles, whether in wearing apparel or in automobiles, is still another factor which has caused producers and distributors of goods and commodities to be design conscious.
Packaging and display of food products have become increasingly im- portant. In 1890 the grocery store customer waited while the store- keeper scooped oatmeal, sugar, or tea from a barrel or box into paper
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bags, which then had to be weighed and tied. Today the same com- modities are packaged in attractive cans, boxes, and transparent con- tainers before they ever reach the grocer's place of business. They are no longer handled in bulk. As a result the products are likely to be cleaner and easier to identify and to handle.
Total consumer spending for food has climbed steadily in both state and nation since 1932. Increase in population and income, the spread of education relating to nutrition and health, the increased consumption of prepared foods both at home and at restaurants, and the shift from farm to nonfarm living are factors which largely account for this in- crease.
While the average New Yorker eats somewhat more food, by weight, than he did two decades ago, the more striking changes in his eating habits have taken place in the kinds of food he consumes. In New York in 1910 the per capita consumption of grain was close to 300 pounds; in 1952 it was about 165 pounds. Fruit and vegetable consumption, on the other hand, rose from approximately 330 pounds to 450 pounds, thereby increasing the intake of vitamins, iron, and calcium by about one-third. Fresh farm products are now available the year round in all parts of the United States. Modern transportation, refrigeration, packag- ing, and large-scale purchasing by chain stores and supermarkets have stimulated the development of extensive truck farms and fruit orchards far removed from retail markets. Today no less than 50 per cent of the fruit crops and 60 per cent of the truck crops of the nation are marketed in fresh form. Quick freezing, one of the outstanding recent develop- ments in food processing, has further transformed the typical diet. Straw- berries and peas were the leaders in the frozen foods until the advent of frozen orange juice.
Consumers in various parts of the state, but especially in New York City, have, from time to time, been outspoken in their condemnation of the high cost of living. At these times they have been prone to place responsibility upon the middleman. Numerous legislative investigations and private inquiries have been made. Typical of these public investiga- tions was the New York State Food Investigating Commission of 1912. A sub-committee of this commission, charged with the task of investi- gating markets, prices, and costs, reached the conclusion that high costs to the consumer were occasioned by outgrown facilities, especially in urban centers, and by a haphazard system of distribution which enabled commission men, wholesalers, speculators, jobbers, and retailers to take from 40 to 70 per cent of the amount paid by the consumer. Despite their analysis, made almost a half century ago, the gap between what the producer receives and the consumer pays is a wide one.
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If the state of New York is a great center of domestic trade, what of its foreign trade? For over a hundred years New York has been famous for its large export and import trade. The state's manufacturers are favorably located for selling in international markets and for obtaining imported raw and semiprocessed materials from all parts of the world. Today, the state handles more than one-half of the nation's imports and more than one-third of its exports; these percentages are somewhat lower than they were a century ago. This trade passes through the four customs districts of the state: New York (which includes Albany and the New Jersey ports of Newark and Perth Amboy), Buffalo, Rochester, and St. Lawrence (Ogdensburg). In 1950 the New York district alone accounted for one-half of the national waterborne shipments to foreign countries.
By far the larger proportion of imports funnels through the port of New York. Especially is this true of imports coming from areas other than North America. The imports coming through the customs districts of Buffalo, Rochester, and St. Lawrence (Ogdensburg) come chiefly from Canada and in recent years are of growing significance in the state's total trade. The port of New York has long been and still is a mecca for importers of both finished and semifinished goods and raw material of foreign origin. Since the Civil War and more especially dur- ing the last half century the port has developed a series of specialized areas. Newark, for example, has become a great lumber entrepôt; Eliza- beth port is a center for spices, pepper, cocoa, beans, cotton; at Fort Tompkinsville tea and rubber are discharged and stored; Brooklyn re- ceives the raw products of the tropics in great volume; Constable Hook, Bayonne, to which comes crude oil by tanker and pipeline, is the scene of perhaps the largest concentration of oil refineries in the East. Raw rubber and raw silk, coffee, tin bars, vegetable oils, undressed furs, copper ore and semimanufactures, diamonds, cane sugar, fruits, nuts, and alcoholic beverages, in terms of dollar value, have been leaders in the import trade of the New York customs district during the last quarter century.
Leading exports of New York State products have varied somewhat since the Civil War. The biggest change has been the growing preced- ence both in volume and dollar value of manufactured goods over raw materials. At the top of the list in monetary value during the period since 1920 have been copper manufactures, petroleum products, electrical machinery, automobiles and trucks, chemicals, furs, photographic and projection goods, coal, wheat and grain mill products, and dairy products.
That the New York customs district should overshadow the other three customs districts, which together account for only about 15 per
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IMPORTS
1921
1927
1933
1939
1945
1951
1955
1
1
T
1
0
10
20
30
40
50
60
70
80
90
100
EXPORTS
1921
1927
1933
1939
1945
1951
1955
-
1
1
T
1
0
10
20
30
40
50
60
70
80
90
100
Chart 4. Percentage of the nation's imports and exports passing through New York, 1921-1955. Solid areas indicate per cent of nation's imports and exports (excluding re-exports) by New York State. Shaded areas indicate per cent of nation's imports and exports (excluding re-exports) by areas other than New York State. (Adapted from Statistical Abstract of the United States, 1956, pp. 822 ff .; Department of Commerce, Bureau of Foreign Commerce, Monthly Summary of Foreign Commerce, 1950-1954; U.S. Bureau of the Census, For- eign Commerce and Navigation of the United States [Washington, D.C., 1950].)
cent of the state's foreign trade by volume, is not surprising. The excel- lent physical facilities of the port of New York, with its 650 miles of water front, and the variety of services provided by the foreign depart- ments of the metropolitan area's banks, its commodity exchanges staffed
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A SHORT HISTORY OF NEW YORK STATE
by specialists in foreign trade are to be found nowhere else in America.
Both the domestic and foreign trade of the state are especially affected by the six commodity exchanges whose home is New York City. The oldest of these, the New York Produce Exchange, was formed in 1862, when the city's independent dealers needed an orderly and more con- venient method of buying and selling flour and provisions. Today the New York Produce Exchange is still one of the principal markets for wheat to be exported from North America. It also has large markets for other grains and lesser markets for cottonseed oil, lard, tallow, and other commodities. The New York Cotton Exchange was organized in 1870. During the period July 1945-June 1951, it handled 64 per cent of the cotton trade of the nation. Wool is also traded on the floor of this exchange under the auspices of the Wool Associates of the New York Cotton Exchange, Inc.
The New York Coffee and Sugar Exchange, Inc., organized in 1882 by a group of coffee brokers who desired to create stable conditions in the coffee market, is the largest of the world's exchanges for both coffee and raw sugar. The existence of this exchange has contributed to making New York City the principal warehouse center and leading import point for coffee in the United States. About half of all coffee imported into this country comes through the port of New York, and over one-fifth of all wholesale coffee sales are made by New York wholesalers. Trading in raw sugar futures did not become important on this exchange until World War I. The Commodity Exchange, Inc., was formed in 1933, when, in an effort to reduce expenses, the New York Hide Exchange, the National Metal Exchange, the National Raw Silk Exchange, and the Rubber Exchange of New York were consolidated. The formation of the New York Cocoa Exchange, organized in 1925, was prompted by marketing difficulties. Today approximately one-half of the world's pro- duction of cocoa beans is consumed by the American chocolate industry. The New York Mercantile Exchange is one of the oldest organized com- modity exchanges in New York City, having been established in 1872 for the purpose of dealing in butter and eggs. This exchange also oper- ates a futures market for potatoes, rice, onions, turkeys, and dry beans.
Of the several functions performed by the commodity exchanges, two are of outstanding significance. First, the exchanges make hedging, or the practice on the part of merchants and processors of attempting to avoid the risk of unforeseen major price movements, possible by buying or selling future contracts on a commodity exchange. A second function is control of price direction by employing the supply and demand for- mula. The passage of the Federal Commodity Exchange Act has assisted the exchanges in preventing manipulation, fraud, and dissemination of false information-practices long frowned upon by the exchanges.
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Table 19. Commodity exchanges in New York City, 1951.
Exchange
Commodity
Cotton
New York Cotton Exchange Wool Associates of the New York Cotton Exchange, Inc.
Wool and wool tops
New York Coffee and Sugar Ex- change, Inc.
Commodity Exchange, Inc.
New York Produce Exchange
Coffee beans, raw sugar, molasses Hides, crude rubber, copper, lead, zinc, tin Cottonseed oil, soybean oil, black pepper Cocoa beans
New York Cocoa Exchange
New York Mercantile Exchange
Potatoes, butter, processed eggs, on- ions, turkeys, rice, dry beans
Trade with Canada, Mexico, Central and South America, and Africa has grown in relative importance and is now over one-half of the United States total. Trade with Europe and Asia has fallen off sharply, while trade with Canada is expanding, and almost one-third of United States- Canadian trade comes through the upstate customs districts. Since the end of World War II, New York has faced keener competition from the Gulf Coast ports. The rapid industrial development in the South and the Southwest and the mounting Latin-American trade has been very favor- able for these ports. Certain Atlantic Coast ports, notably Baltimore, Philadelphia, and Hampton Roads have also succeeded in attracting somewhat larger shares of foreign trade than formerly.
The prospects for foreign trade through the ports of the state will depend not only on national foreign-trade policies-extension of the Reciprocal Trade Act, liberalization of tariffs, simplification of customs procedures, the volume and nature of foreign aid-but also upon the action taken by the ports in the state to combat growing competition from other ports. To this end both the New York and New Jersey por- tions of the port of New York are spending millions of dollars for re- habilitation and modernization. The opening of the Thruway by providing better trucking facilities, will also help. The greatest competition of all is likely to come from the development of the St. Lawrence Seaway which will enable ocean freighters to dock at inland cities on the Great Lakes. These cities, together with Montreal, may challenge New York's supremacy.
Foreign trade by air is still very small but is growing in importance (see Chapter 38).
World War II and the disruptive years immediately following brought changes in both the countries with which the state traded and in the
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volume of the trade. The war itself was a retarding factor. Many com- modities in demand by countries before the war were no longer needed or, if needed, could not be delivered. Trade also shifted from European and Asiatic areas to Caribbean and South American countries. During the postwar years many countries were too impoverished to purchase American goods. To retain and also expand the state's foreign commerce, the legislature in March 1946 provided for a World Trade Corporation "to establish and develop a world trade center to be located within the state of New York for exhibiting and promoting the purchase and sale of products in international trade." The corporation has been organized and is surveying the possibilities of establishing such a center.
The people of the state are increasingly aware of the fact that their economy cannot be maintained without foreign trade. They depend almost entirely upon foreign sources for a number of materials vital to their industries-tin, cobalt, copra, shellac, industrial diamonds, man- ganese, nickel, and quartz. Moreover, their living standards would be reduced without the importation of such commodities as coffee, sugar, cocoa, furs, and tropical fruits. Nor can they maintain some of their present industries without foreign markets. The economy of the state and, indeed, of the nation would be severely dislocated by any sudden interruption of foreign trade.
New York not only became a great import-export center but ultimately the world's leading market for the exchange of stocks and bonds and other types of securities. Business on the New York Stock Exchange grew in volume especially after the discovery of gold in California and the expansion of industry and transportation. It was during the Civil War, however, that the exchange experienced its first big wave of speculative business. Securities, gold, and commodities were subject to unheard-of activity. Merchants, brokers, lawyers, politicians, and even clergymen and women prominent in society were infected with the fever of specu- lation. So great was the activity that brokers dealing in securities not listed on the New York Stock Exchange had recourse to trading on the sidewalk. This was the beginning of the New York Curb Exchange, which took more tangible form in 1873, when it moved from its narrow confines in William Street to Broad Street almost adjacent to the banking firm of J. P. Morgan and Company. Eventually, in 1921, the Curb Ex- change moved indoors. In comparison with the rules of the New York Stock Exchange, the rules for listing stocks on the Curb Exchange are less rigid and exacting, permit younger and less strongly established companies to list, and are less expensive. The Curb Exchange is often regarded as a testing ground for the securities of younger corporations. Most of these usually graduate to the New York Stock Exchange.
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Speculative booms have characterized the New York exchanges from time to time. The most historic of these developed with increasing in- tensity in the years after 1927. As more investors put their money into securities in the hope of making a quick profit on a speculative rise in stocks, the character of the New York Stock Exchange was funda- mentally altered. Instead of serving primarily as a device for the accumu- lation of capital for industrial enterprises, the exchange became a bet- ting ring where people gambled on stocks in much the same fashion that gamblers wagered on roulette or horseraces. Security prices were forced up by competitive bidding rather than by any fundamental im- provement in corporate enterprise, and there was little correlation be- tween actual conditions in industry and stock-market quotations.
Part of the capital that flowed to the New York Stock Exchange in the last two years of the 1920's was supplied from corporations with unexpended cash reserves who could think of no other way of employing their surplus funds than of placing them at the disposal of the invest- ment market. The traditional function of the exchange was thus reversed. Instead of being used as a device for gathering funds for corporate expansion it was transformed into a receptacle for the profits of corpora- tions. These corporate profits deposited in New York banks in turn helped swell the funds available for stock speculation. By buying on margin, the investor had to pay only a fraction of the quoted price of any particular security. The additional money needed to cover the pur- chase was supplied by the broker, who obtained these funds from a bank using his customers' stock as collateral.
If the shares of stock so purchased advanced, the owner could sell at a profit. If, however, they declined, the owner would have to pay the broker additional money to cover the corresponding decrease. If he were unable to do so, the broker would be compelled to sell the stock to protect himself at the bank. It was these three factors-availability of money at low rates of interest, buying on low margins, and the craze for speculative profits which contributed in no small measure to the economic collapse of 1929.
Over the years, as the volume of business on the two New York ex- changes increased, sharp practices tended to develop which roused the ire of the public. Because the stock market was as yet unregulated, un- scrupulous operators like Daniel Drew, Jim Fisk, and Jay Gould took advantage of the ignorance and naïveté of investors. To them, stock watering and stock manipulation were fine arts. If they wanted addi- tional funds, they merely printed more Erie Railroad stock and sold it to gullible investors. Their expenses stopped with the cost of printing, for the new stock issues were not accompanied by an addition to the railroad's physical assets. Furthermore, these stock jugglers could change
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