Read The First Tycoon: The Epic Life of Cornelius Vanderbilt Online

Authors: T. J. Stiles

Tags: #United States, #Transportation, #Biography, #Business, #Steamboats, #Railroads, #Entrepreneurship, #Millionaires, #Ships & Shipbuilding, #Businessmen, #Historical, #Biography & Autobiography, #Rich & Famous, #History, #Business & Economics, #19th Century

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It was that sense of the public mood, of the emerging American character, that illuminated Rochefoucauld-Liancourt's vision of this country. The United States, he wrote, “is destined by nature for a state of strength and greatness, which nothing can prevent her from attaining.” The prophecy was far from obvious: despite the enormous geographical size of the republic, it was desperately underpopulated, with only a skeletal military establishment. And yet Rochefoucauld-Liancourt boldly predicted that it would attain “a degree of prosperity, which must in future render this part of the world the rival, perhaps the fortunate [i.e., more successful] rival, of Europe.”

There was, however, an obstacle standing between the young republic and its destiny. A sophisticated as well as inquisitive traveler, Rochefoucauld-Liancourt saw that New York's busy harbor spoke of weakness as well as strength. A momentary disarrangement of the world—the war between France and its enemies—had allowed American merchants to step in as shippers to all nations. European ports once closed to Americans now stood open; competing merchant fleets now sat at their piers or were impressed into naval service. But Americans traded comparatively little with each other; merchantmen sailed from New York for Europe or the Caribbean rather than Baltimore or Boston. And fully half of American exports, in terms of value, were
re-exports
of goods arriving from overseas, rather than sales of U.S. products.

“The prosperity of a nation's commerce cannot be durable, unless it be founded upon a solid basis,” Rochefoucauld-Liancourt warned; “and the solid basis of a nation's commerce is the produce of its soil, of its manufactures.” But Americans manufactured little that they could sell to each other, beyond the confines of a local community. For a century and a half, London's imperial policies had molded the North American colonies into suppliers of raw materials and consumers of British manufactured goods. As a result, foreign trade had been at least four times greater than domestic during the colonial era, as each port gathered in crops and raw material from its immediate hinterland and shipped them abroad. Even now, foreign trade remained two or three times greater. The ports of the United States were an unstrung line of pearls, shining with Europe's trade but with little to hold them together when peace returned.
18

If there was any place where that would start to change, where the republic would begin to grow into a cohesive
nation
and so grow great, it must be New York. When Rochefoucauld-Liancourt arrived in August 1797, the advantages of its location could hardly be missed. “The situation of this city in point of commercial importance,” observed a foreign visitor, “is surpassed by none in the United States.” Centrally placed between New England and the rest of the states, sitting on a large and sheltered deep-water harbor at the junction of the Hudson River, Long Island Sound, and the sea lanes to Europe, New York drew an ever-greater portion of American trade. By 1807, an Englishman could describe it as “the first city in the United States for wealth, commerce, and population.”

And yet, New York remained in the moment of its dawn. In 1790, it remained the second city in population in the United States, with only 33,131 to Philadelphia's 54,388. New York nearly doubled by 1800 to 60,515, but even then it was hardly a grand affair. In 1811, one visiting Scotsman dismissed it as an “overgrown sea-port village.” Like a rock in a sock, New York sank into Manhattan's toe, leaving most of the island to pastures, fields, and swamps. Much of the city's growth was not upward but seaward. South Street, for example, was constructed in the first decade of the 1800s on landfill dumped along the East River shore.
19

But then, the waterfront was the very reason for New York's existence. “Belted round by wharves as Indian isles by coral reefs,” Herman Melville would write, “commerce surrounds it with her surf.” Every visitor, it seems, felt compelled to comment on the teeming scene. “The wharfs were crowded with shipping, whose tall masts mingled with the buildings,” wrote John Lambert, after seeing it all in 1807, “and together with the spires and cupolas of the churches, gave the city an appearance of magnificence.”
20

Closer inspection tended to ruin that impression. To be blunt, the city stank. The docks consisted of solid masses of stone and dirt packed into wooden cribs, creating enclosures called slips. The water within the slips, observed a traveler, “being completely out of the current of the stream or tide, are little else than stagnant receptacles of city filth; while at the top of the wharves exhibits one continuous mass of clotted nuisance, composed of dust, tea, oil, molasses, &c., where revel countless swarms of offensive flies.”

Within the belt of wharves, this overgrown seaport village swarmed with men rushing to make money. “Every thought, word, look, and action of the multitude,” Lambert observed, “seemed to be absorbed by commerce.” The impression deepened with each step along South Street. “Every thing was in motion; all was life, bustle, and activity,” he wrote. “The carters were driving in every direction; and the sailors and labourers upon the wharfs, and on board the vessels, were moving their ponderous burthens from place to place.” Penetrating a block or two deeper into town, one wandered through the twisting corridors of Pearl, Water, and Front streets, narrow lanes that were home to most of the city's “countinghouses,” or merchants' offices and warehouses. A frenzy of construction was replacing old wooden houses with new brick buildings, standing shoulder to shoulder under slanting tile roofs, along new brick sidewalks lit by whale-oil lamps at night and bustling with business by day. “The Coffee-House Slip, and the corners of Wall and Pearl streets, were jammed up with carts, drays, and wheel-barrows,” Lambert wrote; “horses and men were huddled promiscuously together, leaving little or no room for passengers to pass.”
21

Thirty years earlier, John Adams had expressed other reservations. “With all the opulence and splendor of this city, there is very little good breeding to be found,” he had noted in his diary. “They talk very loud, very fast, and all together. If they ask you a question, before you can utter three words of your answer, they will break out upon you again, and talk away.” These habits would never really change. But at least one visitor found New Yorkers' directness refreshing. “The people of Philadelphia are stiff in their manners,” he noted by way of contrast, “& not so hospitable as those of New York.” This was a more cosmopolitan place, he observed, thronging with an “immense number of foreigners established in N. Y, attracted thither by the advantages of its commercial importance.”
22

Commercial importance brought luxury, best seen on Broadway, the most fashionable street in North America. It flowed north from the Battery, glistening with enough elegance to impress even Rochefoucauld-Liancourt. “There is not in any city in the world a finer street than Broadway,” he declared. Lambert marveled at the boulevard's “large commodious shops of every description … exhibiting as splendid and varied a show in their windows as can be met with in London. There are several and extensive book stores, print-shops, music-shops, jewelers, and silversmiths; hatters, linen-drapers, milliners, pastry-cooks, coach-makers, hotels, and coffee-houses.” At the northern end of Broadway rose the new marble-clad city hall, presiding over an eponymous triangular park.

Still, with every mark of sophistication came a reminder of New York's rustic immaturity Beyond City Hall Park steeped a stinking pond called the Collect. Surrounded by a nauseating cluster of tanneries and slaughterhouses, the Collect was rapidly filled in after 1802, but the area was avoided by all who could help it. The back of the city hall was left undressed with marble because contemporaries thought “it was not likely to attract much notice.” But even the best neighborhood had its woes.

“It is remarked on all hands,” admitted the author of a guide to New York in 1817, “that the streets of New-York are the dirtiest in the United States.” There were the backyard lavatories, for one thing, that overflowed with every heavy rain. And then there were the roaming herds of “innumerable hungry pigs of all sizes and complexions.” Because of the swine, a petition of laborers explained, “many poor are able to pay rents and supply families with animal food during the winter.” The pig was “our best scavenger,” because it ate “fish, guts, garbage, and offals of every kind,” and was smart enough to find its way home each night. But the hogs perpetuated the habit of strewing rotten waste into the gutters. “So long as immense numbers of swine are allowed to traverse the streets,” wrote the travel-guide author, “so long will the inhabitants think themselves justified in throwing out their garbage to them for food; and so long will the streets of New-York remain proverbial for their filth.”
23

The same tension between sophistication and simplicity—if not exactly squalor—could be felt off the streets as well, in the countinghouses, where clerks perched on high stools and scratched with quills in copy books, where porters lumbered in and out with sacks, crates, and barrels. A quarter of a century had passed since Adam Smith had explained the division of labor in
The Wealth of Nations;
yet this commercial community remained a city of the unspecialized. Apart from artisans who sold merely what they made, the economy belonged to general merchants.

“Their activities,” writes historian George Rogers Taylor, “comprehended almost every aspect of business.” Each master of the counting-house (perhaps with two or three partners) bought and sold cargoes of goods, owned the ships that carried them, and warehoused them in the same building with his office. He distributed these goods to smaller general merchants in towns and villages, and perhaps retailed them from his own storefront, and spun out a web of credit to his customers. He made no specialty of any particular product, but bought and sold what he could.
24

He also traded in promissory notes and bills of exchange. Cash was scarce. British law had banned exports of specie (precious-metal coins, worth their face value in gold or silver) to the colonies and prohibited them from minting their own. Americans mostly used foreign coins acquired in their trade with the Caribbean—especially Spanish dollars (the legendary “pieces of eight”) and their constituent eighth-dollar coins. As the United States began to mint its own coins, Congress made the new American dollar equal to the Spanish in silver content, for an easier transition. In New York slang, the eighth-dollar coin, worth twelve and a half cents, was known as a “shilling” well into the nineteenth century.
*1
(Spanish pieces of eight continued to circulate in the United States as legal tender until 1857.)
25

By any name, silver was hard to come by, so Americans made do with informal devices. A bill of exchange, for example, was a certificate of debt written up by a merchant who was owed money by a party in a distant place—London was a common case. It would be purchased by someone in New York who owed money in London. The buyer would then send it across the Atlantic with instructions for the seller's debtor to pay his own creditor. In this way, the movement of coin and final settlement of credit took place locally, at either end of these long-distance transactions. But the system was highly personal and unpredictable; it depended heavily on how well individuals knew and trusted each other. Because of the risks, the buyers of bills usually paid less than face value for them, driving up costs for everyone.

Locally, merchants usually paid each other with promissory notes, pledging payment with interest on specific dates. The recipient of one would endorse it, then use it to pay his own debts. But if the person who first issued it refused to pay when it came due, the endorser could be sued for payment, “according to the usage and custom of merchants,” as the standard legal form read. It's notable that there
was
a standard legal form (in New York at least), indicating just how common unpaid notes were. And yet, promissory notes would remain a primary method of payment for decades to come.
26

If this unspecialized, informal economy were to change, it would first be through organization, by institutions that would replace these messy personal dealings. And it was in New York where just such institutions began to rise. It was there that the merchants' patron saint, Alexander Hamilton, helped to found the Bank of New York, one of the nation's first commercial banks. Commercial banks concentrated money for bigger loans; as specialized, professional lenders, they tended to make better choices about borrowers than individuals did, so their loans were more productive. Banks also eased the cash shortage. They began to experiment with checking early on, and they also made loans by issuing banknotes—paper money—that could be redeemed at the bank for gold or silver coin.

Hamilton's role in the Bank of New York was nothing compared to what he accomplished as secretary of the treasury in Washington's first term, when the federal capital was temporarily located in Manhattan. In 1790, he presented a plan to have the federal government assume the states' Revolutionary War debts, paying for them with interest-bearing federal bonds, backed by a tariff and an excise tax on whiskey. Despite fierce resistance by Thomas Jefferson and James Madison, Congress enacted the program. The new federal bonds—known as “the Stock”—essentially created the securities market in New York, and by extension in America. The Stock's interest payments funneled federal revenue—those hard-to-come-by silver coins—to merchants, who invested the money in their enterprises. More important, the federal bonds provided a universal form of payment and collateral. The first, cautious banks in America unhesitatingly loaned money to merchants who mortgaged them; the Stock also provided a convenient means of payment over long distances, as they held their value anywhere in the country, even overseas in the British and Dutch markets.

BOOK: The First Tycoon: The Epic Life of Cornelius Vanderbilt
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