Liquid Capital. Joshua A. T. Salzmann

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Liquid Capital - Joshua A. T. Salzmann


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be dismembered.”6 In the first two years of the conflict, grain exports from Chicago soared from thirty-one million to sixty-five million bushels.7 These levels of production continued after the war, with global economic ramifications. In 1873, for instance, the city handled over sixty-eight million bushels of grain, and Chicago wheat flooded markets as far away as Central Europe and Russia.8

      These great commodity flows were made possible through feats of engineering—the dredging of the river and the construction of the Illinois and Michigan Canal, for example—as well as the development of new technologies, like steam-powered grain storage elevators and railroads, which linked the nation’s watercourses to a rapidly growing transportation network centered largely on Chicago.9

      No less important than these, though, were feats of legal and political engineering undertaken by Illinois lawmakers, some business leaders, and state and federal judges. Methodically and very intentionally, they created well-regulated, public waterfront spaces through which the Midwest’s bounty could freely flow.10 Their efforts culminated in two landmark Supreme Court cases, Munn v. Illinois (1877) and Illinois Central v. Illinois (1892), which declared public, state control over Chicago’s riverside grain elevators and its lakeshore harbor.11 These rulings helped spur Chicago’s economic development by making the city’s waterfront accessible to those who wished to use it for profit. Illinois Central and Munn also shaped how jurists made the often-subjective distinctions between public and private sectors. Those distinctions defined late nineteenth- and early twentieth-century American law.

      Monopolizing Space and Information at the Gateway of Commerce

      In 1848, the Chicago waterfront became what Supreme Court Justice Morrison Waite would later call the “very gateway of commerce,” when the Illinois and Michigan Canal breached the continental divide, making it possible to ship grain and other goods from points on the Mississippi River watershed to Chicago.12

      Just as the canal brought goods from the city’s hinterland to its busy waterfront, so too did railroads; Chicago’s waterfront thus became a critical junction between North America’s waterways and its growing web of railroads. In November 1848, Ogden’s new Galena and Chicago Union Railroad sent the first locomotive steaming out of the city, connecting its waterfront to a new agricultural hinterland. Starting at the railroad’s terminal near the Chicago River, the Pioneer pulled a single baggage car carrying a cadre of prominent Chicagoans to a point eight miles west of the city. On the outskirts of town, the train encountered a farmer bringing a wagon load of wheat and hides into Chicago. Two of the Pioneer’s passengers purchased the goods and transported them to the city aboard the train. By 1848, then, a new economic geography had been established. Grain traveled from the farms of the Midwest by rail and by canal to the banks of the Chicago River where it awaited transshipment to consumers.13

      Businessmen such as Ira Munn and George Scott erected large warehouses—with rails flanking one side and the Chicago River on the other—to store the grain in route from the Midwest to consumers in the eastern United States and Europe. As grain sat in those elevators awaiting rail or water shipment, Munn and Scott not only charged farmers storage fees, they harbored immensely valuable information about the supply of a crucial global commodity. Their control of this market information owed to economic geographies, technologies, and business practices developed in the 1840s and 1850s—all of which had made the Chicago waterfront a critical bottleneck in the global grain trade.

      Chicago’s grain elevator operators made their private riverfront property—and information—the subject of broad, public concern by using it to manipulate markets. The men came to epitomize the nineteenth-century “robber baron.” Though often associated with pitchfork-wielding populists, the term was actually coined by scions of two elite Boston families, Charles Francis Adams Jr. and Josiah Quincy Jr., who dubbed the businessmen who monopolized transportation corridors “robber barons,” recalling the medieval Germanic warlords who had allegedly strung iron chains across the Rhine River and taken toll from all who passed.14

      The grain elevators built by men like Munn and Scott provided railroads with a critical, labor-saving technology that, for legal reasons, they could not directly harness themselves. When the Pioneer brought the first load of wheat to Chicago, it was most likely stored in sacks by the farmer who grew it. Sacked wheat required an enormous amount of labor to transport. Each sack had to be loaded onto a railcar or boat, transported to Chicago, offloaded for inspection and purchase, reloaded for shipment to the consumer, and, at its destination, unloaded again. These steps required human muscle, but this changed in the 1850s when Chicagoans adopted the steam-powered grain elevator introduced in 1842 by Buffalo warehouseman Joseph Dart. A conveyor belt with affixed buckets carried grain to the top of the multistory structure where an operator weighed it before dumping it into one of several great, vertical storage bins. When it came time to transport the grain again, the elevator operators simply opened a chute at the bottom of the bin and poured its contents into a waiting ship or railroad car below.15

      Even though the railroads that handled grain required elevators, their corporate charters seldom permitted them to enter the storage business.16 Consequently, railroads often rented waterfront lands to elevator operators. In the early 1860s, for example, the massive Chicago and Northwestern Railroad, which had since subsumed the Galena and Chicago Union, leased a parcel of land on Chicago’s Water Street near the Kinzie Street Bridge to Munn and Scott. In 1862 Munn and Scott erected the Northwestern Railroad Elevator with fifty bins capable of holding up to six hundred thousand bushels of grain.17

      The adoption by Munn, Scott, and other warehousemen of steam-powered elevators depended on organizational innovations that transformed the fruit of the prairie into a form of currency. As elevators became larger, it proved impractical to store just one individual’s grain in a single, voluminous bin. Warehouse owners therefore sought to mix the grains of various owners. This presented a problem. If different grains were mixed, how could property be returned to its rightful owner? This question was taken up by the Chicago Board of Trade. The board was founded in 1848 by eighty-two businessmen, from a wide-range of occupations, 38 percent of whom had served as members of the organizing committee for the 1847 River and Harbor Convention.18 In keeping with the members’ interest in transportation, the board became increasingly focused on the city’s growing grain trade during the 1850s and 1860s. Grain elevator operators, in turn, assumed positions of power in the Board of Trade; Munn, for instance, served as its president from 1860 to 1861. To help elevator operators maximize their storage space, in 1856 the board established categories and grades, or quality measures, for wheat. Thus, when a farmer deposited his crop into an elevator, it would not be segregated. Rather, the elevator operator would mix it with wheat of a like grade and category, “no. 2 winter wheat,” for example. This practice helped maximize storage space as well as facilitated transactions. The person who deposited grain into the warehouse received a receipt not for the very same grain but for a like amount of the same category and grade.19 The elevator receipt became a form of currency. Farmers sold them to grain merchants. Grain traders bought and sold receipts in the trading “pits” at the Board of Trade, and banks accepted them as collateral and for deposit.20 In effect, a warehouseman who issued a grain receipt printed money.

      Chicago elevator owners colluded to cheat farmers and grain traders alike. In 1862, the owners of the city’s north and west side elevators established a secret pool; they divided ownership of seven elevators into four hundred shares, bought interlocking portions, and distributed dividends. Munn and Scott, majority owners of four elevators, managed the warehouses on the city’s west side, keeping books and distributing dividends.21 Through the pool, Chicago’s warehousemen helped eliminate price competition and negotiated favorable shipping agreements with railroads. Farmers had virtually no control over which elevator received their grain or the cost of storage. This made them susceptible to even greater abuses. Elevator operators shortchanged farmers by rigging scales, arbitrarily downgrading wheat, and lying about crop spoilage.22 With their cunning and their control over a commercial gateway, grain elevator owners became extremely wealthy. In the 1860s, a typical elevator charge for receiving, twenty days storage, and shipping grain amounted


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