republic is to appreciate that there was strength in numbers, so too was there strength in structure. Government was now under the control of a more popular politics; the key to gaining leverage in the city and state’s political economy lay in mobilizing the people who were the constituent members of the sovereign state of New York’s body politic. Like it or not, the most durable and useful legal tool to accomplish that turned out to be the corporation, the legacy of which we continue to wrestle with today.41
Case Studies in Empire Building
The chapters in this book are chronologically organized as case studies, examining how the business strategies of political entrepreneurs were directly related to the political structures of the state and responsive to the wishes of lawmakers.
Chapter 1 details the introduction of finance capital and commercial banking into the un-banked mercantile community of New York City. Propelled by newly won state sovereignty and seeking competitive advantages in politics, policy making, and commerce, several separate cohorts of elite New Yorkers tried to found incorporated banks in 1784. When only one of those proposed banks, the Bank of New-York, opened its doors and did so without the state’s blessing, it nevertheless gained legitimacy by rooting itself in the state’s institutional ecosystem as a lender to the state and municipal government and a bulwark against the incursions of a federal bank.
Chapter 2 examines the founding of the Northern and Western Inland Lock Navigation Companies, two Albany-area canal companies chartered in the early 1790s to connect the Hudson River to Lake Erie and Lake Champlain. Both companies failed and were seen as cautionary precursors to the Erie Canal.
Chapter 3 looks at how a clever cabal of elites manipulated the corporate chartering process to launch a bank from within a water utility, called the Manhattan Company, in 1799. For nearly a decade, the Bank of New-York used its financial leverage to sway political favor and block new entrants from opening rival banks until Aaron Burr and other New York Democratic-Republicans seized an opportunity to open their own bank. Amid the controversy, partisans and bankers confronted the political implications of partisan corporations and the propriety of using credit as a tool in electoral competition.
Chapter 4 examines the complicated political economy of monopoly rights in the early republic during the beginning of the nineteenth century. Even more so than the corporation, the embrace of monopoly privileges by early American states was a continuation of an imperial practice that was unquestionably monarchical: giving one person or association a long-term exclusive right to a route, waterway, structure, type of business, or stream of revenue. A paradox emerged in the republic’s use of the privilege: a successful monopoly inspired legal and political challenges, forcing its proprietors to be open to partnerships with would-be rivals. In the case of the steamboat, state legal protections were ultimately more useful in maintaining a monopoly’s viability than any federal patent protection for technology.
Chapter 5 considers the implications of New York lawmakers’ 1817 decision to directly manage and publicly finance the Erie Canal, which fundamentally changed the relationship between the state government and its maturing institutional ecosystem. The diminishing appeal of exclusive privileges led to a fundamental reorientation in state policy with the public mobilization on behalf of the Erie Canal and legislative wrangling over how it would be financed. Although it is thought of as a “public” project and one of the first of its kind, beneath that veneer it was a hybrid—a desirable investment among wide slices of the electorate who included proprietors of incorporated financial institutions and land speculators who stood to benefit from its operation, and a civic project that legislators and merchants realized would bring the western United States into the close orbit of New York, creating the conditions for the city and state to become the commercial epicenter of the eastern seaboard.
CHAPTER 1
“The Most Dangerous and Effectual Engine of Power”
New York officially became an American city at one o’clock in the afternoon on 25 November 1783. To the sound of pealing bells, Major General Henry Knox and a retinue of horse-mounted dignitaries left Bowling Green, at the foot of Broadway in Manhattan, setting off to the Bull’s Head Tavern on the Bowery, accompanied by a crowd that had assembled at the city’s “Tea-Water Pump” and followed on foot. There they met George Washington, New York governor George Clinton, Chancellor Robert R. Livingston, and other members of a provisional government, which was about to take possession of the southern parts of New York that had been under British occupation for the last seven years.
The thousands of spectators reviewing columns of troops that day were firsthand witnesses to spectacles of regime change reflected even in the naming of New York’s taverns. Evening festivities were hosted at Cape’s Tavern, a site formerly known as the “Province Arms” and then the “City Arms” when it was a favored haunt for the officers of His Majesty’s occupying forces. After being purchased by John Cape, the new proprietor’s first public act was to replace a thirty-year-old sign that had hung above the door with a new one bearing the armorial insignia of the now-independent state of New York.1
However meaningful, the symbolic acts of replacing signs and changing flags were inherently complicated by some unpleasant facts concerning New York City’s population and prospects. With the evacuation of more than twenty-nine thousand British Loyalists complete, there remained just twelve thousand people living inside the belt of Manhattan’s terraqueous border.2 Although people could strip away physical vestiges of British dominion and occupation, the uncomfortable truth was that many of those who remained in the city could be classified as British Loyalists: Tories who had cooperated in the British occupation but who were not so loyal that they felt compelled to leave the United States after the war’s end.
To people like Chancellor Robert Livingston and his circle of correspondents, which included George Washington, foreign affairs minister John Jay, and former New York congressmen Gouverneur Morris and Alexander Hamilton, the presence of those Tories was essential if the city were to rebound as a commercially viable destination for goods and capital. Americans had rejected British imperial governance during the Revolution, but the mercantilist practices and habits of the British Atlantic remained intact and Hamilton in particular was convinced that the new nation needed Tories to help negotiate that world. The willingness of the Tories to participate in American commerce would entangle the city, state, and nation in a web of trade that, both Livingston and Hamilton hoped, would foster geopolitical stability for the United States as a whole. Furthermore, the treatment of those Tories would speak volumes about the intentions and nature of the new American regime and its ability to reconcile with its former kin. And finally, in the view of Livingston’s cohort, New York desperately needed the Tories’ money. The city was hemorrhaging coined metal—gold and silver—that was essential to participate in international trade. There was a real risk that Tories’ capital and connections could be lost for good.
But not everyone was enthusiastic about continuing to host these former Loyalists. During the Revolution, New York legislators punished British collaborators by confiscating their estates and chopping them up to be sold to (ostensibly) patriotic rent-paying tenants.3 Although the war was now over, such punitive acts showed no signs of abating. For months, vitriolic attacks circulated in New York under the “Whig Party” moniker, while selfidentifying Whigs in the legislature stoked their countrymen’s passions by calling for the expulsion of Tories and pressing for invasive new laws to forever bar them from owning property,
