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 to two cents per bushel, or approximately 5 percent of the total cost of transportation from a Midwestern farm to New York City. In 1864 The Prairie Farmer estimated that Chicago’s warehousemen reaped one million dollars in annual income or an average of eighty thousand dollars per elevator.23 By the late 1860s, Munn’s dividends from the pooling agreement averaged one hundred thousand dollars per year, an income he sought to augment through market manipulation.24
A Chicago grain elevator bestowed upon its owner the ability to control market information—a power warehousemen frequently abused. As the grain of the American Midwest passed through Chicago, elevator owners issued storage receipts. Those texts not only functioned as a claim check, they told a story about the quality and supply of a commodity. And, as that story changed, so too did prices. In the hands of a duplicitous elevator operator then, the storage receipt took on a literary form best described as market fiction. Sometimes an elevator owner issued bogus receipts. Other times, an owner simply neglected to retire a receipt after a client claimed a lot of grain.25 In either case, the effect was the same. The elevator owner circulated receipts not backed by actual grain, thereby profiting from a lie.
That lie also created the impression of larger grain supplies, driving prices lower. An elevator owner could profit from buying low on his own reports of large supplies, leaking the truth about the actual amount of grain in store, and selling to hapless traders as the prices rose. If an elevator owner wanted to put upward pressure on prices, he could fabricate a story of scarcity. An elevator owner might falsely report that grain supplies in his care had spoiled—and sell high on the news.26 Whatever the market fiction, an elevator operator’s word was made both plausible and unverifiable by the space he controlled. His elevator contained the truth about grain supplies, but by invoking his private property rights, he could deny others the opportunity to confirm his word.
Public Space and Access to Market Information
After the Civil War, Midwestern farmers belonging to cooperative organizations known as Granges successfully pressed Midwestern state legislatures to enact railroad and grain elevator rate restrictions, leading to a series of six cases testing the legitimacy of statutory economic regulation. The court’s ruling in Munn was the first in the “Granger Cases,” which upheld the state rate regulations.27 Illinois farmers did advocate grain elevator rate restrictions, though the more powerful impetus for elevator regulation came from Chicago grain traders who wished to peer inside the bins. The story of this strange alliance of farm and finance shows that critical economic spaces like the Chicago waterfront were the site of fierce contests over more than just goods. In Munn, the court used the language of space—the “gateway of commerce”—to pronounce upon a conflict over information.28
That fight began in the Board of Trade during the 1850s, and it spilled out into state politics. The board’s members comprised, in part, grain traders who wanted a public accounting of supplies and elevator operators who sought to hide their stores from prying eyes. In 1857, the grain traders took the upper hand, compelling the board to appoint inspectors to enter the warehouses and report on the quality and condition of stores. At the same time, the Board of Trade also began to act as a clearinghouse for market information by recording incoming and outgoing grain shipments to prevent the issue of false receipts.29 Two years later, the Illinois state legislature enhanced the Board of Trade’s powers by granting the organization a special charter as “a body politic and corporate.” The board thus assumed a quasi-governmental status with legal authority to compel its membership, which included the elevator owners, to comply with its inspection rules and standards for weights and grades.30
Elevator owners nonetheless sidestepped board regulations. Since the elevators were private property, board inspectors depended on the permission of their owners to enter. Consequently, elevator operators could arrange for inspections at times when they were in compliance with regulations or their abuses could be masked.31 In light of these evasions, a growing faction of board members began to call for state regulation of the warehouses. That faction drove the grain elevator operators out of power during the 1870 Board of Trade officers’ election. Thus, the board that Munn had headed ten years earlier was now committed to using the state government to, in the words of its president, break “a monopoly highly detrimental to every interest of the city.”32
