Middlemen and Foreign Trade

Sources

New York Merchants. Before a piece of English ironware, a bottle of French wine, or any other imported item could reach an American consumer, it had to pass through the hands of a foreign exporter, a domestic importer, a jobber or wholesaler, and a retail seller. By the 1830s more than half the value of all imports entered at New York, and it was New York’s wholesale merchants who dominated this network of middlemen. Their huge auction houses and warehouses on Pearl Street in lower Manhattan supplied the vast majority of regional wholesalers and country merchants throughout the nation, with domestic as well as imported items. Storekeepers and regional jobbers from the West and South made annual pilgrimages to lower Manhattan, where they purchased (usually on credit) and arranged for the shipment of goods for their stores. Wholesale merchants specializing in coffee, ready-made clothing, or hardware, and jobbers with huge lots of cheap textiles from Lowell or Manchester plied the visiting merchants with their wares.

Regional Competition. As the nation expanded westward, other cities tried to compete with New York as a wholesale outlet. In the 1830s and 1840s regional networks of production and marketing developed, centered around cities such as Cincinnati, New Orleans, Saint Louis, and, later, Chicago. Manufacturers in these cities began producing furniture, hardware, and farm implements for their own local markets, and wholesale networks soon followed to distribute these goods further afield. The rapid growth of canals and railroads greatly facilitated this expansion. But most of the money to pay for these consumer items ultimately came from the sale of lumber and agricultural products to the more-populous cities of the Eastern states or Europe, which almost always involved some transaction with New York. As one chagrined Indiana congressman noted in 1851, “the city of New York controls at the present time, with its immense monetary power, the commercial destinies of the Union.”

Cotton Factors. New York middlemen controlled exports as well as imports, and America’s main export was cotton. Only seven years after Eli Whitney invented the cotton gin, American cotton growers were exporting fifty thousand bales (20.9 million pounds) annually. Between 1815 and 1840 the annual value of America’s cotton exports rose from $17.5 million to $64 million; no other crop even came near to cotton in volume of exports or

dollar value. The volume and unusual marketing needs of King Cotton became the responsibilities of a new breed of specialized middleman, the cotton factor. Unlike storekeepers and traditional shipping merchants, cotton factors did not take tittle to the cotton itself but operated as commission merchants, charging fees for each service they provided to the cotton planter. Those services included arranging for the shipment of the planter’s entire crop by steamboat and ocean vessel to its destination in Massachusetts or England, providing safe storage for the bales at each stop along the way, coordinating insurance and paying carters and drayers, negotiating the best price for the crop with the professional cotton buyers of Liverpool, and then purchasing in London or New York City a full range of supplies for the planter and his family with the proceeds. In addition factors often operated as creditors, providing advances against the crop as the crop as the bales made their way from the field to the factory. To resist the many opportunities for corruption and price gouging in all of these transactions, factors had to be trustworthy, and many formed close personal relationships with the planters they served.

The Cotton Triangle. New York’s commercial dominance over America’s marker economy was nowhere more apparent than in the role city’s middlemen played in the cotton trade. By the 1820s most Southern cotton went through the port of New York on its way to Liverpool, Le Havre, or Lowell. Unloading, storing, and then reloading cotton bales at East River wharves added both cost and miles to a voyage that could easily have gone directly from New Orleans, Mobile, Charleston, or Savannah to its destination. Yet such was the power of the port of New York and its merchants that they were able to corner the most lucrative trading network in America, which became known as the Cotton Triangle. The southern point of the triangle started at the door of the cotton presses, where giant machines compressed each wagonload of fluffy ginned cotton into four-hundred-pound bales wrapped in burlap and wire. After baling, the factor took over responsibility for the planter’s crop, shipping it first to the nearest steamboat landing, then down river to an ocean port on the Gulf or Atlantic coast. Beginning in October, New York-owned coastwise packers sailed down to these Southern ports to pick up their precious cargo. Most cotton shipments then made a detour to New York, completing one side of the triangle.

Overseas. On the second side of the triangle dozens of regular packet liners picked up bales on the East River wharves and carried them to Liverpool (where buyers from the big Manchester textile mills negotiated for their purchase), or to the Lowell mills in Massachusetts via Rhode Island, or to French mills via Le Havre. After dropping off their cargoes, the ships returned carrying finished textiles, wines and liquors, steel, toys, or any of a hundred items bound for the wholesale houses lining the East and Hudson Rivers of the Port of New York. The cotton factors then bought luxury furniture from the shops of Duncan Phyfe, the newest silk dresses from Paris, marble and chandeliers for the big house, and cheap clothing, shoes, and blankets for the slaves to be sent south with the returning coastwise packets, thus completing the triangle.

Sources

Robert Greenhalgh Albion, The Rise of the New York Port, 1815–1860(New York: Scribners, 1939);

Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass.: Harvard University Press, 1977);

Steven J. Ross, Workers on the Edge: Work, Leisure, and politics in Industrializing Cincinnati, 1788–1890(New York: Columbia University Press, 1985);

Harold D. Woodman, King Cotton and His Retainers (Lexington: University of Kentucky Press, 1968).