Although explorers had been sailing the California coast since the 1540s, San Francisco Bay remained undiscovered until 1769. In 1776 the Spanish established a mission and a military presidio in San Francisco, but the city had limited economic importance through the late 1830s. Sea otters brought Russian and British fur traders to the coastal area, but the fur trade with Asia and Europe fostered little urban development. San Francisco's major economic role was to facilitate trade in the hides and tallow produced on the large California ranchos nearby; these materials were exported to the footwear and soap industries in Britain and New England.
Just before Mexico ceded California to the United States in 1848, gold was discovered near Sacramento. This single event transformed San Francisco into the Pacific Coast's trade and financial center. At the city's wharves and warehouses, merchants transferred manufactured goods from British and Eastern clipper ships to the steamers that traveled up the Sacramento and San Joaquin Rivers into the Central Valley and Sierra foothills. The rise of large-scale mining after 1850 stimulated industrial development so much that between 1860 and 1900, mining-related foundries and machine-tool firms were the city's largest employers and, by 1875, they supplied much of the mining equipment for Australia and South Africa. The creation of the San Francisco Stock and Exchange Board in 1862 also greatly eased local and foreign investment in the mines of California and Nevada.
Still, it was not the miners, but the local merchants supplying them, who were enriched by mining. Merchants reinvested their profits in trade-related ventures such as banking, insurance, real estate, and ocean and rail transport. For example, the Pacific Mail Steamship Company built a railroad across the Isthmus of Panama in 1855, and thereby dominated passenger travel along the west coast of North America until the completion of the transcontinental railroad in 1869. Thereafter, the company (along with Matson and other freight lines) re-exported much of the Pacific Northwest's timber, grain, and canned salmon to Asia, Australia, and South America. San Francisco's monopoly on Hawaiian trade also advanced the city's highest-value industry in the late nineteenth century—sugar refining—but limited space on the peninsula discouraged further industrial expansion. Except for shipbuilding (fostered by the opening of the Panama Canal in 1914 and by the two world wars), San Francisco was largely a service economy by 1900.
Until 1869 Oakland was commercially insignificant. That year, however, the city became the western terminus of the transcontinental railroad, making it an important transshipment point between land and sea. Agriculture became California's largest sector by 1875, and Oakland's transport networks and plentiful real estate quickly attracted firms that processed, canned, and preserved the state's agricultural goods. Although its port was ultimately eclipsed by Oakland (and by Los Angeles which, having no natural harbor, had built one by 1914), San Francisco expanded its financial reach as home to a Federal Reserve Bank and to the branch banking empires of Wells Fargo and Bank of America.
World War II reinforced the place of these cities in the world economy. Defense industries laid the foundation for the high-tech and internet firms that now draw many of their business services from San Francisco. Oakland provided ships and staging grounds for troops and cargo, and secured its place as a major international port by building the West Coast's first container ship terminals in 1962. By 2000 these cities anchored Foreign Trade Zones (areas granted special tariff exemptions designed to promote local manufacturing and processing of goods for export) that exported 60 percent of their goods to China and East Asia.
SEE ALSO Agriculture; Baltimore; Boston; Cargoes, Freight; Cargoes, Passenger; Chambers of Commerce; Charleston; Containerization; Empire, Spanish; Ethnic Groups, Cantonese; Ethnic Groups, Fujianese; Free Ports; Gold Rushes; Harbors; Los Angeles–Long Beach; New Orleans; Newport; New York; Philadelphia; Port Cities; Salem; United States.
Cherny, Robert W., and Issel, William. San Francisco: Presidio, Port, and Pacific Metropolis. San Francisco: Boyd and Fraser, 1981.
Issel, William, and Cherny, Robert W. San Francisco 1865–1932: Politics, Power, and Urban Development. Berkeley: University of California Press, 1986.
Vance, James E., Jr. Geography and Urban Evolution in the San Francisco Bay Area. Berkeley: University of California Institute of Governmental Studies, 1964.
Wollenberg, Charles. Golden Gate Metropolis: Perspectives on Bay Area History. Berkeley: University of California Institute of Governmental Studies, 1985.
Kerry A. Odell