Economic Development and Labor By Drew E. VandeCreek, Ph.D.

In the decades between gaining statehood in 1818 and the outbreak of the Civil War in 1861, Illinoisians turned to new economic opportunities, and increasingly integrated themselves into the emerging national economy. Their efforts met with grave setbacks, as in the case of long-delayed Illinois and Michigan Canal project, and the larger economic depressions of 1837 and 1857. But by 1861 Illinois had emerged as the home of a prosperous agricultural economy. Chicago, blessed with its location at the southwestern edge of the Great Lakes chain, became the nation's northwestern transportation hub and commanded a vast agricultural hinterland that extended to the North Woods and the Great Plains.

Working men found Illinois hospitable from the start. A general labor shortage pushed wages higher than those found in Europe, or even on the eastern seaboard. For those seeking a farm, public lands abounded. Such conditions attracted immigrants.

American settlers first arrived in Illinois from the southern and mid-Atlantic states, and gathered along southern Illinois river bottoms. There they found rich soils and ready access to water transportation linking them with home. The introduction of steamboats further encouraged settlement along rivers in the 1820s, and settlers slowly pushed northward along navigable streams. Illinois' early, riverine economy moved goods down the Wabash, Ohio, Illinois and Mississippi Rivers to the trading ports of St. Louis and New Orleans. Steamboats carried large loads of bulk goods, especially agricultural products, while smaller flatboats floated downstream carrying lighter loads, including cords of wood to refuel steamboats' raging furnaces. As a young man Abraham Lincoln found work on such a flatboat, and traveled as far as New Orleans.

While many white men found the early Illinois economy's high wages and abundance of land to their liking, labor often provided starker alternatives for women and African-Americans. Frontier women usually performed hard, manual labor on the farm while also maintaining their child-rearing and housekeeping duties. Few found opportunities for the profitable wage work that many men enjoyed. While Illinois' state constitution officially barred black slavery, loopholes allowed slaves held by the French (who tolerated slavery) to remain enslaved in Illinois. Supporters of slavery also negotiated a system of "indentured servitude" that allowed masters to keep African-Americans in a state of practical slavery masked by the convention of contract labor.

By the 1830s American settlement had extended into central and northern Illinois. In 1820 the federal government had maintained land offices in only three southern Illinois towns; by 1831 eight such offices handled a rapidly growing land business as far north as Chicago and Galena. The rush to settle Illinois provoked widespread land speculation. Many settlers with a few dollars to spare acquired extra plots of land in hopes that prices would continue to appreciate. The more ambitious planned out future towns on their properties and attempted to round up settlers to purchase the lots at inflated fees. Eastern land speculators also moved into Illinois, acquiring large blocks of property through straw buyers and proxies, and retailing individual farms in the East. Many settlers took offense at these tactics however, and organized settlers associations. These organizations sniffed out straw buyers at land auctions and vigorously discouraged their activities, occasionally resorting to violence.

In 1825 the State of New York completed the Erie Canal, which linked the navigable Hudson River (and hence, New York City) with the Great Lakes. This watershed development made Chicago a major lake port shipping Illinois' agricultural products eastward. Suddenly Illinoisians found themselves tied to eastern merchants and markets as well as those in St. Louis and New Orleans.

The completion of the Erie Canal facilitated northeasterners' migration to Illinois, and hastened the development of northern Illinois. It also sparked a mania for canal-building in other states, including Pennsylvania, Ohio and Illinois. A narrow neck of marshy land separated the navigable Illinois River (which drained into the Mississippi above St. Louis) from the Chicago River and Lake Michigan. Indians had paddled their canoes from one river to the other during high water. Illinoisans, especially the ambitious Yankee settlers that increasingly poured into northern Illinois in the 1830s, began the drumbeat for a major canal linking the Mississippi Valley and the Great Lakes. Such a waterway would make Illinois the keystone of a national transportation system stretching from New Orleans to New York.

In the mid-1830s such entrepreneurial enthusiasm swept legislators determined to use state government for the promotion of economic development into power in Illinois. Among their number was a young Abraham Lincoln. The idea of an Illinois and Michigan Canal, which had kicked around for nearly ten years, sped through the legislature. In 1837 the legislature expanded their ambitions with an additional $10 million in obligations for internal improvements, including the canal and the construction of a wildly ambitious railway grid spanning the state.

1837 proved to be a singularly bad time for taking such financial risks. In that year the American economy nosedived into a prolonged depression on the heels of a decade's western speculations and the wrecking of the national credit and currency system that accompanied President Andrew Jackson's refusal to recharter the Bank of the United States.

In the antebellum United States commerce developed without a national system of currency, or legal tender. Instead, individual banks issued notes that could be redeemed for gold specie on request. Most banks routinely issued more currency than they had gold bullion, and relied upon their good name to maintain the value of their notes. Nevertheless, many banks skirted the edges of disaster by issuing far more currency than they could hope to support. During its heyday the Bank of the United States, a private bank chartered by the United States government, kept such banks in line by frequently presenting their notes for redemption. This ever-present threat provided an ad hoc system of bank regulation.

The depression thoroughly derailed the state's bold railway plan. But the Illinois and Michigan Canal project, despite a set of grave financial setbacks including the state's repudiation of its bonded debt, continued forward. The construction of the canal demanded large amounts of labor, and only increased the general labor shortage. Many Irishmen answered the call and immigrated to Illinois to take up work on the waterway. Their arrival began to change the face of Illinois society, introducing the Catholic religion to a state previously dominated by the Protestant faith.

As the canal work ground on, another technological innovation introduced a rival system of transportation that would prove far more consequential for Illinois' development. Railroads could be constructed for far less than canals, and could carry freight and passengers more quickly to their destinations. The first small railroad in Illinois had debuted in 1839, but it was not until the late 1840s that financiers, engineers and political leaders surmounted the spectacular failure of 1837 and began large-scale railroad construction.

In 1848 Chicago emerged as a commercial hub. In that year the long-awaited Illinois and Michigan Canal reached Lake Michigan. Telegraph lines also linked the city to individuals and markets across the United States. Plank roads linked the city with nearby commercial centers, and construction began on the first railroad linking Chicago with more distant western points. Cyrus McCormick, the inventor of the mechanical reaper, arrived from Virginia, and the first stockyard began its operations in Chicago. Suddenly these pieces fit into place, and pushed Chicago from the status of a lake port largely known for land speculation into its role as the hub of the northwestern United States.

No American city gained more from the rise of railroads than Chicago. Its unique location at the southwestern edge of the Great Lakes placed Chicago at the center of the developing West's transportation network. The Illinois and Michigan Canal gathered grain and other agricultural products from rural Illinois in to Chicago, taking business away from rival St. Louis. Chicago merchants purchased these materials and forwarded them to the East via the Great Lakes and the Erie Canal.

In the following decades a vast web of railroads would extend Chicago's commercial reach westward to the Rocky Mountains, assembling the lumber of the North Woods and the grain and beef of the Great Plains in vast warehouses and elevators. Chicago merchants would use these rails to distribute hardware, household goods, and even pre-fabricated homes themselves to their vast commercial hinterland.

Yet the push westward did not usher in an arcadian era of economic bounty and growth. The development of railroads produced winners and losers. Chicago's transportation advantages swept riches into its coffers as surely as they gathered in logs and steers. Chicago merchants' railroad-enhanced reach pushed struggling local merchants and retailers aside in many western communities, and brought their profit margins to Chicagoans.

Prairie towns' economic fortunes rose and fell with the arrival of the railroad. Those bypassed by the roads often disappeared. The river towns that dominated the North-South riverine economy similarly depended upon the railroads' extension from East to West. Those that attracted railroads thrived. Those that could not add the railroad to their river-based trade regressed in wealth and stature.

Economic development emerged as the work of human actors embroiled in a larger political and social context. As railroads pushed toward the new territories won from Mexico in 1847, they deepened the sectional crisis that led toward the Civil War.

Senator Stephen Douglas saw a transcontinental railroad linking the Mississippi Valley with gold-rich California in the nation's immediate future. Southern partisans argued that New Orleans or Memphis should serve as the road's eastern terminus. St. Louis boosters threw their city's hat into the ring. Ever eager to promote Chicago's commercial interests, Douglas saw that the disorganized state of the Nebraska territories blocked a northern route including Chicago. With the dynamics of westward expansion and commercial rivalries in mind, he stepped forward with the bold Kansas-Nebraska Act of 1854 that introduced "popular sovereignty" as the solution to the national slavery question, precipitated the organization of the Republican Party, and thrust Abraham Lincoln onto the national stage.

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