How New York Became America’s Largest City
Colonial New York was not the largest city this side of the Atlantic. Boston often imported and exported more, and Philly had more people in the decades leading up to the Revolution. New York’s economy was sort of Philly-light, sending grains, corn, and wheat surpluses around the world in exchange for manufactured goods. While it was more active in the slave trade than Philly, which benefitted it financially, it never attracted farmers to nearby lands the way Philadelphia did in the mid-18th century, especially German farmers who became known for their productive farms west of the Delaware Valley.
There are a lot of reasons cited for why New York surpassed Philadelphia. The Erie Canal is often mentioned, although it was built 15 years after the 1810 Census that showed New York had grown larger than Philly. You also hear something about the port, the harbor not freezing, Alexander Hamilton, the bankers, the bagels, the crazy Eagles fans, and other ideas. But there’s really one reason New York became number one — cotton. All the things about the port and access to the ocean are true, but these advantages meant nothing until there was a product that could actually use them.
Cotton was as central to the early 19th century economy as the Internet was the early 21st century economy. By the middle of the century, one out of four Britons worked in textiles, and at that point, Britain still had as many people as the U.S.. And those Britons turned American cotton into cloth. The name King Cotton was no joke.
Cotton was also the first agricultural commodity in America to undergo a huge productivity gain as a result of an industrial technology. Unlike grain, fish, indigo, rice, or tobacco, cotton was being produced at dramatically increasing rates due to the cotton gin, which arrived in 1793. Mississippi went from producing no cotton in 1800, to half a billion pounds before the Civil War.
But Mississippi didn’t have the ports, and certainly not the need for imports, to ship cotton abroad, so that was done out of New Orleans and as time went on, New York. As a result, New York’s growth accelerated in the early 19th century, when urbanization across the country was still progressing at a very slow pace.
New York was nowhere near a cotton producing region, but Savannah and Charleston were, especially in the early 19th century. However, with few immigrants wanting to move to the antebellum South, those areas struggled to fill up the cotton ships on the way back, especially after international slave trading was banned in 1808, and made the triangular trade far more challenging. Financiers in those cities also had limited ability to risk capital on long ocean voyages. But New York could, and it also could aggregate volumes of cotton that helped it become a price maker for the commodity, not just a price taker. As a result, many eastern seaboard planters reduced their risk of empty ships and volatile prices by shipping to New York, which in turn could send back manufactured goods, often garments, produced in the city. New York would even provide similar services to New Orleans and Mobile traders in some cases. This interception of the cotton trade not only required a port close to the ocean, but financiers willing to take risks their peers in other cities would not.
Rapidly growing cotton production volumes required a completely new trading network to keep transport costs from taking all of the cloth manufacturer’s profits. The cotton gin was pushing up productivity dramatically, and it made it economically possible to put ever larger shipments on a single vessel, and reduce the transport cost per pound of cotton. One large ship could aggregate production from states half a continent away, send them to a single place across the ocean, most often Liverpool, from where they could be offloaded to a smaller boat which would distribute the goods among the textile mills of northern England. This became an even better setup financially when the local legs of the trip could be made on trains.
As a result of quickly developing economies of scale, cotton leaving the country had to have an ocean port. Having inbound and outbound boats, which were getting larger and larger, make their way up and down rivers wasn’t really going to work for these big steamships. They had the potential to lower unit transport costs for goods because of their larger capacity, and the same potential to raise those unit costs if that extra capacity wasn’t used. This made it hugely expensive to have a large boat crossing the ocean partially empty if it had to start and end its journey closer to the cotton fields, or nearer to the textile mill. And wasting travel time on interior rivers only added to the financial risk, especially when goods had to be offloaded to smaller boats and multiple destinations upon reaching those rivers. This wasn’t just an issue in America, but globally as well. Cotton exchanges were set up at Liverpool near the Irish Sea, but not at London on the Thames, at Le Havre on the English Channel, but not inland at Paris on the Seine, at Alexandria on the Mediterranean, but not inland at Cairo on the Nile. These exchanges were needed so that manufacturers could hedge the prices of cotton they were using for raw materials, and the underlying cotton supporting the futures contracts needed to be stored at central warehouses with direct access to the global cotton trading network.
Another reason for ocean transport was the transfer of pricing information. Until the Transatlantic telegraph arrived in 1870, pricing data from the industry’s primary trading hub in Liverpool arrived by ship. This created arbitrage opportunities for those who could access it first, requiring the fastest transport possible. This further advanced the need for global cotton exchanges to be at ocean ports, not larger cities inland.
A number of seaports benefited greatly from the cotton trade, most notably Liverpool, which became one of the fastest growing cities in the U.K. in the 19th century, exploding seven fold to over 700,000 people by 1900. London remained far larger, but didn’t grow as quickly. The cotton trade also stimulated passenger trade in the other direction, with the New York-Liverpool Black Ball line launching the first scheduled transatlantic passenger boat service in 1818.
It was also cotton that allowed Liverpool to beat out Bristol as England’s primary port to the Americas and Africa. Situated on a river that flowed east, and requiring a trip down the English Channel to reach the Atlantic, London was not well situated for heavy ocean trading with the rest of the world. Around 1700, the Crown recognized this, and allowed other British ports to trade with colonies and other countries. Bristol, located due west of London and able to reach the open Atlantic without a trip along the English Channel, quickly emerged as Britain’s major west-facing seaport. However, it required a ten mile trip down the narrow Avon river to reach the ocean and more importantly, was nowhere near the textile mills of Manchester, Yorkshire, and Lancashire that began buying cotton to transform into cloth. Situated on the wider Mersey River and closer to those mills, Liverpool eclipsed Bristol as England’s leading commercial port by the late 18th century, dependent heavily on cotton and cloth, and until the activity was banned in 1808, slaves. The Beatles song “Penny Lane” refers to a street in their home city named after James Penny, a prominent Liverpool slave trader. Liverpool today acknowledges its connections to this history, and in 2007 opened a Museum of Slavery recognizing that the city grew on the back of American slave labor and the slave trade.
A seaport, Boston had access to the global cotton trading network, but it was too out of the way for the coastal boats coming up from the south. Boston even struggled to serve Massachusetts and Rhode Island textile mills because arrivals from the south had to get around Cape Cod to reach it. It was cheaper and easier to ship cotton to New York, and then onto Providence and overland to avoid the extra delay getting around the Cape. While having been proposed as early as the 17th century, The Cape Cod Canal wouldn’t be built until 1914. This also meant Boston was in a bad spot to redistribute imports back to the rest of the country.
Philadelphia sitting 100 miles up the Delaware from the Atlantic was in no position to handle global cotton traffic. Had Philly had 2,000 years to build itself up like river city London, perhaps the lack of an ocean port might not have been an issue. But the economic advantages of ocean ports would only grow over time, and eventually extend to other goods beyond cotton. This meant America’s largest metro economies, which today are New York, LA, Chicago, and San Francisco, would all be on or near oceans or large bodies of water, not on inland rivers like London, Paris, and Rome. All of those European capitals were founded at points where major rivers could be crossed (forded) most easily. The closest example of a similar geographic point in North America would be Montreal, but few major American cities outside of Jacksonville, Florida and to a lesser extent, Dallas, were founded where rivers could most easily be crossed. The shift to ocean ports was visible in Australia, settled by Britain after it lost America, where that country would develop its five largest metro areas — Sydney, Melbourne, Brisbane, Adelaide, and Perth — all within a few miles of the ocean.
Philly’s export volume was a fraction of New York’s by 1850, and as the city consolidated and annexed nearby suburbs in 1854, its growth increasingly depended on the manufacturing capacity of its fall line location. The only U.S. port competing at all with New York for the cotton business was New Orleans, but New Orleans cotton merchants,, like the Virginia tobacco growers and Charleston rice merchants that preceded them as Southern economic powerhouses, mostly imported back money, not people or goods. Once the cotton was delivered, business was largely done. In New York on the other hand, the finished cloth from England came back, which in turn led to development of the city’s first major manufacturing industry, garments.
On the back of the cotton trade, New York and New Orleans were America’s fastest growing large cities in the first half of the 19th century. But with far worse rail access, New Orleans’ growth slowed in the 1840s, while New York’s kept going as waves of German and Irish immigrants began arriving.
New Orleans, focused on exports not imports, never developed the passenger service New York did, which included bringing large numbers of newcomers to America. It did grow into the country’s second largest immigrant port, but brought in five to ten times fewer people as New York depending on the year, in spite of shipping out a comparable amount of cotton. Like many Southern cities, once the commodity trade slowed in New Orleans, so did the city’s growth. It shipped cotton, but didn’t have much of a garment industry to turn the cotton into a marketable consumer product. It had a port, but a limited number of people arriving at that port. The one way flow of international traffic in New Orleans was not going to sustain the city’s role as a Seaport, and would push it to more of an interior river port. It would shift from being a peer to New York to being a peer of Cincinnati and St. Louis.
Importing goods would later turn into importing people. New York’s share of imports before the Civil War mirrored its share of immigrants afterwards. 75% of country’s imports came through New York prior to the War, as did 75% of its immigrants afterwards. The old triangular trade shifted to a bilateral trade with many early steamship lines financed to bring back people from Europe, not just products.
While the Erie Canal clearly played an important role in New York’s growth, it wasn’t just the decision to build the canal that gave New York a natural advantage, the lack of mountains between the City and the Great Lakes later allowed for the creation of the “water-level route” of the New York Central line that could transport immigrants to the Great Lakes without having to chug up mountains. This was not possible out of Philadelphia or Baltimore. This ultimately provided easier connections out of the port than any other immigration locations, providing further options for people who could come over from Europe on ships that sent cotton east.
After 1870, New York benefitted further from the telegraph, which allowed it to synchronize pricing with Liverpool, and furthered its importance as a center of cotton financing. That year, the NYCE, or New York Cotton Exchange, was founded, bringing buyers and sellers together into one building. Publicly traded stocks were still in their infancy then, but cotton was still the most imported and exported commodity. The exchange began the first futures trading in cotton, and expanded New York’s role as a financial center. Other exchanges developed in New Orleans, Memphis, Mobile, and Savannah, but they followed New York’s lead in terms of contract structuring and pricing.
New York would have likely become the largest city in the country regardless due to ever growing steamships requiring seaports, not inland river cities, to transport goods, and ultimately people, at the lowest possible unit cost. But those ships needed cargo, and the timing of the cotton gin, being invented soon before steamboats, was perfect for filling up the first Transatlantic steamers.
