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The Encyclopedia of Cleveland History

ECONOMY - The Encyclopedia of Cleveland History

ECONOMY. To those seeking to sell their own labor or to sell goods or services, from cornflakes to nails to open-heart surgery to major league baseball tickets, the Greater Cleveland Metropolitan region is a single market that includes not only the City of Cleveland and Cuyahoga County, but also the surrounding areas from Lorain in the west to Youngstown in the east to Canton in the south. At the 1990 U.S. census this region included 3,253,000 people, and although it was growing very slowly (or perhaps shrinking a bit) it was still the 11th largest metropolitan region in the U.S., ranking just ahead of Miami-Ft. Lauderdale. The region's diversified economy grew large enough to support this population in 5 stages. Each stage reflected new realities in transportation, communication, and national politics: each stage also grew out of existing conditions.

The pre-history of Greater Cleveland's economy ended with the total subordination of the Indians who had long lived in the "Middle Ground" of the Great Lakes by 1815, and with the establishment of a "Frontier Republic" state government that sought to protect both individual opportunity and social order by 1825. In terms of economic geography, the Cleveland area stands at the easternmost point from which it is possible to build a water-level connection between the Great Lakes and the Ohio River. The first stage in the region's economic development began with the state's authorization of the OHIO AND ERIE CANAL in 1825, the year the Erie Canal connected New York's Hudson River with Lake Erie. The Ohio Canal was completed to Akron in 1827 and then to the Ohio River in 1832: with its branches, the Ohio and Erie Canal eventually constituted a system of some 500 mi., giving Cleveland access southward through eastern and central Ohio to the Ohio River. Previously, the products of Ohio's farms, mines, forests, and workshops had been kept out of national markets by the price of road transport, $15 or more per ton per mile, compared to only about $1 on a canal. Lower transport costs meant higher incomes in AGRICULTURE: wheat, formerly worth only 20 or 30 cents a bushel to farmers in the Massilon and Akron areas, brought as much as 75 or 80 cents by the early 1830s. Cleveland thrived during the 1830s and 1840s as the chief market on the Great Lakes for grain products, including flour and whiskey, for butter and cheese, and for wool. As northern and central Ohio's farm population grew rapidly in numbers and wealth, Cleveland brought in more lumber, construction materials, fertilizer, salt, tools, and household goods. When the canals reached the coal-rich Mahoning Valley (in 1840) and other places along the western slopes of the Alleghenies, Cleveland became the most important fueling station on the Great Lakes. Within a few years it was also a shipbuilding and repair center.

Because different kinds of vessels were used on the canals and on the Great Lakes, nearly all freight arriving at the mouth, of the Cuyahoga had to be unloaded, stored, and either used or transferred to another vessel. In 1838--a depression year for most of the country--the CLEVELAND HERALD reported the construction of 9 large new warehouses. Merchants who had to pay for the unloading and storage of goods sought to process them at the same time, to add value and reduce weight. Grain, pig iron, tallow, wool, lumber, and other raw materials were processed by flour mills, distilleries, foundries, machine-makers, soap and candle factories, millstone shops, sash and door works, and potteries. Cleveland's first manufacturing establishment, the CUYAHOGA STEAM FURNACE CO., appeared in 1827, the year the Ohio Canal reached Akron. Ten years later it had been joined by 2 ropewalks, ship repair yards, and altogether a total of 17 manufacturing plants. Other manufacturing facilities were located throughout the region: Adams Norton established the first blast furnace, for example, at Clyde in 1840.

So long as city dwellers had to walk from place to place, commercial and financial offices clustered within walking distance of the waterfront. By the mid-1850s 6 insurance companies, 43 insurance agents, 6 commercial banks, 6 private banking houses, 2 exchange brokers, and the Society for Savings clustered in the downtown business district near the mouth of the Cuyahoga River. There they were joined by nearly 100 lawyers, who sought to resolve business conflicts in the state courts and in the Federal District Court that was established to handle Cleveland's increasing legal work in 1855. Some of this work had to do with protecting the property rights of entrepreneurs as they built, bought, and sold their farms and businesses; some of it had to do with establishing the state policy of financial aid to local canals and securing state subsidies to canals and railroads that served Cleveland; some of it had to do with maintaining and increasing federal tariff protection for manufactures and federal investment in navigation on the Great Lakes. By the 1850s most Cleveland-area lawyers were also committed to a free market in labor, opposing Ohio's BLACK LAWS as well as slavery, and (with notable exceptions) opposing unionization as well. At the end of the first stage of its economic development, Cleveland had become an important regional market town, providing facilities for the shipment and processing of goods, for the financing of commerce, and for the political and legal arrangements essential for the resolution of commercial disputes and the development of private capital.

The railroad boom of the 1850s initiated the second stage of Cleveland's economic development. The completion of the canal system, the introduction of the steamboat, and the arrival of RAILROADS cut short any ambition that Cleveland might become one of the nation's top wholesale centers: Pittsburgh, Cincinnati, Chicago, and New York were better located for, that purpose as railroads and the telegraph greatly speeded commercial activity and enabled a smaller number of cities to serve national markets. But railroads did reinforce the development of manufacturing in Cleveland. Because Cleveland, like other cities, provided large volumes of easy-to-handle long-distance freight, it attracted competing rail lines, whose competition kept freight rates lower than those faced by producers in small towns. Cleveland's first railroad was completed to Cincinnati in 1851. In 1863 the first through train arrived in Cleveland from New York. By 1870, 6 railroad lines converged upon the Cleveland waterfront from all landward points of the compass, and population, under 18,000 in 1850, had jumped to 92,829.

Mid-19th-century Cleveland quickly became an important center for the building of railroads and then for the development of the iron and steel and the machine industries. HENRY CHISHOLM†, who arrived in Cleveland to lead railroad construction efforts in 1850, joined Jones & Co., which was already rolling iron rails, in 1858. As an important railroad center Cleveland developed railroad repair shops in the 1860s. JEPTHA H. WADE† made Cleveland an early telegraph center with lines to Detroit, Buffalo, Cincinnati, and St. Louis by 1850; by 1856 he had moved to Cleveland and was playing a key part in the creation of the Western Union company. Chisholm and his partners were among the first in the U.S. to use the Bessemer method to produce steel, in 1868; within a few years the area was producing large quantities of iron and steel and was processing it into wire, nails, sheets and plates, and tubes. The expanding metalworking industry attracted skilled iron and steel workers: the Jones brothers (see ) hired Welsh iron puddlers, for example, and Chisholm brought wire men from Worcester, MA, in 1867. Many of Cleveland's smelting and metalworking firms prospered during the Civil War, earning large profits out of which they could finance their continuing expansion. The war also confirmed Cleveland's commitment to free labor and to the belief that government intervention--through tariffs, subsidies to transportation and higher (especially technical) education, and through patent laws and other protections for private property--provided an essential support for economic prosperity.

With its new railroad and lake connections, a rapidly expanding iron and steel industry, and a growing population of skilled metal workers in place by 1880, Cleveland embarked upon the third phase of its economic development, a 70-year period of growth that slowed after 1920 and was harshly interrupted by the Great Depression before resuming during World War II and after. Henry Tuttle, SAMUEL MATHER†, JAMES PICKANDS†, MARCUS A. HANNA†, Daniel Rhodes, C. C. BOLTON†, and others had gained, control of ores from Michigan's Upper Peninsula as early as the 1850s: along with DAVID Z. NORTON†, JOHN D. ROCKEFELLER† and others they reached out further to Minnesota's Mesabi range in the 1880s, then built and operated the fleets of Great Lakes vessels necessary to move the ore. They gained control, also, of coal fields in southern Ohio, West Virginia, and Kentucky, and of the rail lines that could most efficiently move the coal to coke ovens and then to blast furnaces. Careful calculations revealed that Cleveland (and nearby Lorain, Canton, and Youngstown) was the place to which much of the iron ore, coke and essential acids could most cheaply be brought together. Stimulated by this rapidly expanding market and supported by the availability of water- and rail-borne raw materials, Cleveland's CHEMICAL INDUSTRY grew rapidly. Rockefeller used the methods established by Cleveland's iron-ore merchants to bring crude oil from Pennsylvania and western Ohio by rail to Cleveland, making the city, for a time, the largest oil-refining center in the world; railroads (later, pipelines) then carried Standard Oil's (see BP AMERICA) kerosene, fuel oil, and other products via the low-cost Mohawk Valley route to the New Jersey side of New York Harbor, from which they moved on to East Coast and foreign markets.

With steel and fuel abundant and cheap in the Cleveland area (and heavy and expensive to ship elsewhere), and with a cadre of skilled metal workers already in residence, machine-making factories of all kinds rapidly clustered in the city. The federal government (often led by Ohio Republicans including presidents Hays, GARFIELD†, and McKinley and senators Sherman and Hanna) maintained and even increased the tariffs that protected many Cleveland manufactures, took measures to stabilize the money supply and the banking system, discouraged both business monopolies and labor unions, and raised almost no barriers to immigration from Europe until the 1920s. City and state governments also helped, by permitting and even encouraging industry to use the Cuyahoga River and Lake Erie as unlimited sources of "free" water, by allowing industries to discharge wastes into the river, the lake, and the air, and by building, through the agency of the City of Cleveland, adequate paved STREETS, an excellent WATER SYSTEM and effective sanitary and storm sewers for residential and commercial areas in the city and its suburbs. City and state governments also granted the franchises under which private entrepreneurs developed the streetcars of the URBAN TRANSPORTATION and INTERURBANS systems that enabled workers to move from their homes to the city's factories and offices.

Economic growth requires an expanding labor supply. Between 1880 and the 1920s Cleveland drew heavily on IMMIGRATION AND MIGRATION, especially from Europe. Immigrants contributed in many ways. Through family connections and other elements of "chain migration" they themselves organized much of the movement of people, saving employers much expense. Nearly all immigrants arrived as adults, ready to work, and many possessed appropriate skills, whether they were carpenters from the Czech lands, metal workers from Slovakia, railroad workers from Budapest, or skilled stonecarvers from Italy. Black migration from the South accompanied immigration and expanded rapidly just as federal law cut off the flow of immigrants in the 1920s. Immigrant and American-born women, black and white, also participated more and more in the labor force between 1880 and the 1960s, taking jobs not only in the garment and other trades but increasingly in the city's very rapidly expanding clerical, medical care, teaching, and government forces.

The production of finished products also requires a daily intake of components, parts, and supplies from process specialists, such as foundries and electroplating shops. Suppliers of industrial materials, including chemicals (GRASSELLI CHEMICAL CO.), lubricants (LUBRIZOL CORP.), coatings (FERRO CORP., GLIDDEN COATINGS & RESINS DIV. (IMPERIAL CHEMICAL INDUSTRIES), SHERWIN WILLIAMS CO.), abrasives, ores (CLEVELAND-CLIFFS INC., PICKANDS MATHER & CO., MATHER†), metals, and plastics concentrated in Cleveland. Before the introduction of heavy trucks and highways after World War II, dispersed plants in the countryside or in small towns usually had to provide their own roads and water and sewer systems, and to rely on the slow and unpredictable delivery of parts by rail. Thus shops with related operations clustered near raw materials and near each other. Cleveland developed many such clusters--in the FLATS and up the Cuyahoga through NEWBURGH, INDEPENDENCE, and CUYAHOGA HEIGHTS, on Hamilton Ave. and other streets along the Lake Erie shoreline, along the belt railroad that runs between 55th and 77th streets on the East Side, along Brook Park Rd. to the southwest. Other clusters appeared in East Cleveland, in the Birdtown area of Lakewood, and in Lorain, Akron, Canton, Youngstown, and Warren. Fabricators of such products as bicycles, sewing machines, machine tools, locomotives, addressographs and ditto machines (the copying machines of the middle decades of the 20th century), and innumerable other mechanical devices took advantage of Cleveland's inexpensive iron and steel. Skilled metalworkers came to the Cleveland area from all over the U.S., and indeed from all over the world, creating competitive and self-sustaining communities and adding to the area's strengths as a manufacturing center. Many entrepreneurs moved their entire firms from Massachusetts and Connecticut,, sometimes coming to Cleveland after finding insufficient skilled labor in Chicago.

Cleveland's economy in this period was characterized by diversity rather than by concentration in a single industry, but the city might be said to have specialized by the 1920s in the AUTOMOTIVE INDUSTRY, machine tools (WARNER & SWASEY CO.), and industrial equipment (DRAVO WELLMAN CO., BABCOCK & WILCOX, LINCOLN ELECTRIC CO.), and in the production of electrical appliances, as well as in the production of steel. Detroit became the Motor City, but Cleveland produced a very large share of the automobile engines (notably at FORD MOTOR CO. plants), axles and transmissions (EATON CORP.), valves (TRW, INC.) and other key moving parts. Akron became the tire and belt capital, and Canton produced specialty steels. After 1920 Cleveland continued to grow, but not so rapidly, as through the 1960s Cleveland INDUSTRY also ranked at or near the top in the production of the products of the ELECTRICAL AND ELECTRONICS INDUSTRIES, from NELA PARK's light bulbs to coffeemakers and toasters to range tops, refrigerators, and vacuum cleaners, washing machines and dryers, and radios. The GARMENT INDUSTRY, AMERICAN GREETINGS CORP., WORLD PUBLISHING CO., and others produced significant quantities of standardized consumer goods. Altogether, the value of the city's manufactures in 1929 was nearly 120 times what it had been in 1860 (stated in dollars of constant purchasing power), and the population of Cuyahoga County in the same period had leaped 25-fold, from fewer than 48,000 to over 1.2 million.

Cleveland's diverse industries made the city and its region an excellent location for corporate headquarters: from the early 20th century it has been home to one of the largest concentrations of corporate headquarters in the U.S. (it was third in the nation in 1995), and it has been a major center of managerial and professional employment. To serve the corporate headquarters, one of the nation's largest concentrations of corporate lawyers, accountants, business consultants, business marketing firms, and bankers grew up in Cleveland, making the city a logical place for the location of a branch of the Federal Reserve Bank (established in 1914). Industrial and architectural engineering firms (AUSTIN CO., M.K. Ferguson) located in Cleveland for the same reason, as did the many TECHNOLOGY AND INDUSTRIAL RESEARCH laboratories and industrial publishers.

Although no single industry and no small group of firms dominated the Cleveland area, and its economy was characterized by diverse, competitive companies, the area was also characterized by large, businesses that required very substantial capital investments and employed large numbers of workers. Despite their size, however, Cleveland's business firms have never been stable: seeking profits in the face of constantly changing competitive conditions, the city's business leaders carried out major acquisitions, mergers, expansions, deaccessions, and bankruptcies in virtually every industry in every decade. Cleveland thus offered both opportunity and uncertainty to increasing numbers of workers. Seeking security as well as prosperity, its workers persistently sought to organize. In many industries they met tough and equally persistent opposition until the massive crisis of the Great Depression led to federal protection for collective bargaining. By the early 1940s Cleveland's workers were as thoroughly unionized as those of any metropolitan area in the U.S. From then until the early 1970s they enjoyed one of the highest standards of living of any industrial population in the world, their high wages complemented by stable employment, by medical care and other fringe benefits provided through Blue Cross (see BLUE CROSS OF NORTHEAST OHIO) and other agencies encouraged by post-World War II federal legislation and supplemented after 1966 by the Federal Medicare system, by retirement plans supplemented by the increasingly generous federal Social Security system, as well as by access for increasing numbers of their children to the expanding CUYAHOGA COMMUNITY COLLEGE, CLEVELAND STATE UNIVERSITY, and other state institutions of HIGHER EDUCATION whose tuitions were kept low through heavy tax subsidies.

The Cleveland area's ability to prosper on the basis of 19th century achievements came to an end in the 1960s. Its fourth period of economic development, which lasted from the early 1960s through the 1980s, was one of painful stagnation and reorientation. Manufacturing employment peaked in 1969, then declined until one-third of manufacturing jobs were gone by the early 1980s. The success of Cleveland's unions in raising workers incomes also meant that Cleveland-area employers had to deal with higher numbers of days lost to work stoppages and higher labor costs than most of their competitors in the U.S.--at a time when foreign competitors enjoyed labor costs that were much lower still. Goods long made in Cleveland's aging factories faced new competition from the U.S. and abroad as trucks and containers and new investments (such as the St. Lawrence Seaway (1959) which connected the Great Lakes with the Atlantic) cut transportation costs both within the U.S. and around the world, and as changing international political conditions and electronic communications cut transaction costs. The U.S. government, influenced in part by such Ohio leaders as U.S. Senators Robert A. Taft and John Bricker, had encouraged and sometimes invested in the development of new steel production facilities in Italy, Japan, and Korea as, a means of promoting Cold War alliances, and took the lead in international efforts to reduce tariffs and trade barriers. By the late 1970s it was possible to produce goods of any description anywhere in the world and to move them to American markets cheaply and on a rigorous schedule. Cleveland manufacturers and workers found themselves in competition with foreign steel producers, machine-tool manufacturers, and auto makers. Big Cleveland-area firms like Addressograph-Multigraph (AM INTERNATIONAL, INC.) also found themselves driven into obsolescence by computer and other industries whose production facilities were located elsewhere in the U.S.

New transportation and communication facilities and new government policies also posed severe challenges to Cleveland's economy. Federal highway programs, especially the Interstate Highway program begun under Eisenhower, together with new high-capacity trucks (many of them built in Cleveland itself), freed much industrial production from 19th-century water and rail systems. By the 1970s trucking allowed overnight delivery over hundreds of miles, permitting specialization without proximity and allowing automobile and other manufacturers to locate assembly plants in southern states that offered lower wages and taxes, in northern Mexico, or even in Asia. The civil rights movement, Federal civil rights laws, and the replacement of sharecropping with industrial agriculture in the 1960s combined to free the American South of the economically debilitating system of racial segregation and to allow many southerners to move into industry. At the same time, the federal environmental protection laws of the late 1960s and 1970s forced the Cleveland area to tie its manufacturing plants into expensive new sewer and water-treatment systems and to clean up badly polluted land and waterways. Sites within the Cleveland area's industrial clusters became "brownfields," sites so polluted (and so narrow, crowded, and difficult of access for cars and trucks) that despite their location on long-established rail and water lines they did not seem worth the cost of redevelopment. As employment in older industrial areas declined, nearby residential neighborhoods lost population, becoming home to those who were least able to find work or to pay for adequate housing.

Many Cleveland firms failed to adjust to these challenges by redesigning their products and production processes, retraining their workers, and investing in new facilities, and the result was a particularly intense period of bankruptcies and corporate "reorganizations" and "downsizings" in the 1980s. Many firms struggled to reduce labor costs; firms that failed to secure the cooperation of their workers often shut down. Labor unions lost members and morale. The national civil-rights movement secured equal employment opportunity for African Americans just at the time when many Cleveland firms were laying people off. Cleveland had long maintained one of the nation's best public school systems, but many of, the area's people had left school by the 10th grade to take factory jobs, and when the city and its schools encountered serious financial and other difficulties in the late 1960s, the CLEVELAND PUBLIC SCHOOLS lacked solid political support. Cleveland-area workers were not nearly as well educated as their competitors on the west and east coasts. The least affluent half of the area's population saw its real income fall during the 1970s, even though money income per capita in Cuyahoga County actually rose 12% (after correction for inflation), then rose again during the 1980s. The Greater Cleveland area's population had more than doubled between 1940 and 1960, but grew only from 2.7 to 3.3 million in the next 20 years--and actually declined by nearly 300,000 between 1970 and 1990.

A remarkable coalition of business and political leaders (CLEVELAND TOMORROW) worked effectively during the 1980s to move the region into a fifth phase of economic development. It became clear that reorganized, more labor-efficient heavy industry would remain, and large investments were made in many of the region's steel, automobile, and other manufacturing factories (the Ford Motor Co. alone invested $4 billion, confirming Cleveland as its second largest employment center in the world). Cleveland continued to be an excellent location for distributors of industrial materials and components, including the PREMIER INDUSTRIAL CORP., which grew up after World War II. Business and labor leaders negotiated new labor-management agreements that improved productivity and increased investment in job training and in the use of the most advanced manufacturing technologies. Although many factories moved south, many of the highly skilled specialists who knew how to build, install and maintain manufacturing equipment remained in Cleveland, traveling up and down the interstate highways to serve plants from Ohio to South Carolina to Arkansas. The GREATER CLEVELAND GROWTH ASSN., its Council of Smaller Enterprises, and others worked to train and support skilled and technical workers and to provide essential services to the smaller firms that employed many of them. There were encouraging signs that Clevelanders were learning to overcome racial prejudice and work together, although the poverty of inner-city neighborhoods in Cleveland, East Cleveland, Akron, and Youngstown grew more and more concentrated. Cleveland's substantial communities of specialists in business services--law, accounting, engineering and industrial design, banking and finance, and industrial advertising and public relations--also proved to be durable and capable of expanding.

In an effort to build new industries on the region's existing strengths and to move Cleveland into a leadership position in scientific research, Cleveland business and political leaders also established new research centers in polymers (whose plastics and other compounds were supplementing, and replacing rubber, steel, and copper) and factory automation and reinforced long-standing strengths in biomedical and aerospace at Case Western Reserve Univ., the Cleveland Clinic, the Univ. of Akron, and NASA, and encouraged the continuing activities of the region's many industrial research laboratories. The business and political leaders also created new pools of venture capital intended to turn new products and processes developed in these laboratories into new, rapidly growing companies.

Seeking to move beyond Cleveland's identity as a manufacturing center, business and political leaders promoted the idea that the region could develop a significant visitor economy in the 1980s. They sponsored major renewal projects such as GATEWAY ECONOMIC DEVELOPMENT CORP. (home to key professional SPORTS teams), PLAYHOUSE SQUARE, the NORTH COAST HARBOR with its ROCK AND ROLL HALL OF FAME AND MUSEUM and Great Lakes Museum, and the Cuyahoga Valley National Recreation Area. These publicly subsidized projects supplemented private ventures in the Flats, Cedar Point, Sea World, and Geauga Lake, and such 75-year-old institutions as the CLEVELAND ORCHESTRA, the CLEVELAND MUSEUM OF ART, the WESTERN RESERVE HISTORICAL SOCIETY, the CLEVELAND PLAY HOUSE, KARAMU HOUSE and the CLEVELAND METROPARKS. The increasingly successful effort to clean up the region's rivers and lakeshore also enhanced opportunities for active recreation. Taken together, these facilities were designed to position Cleveland to compete for visitors and conventions that had not come to the area since the 1930s. These amenities, together with the region's many excellent suburban, Catholic, and PRIVATE SCHOOLS, also made the area a desirable place for well-educated and well-paid professionals, helping existing financial and consumer service firms to expand (Key Corp, PROGRESSIVE CORP.) and persuading expanding new firms to relocate to the Cleveland area--often in new downtown office buildings constructed with the aid of substantial tax abatements and other subsidies. These developments promised to enrich some of the region's inhabitants even if they failed to attract new business. In 1995 it was still uncertain whether they would increase opportunities for the unemployed.

David C. Hammack

Case Western Reserve Univ.

Bausch, Thomas, et al. Economic and Demographic Analysis for Cleveland, Ohio (Cleveland: Cleveland Urban Observatory, 1974).

Gurwitz, Aaron S. and G. Thompson Kingsley. The Cleveland Metropolitan Economy (Santa Monica, CA: The Rand Corp., 1982).

Hoffman, Naphtali. "The Process of Economic Development in Cleveland, 1825-1920" (Ph.D., diss., Case Western Reserve Univ., 1981).

Knight, Richard. The Cleveland Economy in Transition: Implications for the Future (Cleveland: College of Urban Affairs, Cleveland State Univ., 1977).

Milne, Ruth J. "The Economic Development of Cleveland, 1796-1827" (M.A. thesis, Case Western Reserve Univ., 1994).

Last Modified: 13 May 1998 10:23:12 AM

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