by Martin Doyle
Per Jefferson’s agrarian and state-centered ideology, limiting federal debt would beget limited federal taxing and spending and thus limit federal activity and power altogether. For him, decentralized finances were a tool to ensure decentralized power. Indeed, as president, Jefferson developed a religious commitment to a balanced federal government budget with no federal debt—the fiscal extension of his limited government ideology.
This tension between Jefferson and Hamilton over budgets, and which level of government should be responsible for debt and taxes, was the ideological and fiscal starting point for the United States. The whole economic history of the United States is the saga of negotiating the fiscal roles and responsibilities of the different levels of government in providing the most basic of services for their citizens—the water supply and sewer systems.
When the 38-year-old Ellis Sylvester Chesbrough set out from Boston and headed west toward Chicago in 1851, he was crossing a landscape in the throes of dramatic changes both fiscal and physical—much of which he had witnessed firsthand. Chesbrough had grown up in Baltimore watching his father work for the Baltimore and Ohio Railroad Company, which was responsible for the Mid-Atlantic region’s most ambitious building project of the early nineteenth century. Ellis Chesbrough followed his father’s lead, and at age 15 he began working as a surveyor around Baltimore. In a few short years, he rose through the ranks to serve as an assistant engineer. Like many of the civilian engineers in his time, Chesbrough was self-taught, but he was mentored by the more experienced men who did the actual engineering work on enormous engineering projects ranging from railroads to canals.2
This was an ideal era for a young, self-made engineer like Chesbrough, and the projects he worked on over the years show where and when the economy was growing—or shrinking. When Chesbrough began his career in the early 1830s, the federal government was largely inert and its engineering work was limited to a few harbor projects. In contrast, large engineering and building projects funded by the states were sprouting up all across the United States. For engineers like Chesbrough, working for a state government was the way to gain experience as an engineer because the different states were frantically building canals, railroads, and turnpikes in efforts to outdo each other.
The projects being undertaken by the states were certainly necessary, but they were also driven in part by the fiscal model adopted by states in the early nineteenth century: asset income. Asset income entailed financing projects that could pay for themselves from revenue generated by the direct use of those projects. State governments sold bonds to generate funds for constructing infrastructure projects. People using the infrastructure would pay tolls or fees, which would then be used to pay off the state debt—that is, the bonds. As these public works projects became sources of revenue, the states would be paying back bondholders and simultaneously growing the state economy.
The best example of this type of investment was the Erie Canal, a model that all other states looked to in justifying their frantic building campaigns and associated debt accrual. The Erie Canal had been remarkably successful in achieving the ideal of a self-financing building project that grew the economy while it grew itself: it increased the market for commodities, which drew more settlers to the region, whose use of the canal increased its revenue, which allowed the state to repay the bondholders on schedule and in full. The returns on Erie Canal bonds were so secure that the bonds themselves were used as currency, sold throughout the United States and even in Europe. The allure of the asset income approach for states was that it reduced the need for direct taxes such as property, poll, or income. State investments in public works then could both increase economic productivity and greatly reduce general taxes by targeting only those using the specific state-funded assets.3
Knowing that New York’s coffers were burgeoning, all other states enviously went into the business of internal improvements. But the necessary initial costs of designing and building infrastructure meant that by selling bonds, states also went into the business of taking on debt. Indeed, just as Jefferson had envisioned, the states rather than the federal or local governments were the hub of financial activity. By the 1830s the state share of government debt was 86 percent of total government debt, and federal debt was only 1.5 percent. Local debt accounted for the remainder—less than 13 percent. And, just as Jefferson had hoped, the federal government derived its revenue primarily from import taxes on foreign manufactured goods—tariffs to protect American industries.
Relying on asset incomes was a high-risk fiscal strategy for states. Many states incurred considerable debt to finance the canals, which in turn became primary sources of state revenues. After an initial love affair with all proposed canal projects, investors began to realize how exceptional the Erie Canal was; few other canals in the United States were used as heavily as the Erie. This lack of use in other canals led to declines in revenue and challenged states to pay the debt they had incurred, largely in constructing the canals: nationally, the total value of state bonds issued in 1820–1824 was $13 million; but that figure swelled to over $108 million in 1835–1837, and over half of it was for canal building alone. With so much state debt and essentially no regulations on finance, the first great financial panic hit the United States in 1837 during that era’s technological boom—the first tech bubble.4
Much of the credit taken on by state treasuries to pay for canals was extended by foreign investors, most often in London. As canal and river companies began to fail, leaving canals incomplete or in disrepair and thus reducing their use and revenue generation, states defaulted on their debt payments: Maryland, Illinois, Indiana, and Pennsylvania. Virginia took on enormous debts from foreign investors throughout the early nineteenth century to finance river and canal companies, and the state did not repay its debts in full until 1966.
The British developed a jaded view of Americans’ ability or willingness to pay their debts. The London Times denounced all Americans for the defaulting by some states, and by 1842 the U.S. government was not able to float a bond in European money markets. What’s more, the United States had become the butt of English rhymes, which jeered at the American habits of both repudiation (as default was called) and slavery:5
Yankee Doodle borrows cash,
Yankee Doodle spends it,
And then he snaps his fingers at
The jolly flat who lends it.
Ask him when he means to pay,
He shows no hesitation,
But says he’ll take the shortest way
And that’s repudiation . . .
Chesbrough was on the front line of the financial collapse, largely because he was an engineer. Just as software engineers were unemployed after the 2001 tech bubble collapsed, public works engineers were unemployed after the 1837 state debt collapsed. Chesbrough, now in his early thirties, moved back home with his father.
In the mid-nineteenth century, opportunities on large infrastructure projects that spanned states were slim to none for engineers like Chesbrough. Instead, demand for engineering projects began to come primarily from the nation’s rapidly growing cities. At that time, Midwestern cities in particular emerged as links between the Atlantic and the Great Plains, the Great Lakes, or the Ohio Valley. The growing network of railroads funneled a never-ending stream of grain, beef, iron, coal, and timber, all of which were processed and handled in the rapidly growing metropolises of Chicago, Cleveland, Detroit, and Milwaukee.
While the mid-nineteenth century is often envisioned as the era of California prospectors and frontier settlers out on the prairies, these were the exceptions. The real population growth at the time was in the overcrowded streets and alleyways of cities. The U.S. population grew from 23 million in 1850 to 106 million in 1920—a growth of over 350 percent compared to the world’s population growth of 55 percent. The typical American city doubled in population every twenty years over the last decades of the nineteenth century, and in the Midwest that growth was further accelerated: Chicago’s
population doubled approximately every decade from 1860 to 1890, while Cleveland’s population almost quadrupled from 1860 to 1880 and then more than doubled again between 1880 and 1900.6
Along with this spectacular demographic change came an equally enormous but far less appreciated fiscal change. The financial panic of 1837 brought about the first fundamental fiscal reorganization in the United States. After the collapse of canals and turnpikes, state bonds were no longer viewed as secure investments. Potential transportation customers abandoned the often unfinished canals for the far more convenient railroads, eliminating revenue for the canals and driving them out of business but also undermining the fiscal model of asset income as a basis for government budgets. In response to the panic, many states revised their own constitutions to cap the amount of debt they allowed themselves to take on. In the place of states, cities—municipal governments—grew in financial importance as investors increasingly turned to municipal bonds, essentially investing in the future of cities. And no city seemed to have a brighter future than Chicago.
The rapid growth of Chicago was due largely to its glacially carved geography, which proved both a blessing and a curse. Notably, Chicago sits at a remarkably short and flat distance—ideal for portage—between the Great Lakes and the Mississippi River, providing trappers, farmers, and settlers with a quick link between the nation’s interior and the Atlantic economy via the Great Lakes or the Erie Canal. Chicago’s front porch is Lake Michigan, and its back door is the Illinois River, which drains into the Mississippi. At the end of the last ice age, Lake Michigan drained directly into a then enlarged Illinois River and on into the Mississippi. But as the glaciers receded, they left behind a hint of a ridge between Lake Michigan and the Illinois River. Without the ridge, Lake Michigan would have continued to drain directly into the Mississippi basin. But with the ridge—a minor topographic anomaly—the two great waterways were just barely separated.7
In 1855, when Chicago went searching for “the most competent engineer” available to grapple with this geography, Chesbrough rose to the top of the list. The situation he found in Chicago was appalling. Like many other American cities at the time, Chicago was plagued by its highly decentralized approach to urban sewage: privy vaults. Essentially, privy vaults were urban outhouses built anywhere space for a hole in the ground could be found amid the increasing density of the urban landscape. Some of them were built in basements, some behind buildings, and some so that they drained directly into streams or rivers. Everyone was left to their own devices for the disposal of human waste. The only role of the city government in this system of waste management was to arrange for these vaults to be cleaned out periodically, using dippers, buckets, casks, or pumps to scoop out the human waste. The waste—or “night soil”—would then be carted to the outskirts of cities and either dumped into a nearby stream or sold to farmers who used it as fertilizer that eventually washed downslope into creeks and streams.8
The privy vault system was a functional response to pollution but not appropriate for the scale of rapidly industrializing cities in the late nineteenth century. Cities across the United States were concentrating people, and the factories that employed most of the city residents concentrated them even more dramatically during the workday. A typical New England mill village of 1,500 to 2,000 people generated about 500 gallons of urine and half a ton of fecal matter. When people were accumulated into industrializing landscapes, the numbers started to seem nonsensical: the small industrial towns of Holyoke, Chicopee, Springfield, Hartford, and New Britain contributed over 42 tons of fecal matter and almost 46,000 gallons of urine to the Connecticut River daily.9
Cities located on rivers had an immense advantage—at least their sewage was naturally whisked downriver. Chicago produced much more waste than the small industrial towns, but then that waste didn’t drain. The city’s flatness, which had been so attractive to early settlers, made the simple act of getting water out of the city an enormous task. Without the aid of gravity, sluggish water backs up and seeps into nooks and crannies, muddies soil, weakens structures, and grows bacteria; getting water out of a city is as important to the growth of great cities as getting water in. Drains and ditches were part of the earliest work done in Chicago; but without much natural slope to move the water away, they proved ineffective. As Chicago’s growing population dumped its waste into the open drains, it backed up into the putrid streets, drains, and basements.
Chesbrough’s comprehensive approach to Chicago’s troubles set it apart from all other plans the city had tried. He intended not just to construct new drainage and sewer lines, but to apply a systematic approach to control where and how quickly the water drained. After surveying the situation, Chesbrough proposed four options to the city: (1) drain the city into the Chicago River, which would then flow into Lake Michigan; (2) drain the different streets and gutters directly into Lake Michigan; (3) drain the city into artificial reservoirs to be pumped out and used as fertilizer on nearby farms; or, most dramatically, (4) drain the city into the Chicago River and then reroute the Chicago River backward, away from Lake Michigan and toward the Illinois River to the south.10
Chesbrough’s options balanced all the elements of what would be the key qualities of the city engineer: creativity, specificity, and sensitivity to fiscal concerns. All of the options were staggering in their scope; but Chesbrough believed the last, costliest proposal—rerouting the river—was the only long-term option viable for the city. Despite this, due to the projected expense—and because he thought that option would be necessary only if the city ever reached the then unthinkable five times its current population—he advised against it at the time.
The city took the simplest option: drain everything into the Chicago River and on toward Lake Michigan. Yet even this simple approach would require a greater slope than currently existed. This was a constraint not of infrastructure, but of topography. Chesbrough set out to rebuild the city from the sewers up, as well as rethink the way sewers were used.
There were, and are, two types of sewers: storm sewers and sanitary sewers. Storm sewers drain surface water from rainstorms; street gutters, for instance, collect the enormous quantities of water generated during rainstorms and then route it into ditches and pipes toward the nearest stream, river, or lake. Sanitary sewers collect and transport human waste, including that from business and industry. In nineteenth-century Chicago, storm sewers were small, rudimentary, triangular wooden troughs that ran along the roads and fed into the sewer mains—composed of hollowed-out logs. Sanitary sewers were rare in Chicago at that time; when they existed at all, they were merely pipes and canals tasked with carrying away the voluminous human waste. Instead of sanitary sewers, most of Chicago relied on thousands and thousands of privy vaults, which Chesbrough soon came to despise.
The first novelty of Chesbrough’s vision for Chicago was to integrate the two types of sewer systems, creating one “water-carriage system” that would collect sewage from buildings and streets and use the water flow from the storm sewers to carry away the sanitary sewer waste. Combined sewer lines that carried water from storms in the same pipes that carried sanitary wastewater would later become the norm, following Chesbrough’s example in Chicago.11
Beyond this central innovation, the project began to take on audacious proportions. Because the city was so flat, its existing sewer lines simply filled with stagnant water during drier periods. When rain fell and the river rose, the sewers flowed backward into alleys, cesspools, and gutters throughout the city. Combining the sewer and sanitary lines into a water carriage system would only magnify the problem, causing sanitary sewage to back up into the city along with the stormwater.
Chesbrough’s insight was to make Chicago less flat. He recognized that the water level of Lake Michigan was immovable, so that everything else would have to adjust to the lake. That is, rather than starting with the buildings and streets as fixed points, he solved the slope problem by working in the opposite direction. He started a
t the level of the lake and calculated the precise slope that would be necessary to keep the sewer lines flowing.
The new system involved using brick sewer mains from 3 to 6 feet in diameter, placed aboveground and running down the center of the street and into the collection point of the Chicago River. Because the city already existed at the older and flatter, inconvenient topography, entire swaths of the city had to be razed and then set at a higher elevation—literally, raised. The streets and the sewers of a city are its skeleton; the rest of the city infrastructure—buildings, hotels, and sidewalks—are the flesh and sinews that have to connect to this skeleton. As construction progressed away from the river, the sewer lines were raised to maintain the slope required to keep the water flowing in the pipes. Earth was then backfilled around the mains, elevating the street level along with the sewer mains. Close to the Chicago River, which drained into Lake Michigan, this plan required raising streets by just a foot or so; but farther away from the river, street levels had to be raised by as much as 10 feet to maintain sufficient slope.12
For a city whose skeleton was changed, adapting the remaining structures was a staggering achievement. Empty lots, created by tearing down buildings, were filled with enormous quantities of earth to raise them to the new street level. Many older buildings were left at the old level, creating a city that operated at two levels. For existing buildings whose owners wanted them at the new level—particularly brick buildings—raising them was a novel undertaking. In this era of entrepreneurial engineering, George Pullman—who would later become known for his palatial railcars—devised a method of placing the foundation of a building on a series of screws and then, by simultaneously turning all of the screws, lifting the entire building to the new elevation, where it was then supported by backfilling with additional earth. With hundreds of men turning the jacks simultaneously underneath each structure, building after building went through this topographic correction.