Issues of an Early Economy

The development of a city inextricably relies upon the development of an economic base, or system of exchange. As the first settlers followed John Allen's lead to Ann Arbor, they developed ways of interacting that mutually benefited each other. Feeble businesses arose, such as tanneries and dry goods stores. These businesses were very small in size and often located in the front rooms of homes, yet provided the spark for the economic wheel to begin turning. Throughout this analysis, economics will be referred to as the consistent circulation of money amongst Ann Arbor residents. Over time flourishing businesses, banks, and the University of Michigan, developed an interdependent relationship credited for the economic progress of the city of Ann Arbor. The undercurrent of these institutions is the constant exchange of money, or economics. 
In order for a dependable economic system to arise, a substantial population must reside in an area providing supply and demand - two basic principles of economics. John Allen's original home functioned as an embryo which housed over 30 original settlers until they could construct homes of their own. Homes then resembled little more than log huts. These settlers had the advantage of living in Allen's house while establishing their homes. Immediately, property values ascended and those with more money could select the choice locations of their homes.  
The desirable location was on the hill. Ann Arbor spit between upper town and Lower Town (pictured right). 
Due to its geographic location, lower town was often plagued with drainage and flooding problems. Real estate emerged as one of the first industries in Ann Arbor. John Allen originally purchased 480 acres of land for 600 dollars in 1824. Within 5 years he was parceling out pieces of his land for three times the amount he paid. Land became a hot commodity - a trend which has ballooned with time. Today, lower town may be identified as any land located to the north of Detroit St. and Broadway. Property values remain skewed with lower town's much lower than the hill's. 

[More about Lower Town]
By 1829 the population had risen to between 300 and 400 people. With a growing population, came the need for economic interaction. Businesses arose to provide residents with goods and jobs. In 1827 the first tannery emerged. Distilleries, furniture factories, and dry goods stores quickly followed. The Huron river provided a prime channel to import and export goods to the flourishing city of Detroit. The Ann Arbor Land Company was an eager group of enterprising citizens. Two of the more prominent members were Charles Thayer and William Maynard. The Ann Arbor Land Company participated in many business ventures, most notably the change in location of the University of Michigan. They were determined to bring the University of Michigan from Detroit to Ann Arbor so that Ann Arbor could financially profit from a higher institution of learning. They were well aware that a successful university would attract students that would rent Ann Arbor houses and shop in Ann Arbor businesses. Since the arrival of the University in 1878, the University and Ann Arbor's economics have been intimately related. 
With the newfounded outburst of business activity came the need for banks. In 1835 the first bank of Ann Arbor, the Bank of Washtenaw, was officially organized. It was located on the streets known today as Fourth and Ann.  
Founders of this bank include James Kingsley (pictured right), William Thompson, and Volney Chapin. Almost immediately the bank faced problems due to its liberal loan and collection policies.
  Loans were granted to almost any citizen with a friendly face. Due to the immense amount of loans, the bank had a significant lack of "hard money" available to its users which led to its collapse. In 1846 the bank closed, leaving Ann Arbor without a legally incorporated bank. Ann Arbor's citizens were forced to carry their entire savings on them, usually sewed up inside pockets of clothes. It was not until 1863 that citizens regarded banks as a safe haven for their money.  
"The bank had a significant lack of 'hard money' available to its users which led to its collapse."
This ease was partly due to the rigid and conservative policies of the new bank, the Ann Arbor City Bank. Volney Chapin, involved in the creation of the Bank of Washtenaw, learned from the weaknesses of the first bank and became the President of the new bank. The bank is still in operation and is the oldest bank in Washtenaw county. 
A secure bank inhibited citizens from making foolish business decisions. Businesses began growing at a rapid rate and replaced the prevalent "mom and pop" stores which characterized early Ann Arbor. By the late 1870s Ann Arbor had the most thriving businesses of any city west of Detroit. Most of these businesses focused on the production of wood, metal, or cloth. Mr. Titus Hutzel developed the first plumbing business in Ann Arbor at this time and found immediate success. The introduction of plate glass in 1875 monumentally changed the act of shopping into what we know it as today. Plate glass changed the look of shops and enabled the first "window-shoppers." Store owners proudly showcased choice products in store windows. Store owners became crazed with the aesthetic value of their shop windows. Shoppers responded as shopping shifted from an act of necessity to an act of pleasure. In 1900 the census was 231 manufacturing establishments in Ann Arbor employing 1,181 workmen and paying $462,181 per year for wages. Much of this money filtered throughout Ann Arbor at restaurants, taverns, shops, and taxes. Ann Arbor assumed a reputation as a wealthy city and desirable place to live. 
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