|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.
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]
|The desirable location was on the hill. Ann Arbor spit
between upper town and Lower Town (pictured right).
|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
|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.
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.
|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.
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.
|"The bank had a significant lack of 'hard money' available
to its users which led to its collapse."