A bumpy ride: Seattle's economic booms, busts, and comebacks

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The news hit Seattle like a punch to its civic solar plexus. A giant corporation was dumping it for another city. Community plans and individual hopes were crushed, and some wondered if Seattle had a future at all.

This message of doom was not Boeing's March 21, 2001, announcement that it would depart its corporate nest of 85 years, but a terse telegram from executives of the Northern Pacific Railroad to Seattle founder Arthur Denny. It arrived on July 14, 1873, and read simply, "We have located the terminus on Commencement Bay."

These words burst Seattle's first economic bubble. They meant that all the goods, people and wealth anticipated from development of the nation's second transcontinental railroad, linking the Great Lakes with Puget Sound, would flow to Tacoma, then barely a village, not to its larger neighbor to the north.

Seattle felt used, abused and betrayed. The town had treated NP surveyors and executives like visiting royalty over the previous three years, and chipped in to fund a generous inducement (bribe is such a harsh word) of cash, bonds and land totaling more than $700,000. Seattle was already the Territory's third largest city with more than a thousand souls, and the odds seemed so biased in its favor that speculation had sent local land prices soaring.

A Lesson in Economics 101

Only later did Seattle learn that while it was feting Northern Pacific agents, they were quietly buying up most of Tacoma's future downtown and harbor. Seattle's business establishment really had no right to be shocked by this lesson in applied capitalism. After all, Henry Yesler (Seattle's mayor at the time of the NP decision) had manipulated a bidding war among Puget Sound settlements for the privilege of hosting his saw mill. He chose Seattle in 1852 not out of sentiment but because its pioneers, including Arthur Denny, offered him the most land and benefits.

Our city's first economic bust also set the stage for its first comeback. If the Northern Pacific would not build Seattle a railroad, Seattle would just have to build its own. So, on May 1, 1874, hundreds of citizens of all classes literally rolled up their sleeves and headed out to Steele's Landing on the Duwamish River to start laying tracks. Thus was born the legend of an indefatigable "Seattle Spirit."

Though the Seattle & Walla Walla Railroad never got close to its second namesake, it did reach the new mines around Renton and established a thriving enterprise for coal exports to California. Future Northern Pacific chief Henry Villard was so impressed he bought the whole caboodle for $1 million in 1880.

By then, Seattle had shaken off its brief depression following the NP's selection of Tacoma. Indeed, work on the railroad had stalled, along with development of the self-styled "City of Destiny." Seattle's population, on the other hand, had tripled to more than 3,500 people and it boasted a vigorous local economy. Seattle was big enough even to forgive the Northern Pacific's slight, and greeted Henry Villard with a lavish celebration when he visited in 1883 to announce construction of a spur between Tacoma and Seattle.

'The Boomingest Place on the Earth'

Seattle gained its coveted transcontinental link a year later, but the spur offered only fitful service under Villard's successors. Seattle rallied again to build a new line, the Seattle Lake Shore & Eastern, now the route of a trail named for its organizers Thomas Burke and Daniel Gilman. Again, Seattle prospered in the face of adversity - growing by nearly 40,000 residents during the 1880s.

Not even the Great Fire of June 6, 1889, could slow the city, labeled "the boomingest place on the earth." It enticed Great Northern Railway magnate James J. Hill to locate his western terminus in Seattle, but the line's completion in 1893 coincided with the onset of a national depression.

Triggered by dwindling federal gold reserves and a stock market crash that idled 20 percent of the national workforce, the so-called Panic of '93 hit Seattle especially hard. It was only rescued by the arrival on July 17, 1897, of the steamship Portland bearing "more than a ton of solid gold" from the icy banks of the Yukon River.

Seattle knew that this stroke of luck did not guarantee prosperity. City booster Erastus Brainerd launched a publicity blitz to establish Seattle as "the gateway to Alaska" for the thousands of prospectors expected to race north. When the city won the nod as home of the federal assay office, its success was assured - and merchants grew rich fleecing the pockets of "sourdoughs" on their way to and from the gold fields.

Thanks to the Klondike Gold Rush and expanding Asian trade, Seattle prospered for the next 20 years. Its population nearly doubled to 80,000 in 1900, and then tripled to 240,000 over the following decade. The town celebrated the seemingly endless boom in 1909 with its first world's fair, the Alaska-Yukon-Pacific Exposition on the University of Washington campus.

Soaring and sinking with Boeing

Growth continued at a somewhat cooler pace through World War I and the 1920s. Then the stock market tanked in October 1929, and Seattle followed it down the drain. Population growth stagnated at around 365,000 in the 1930s, and thousands of unemployed workers camped in a shantytown called "Hooverville" on the site of an idled shipyard south of Pioneer Square. A new building would not rise in downtown Seattle for another 30 years.

World War II jump-started the economy but at a terrible price - thousands of deaths and the internment of the nation's second-largest Japanese-American community. Boeing was the biggest local winner, and it applied the Cold War technology of jet bombers to revolutionize airline travel. Thanks in large part to Boeing's expanding workforce, population growth resumed in the 1950s and spread into burgeoning suburbs. Seattle celebrated good times and a bright future with a second world's fair, the Century 21 Exposition, in 1962.

But nothing lasts forever. Boeing was buffeted during the mid-1960s by the loss of several crucial defense contracts, and it launched its new 747 Jumbo Jet just as the air went out of the airline industry. The company shed more than 60,000 workers during the ensuing "Boeing Bust," and when a Sea-Tac billboard teased, "Will the last person leaving Seattle turn out the lights" in April 1971, nobody laughed.

A lot of people did leave Seattle during the bust. The city's population dropped from 565,000 in 1965 to under half a million by 1980, but the larger metropolitan area continued to grow, permanently tipping the balance of regional power. After their white-knuckle ride with Boeing, business and government leaders vowed to diversify the local economy by attracting new and different businesses. Among these, a little software firm called Microsoft relocated from Abuquerque to the Eastside in 1978.

The region's economic strategy has, in fact, helped to cushion the area against the ups and downs of the past quarter of a century. Some might argue that it has worked too well, for growth is now the cause of most of our social and environmental complaints. There is an alternative, of course, but do we really want to go there again?

To learn more about our community's past, visit www.historylink.org.