Reynolds & Bethune (2004) noted that the advent of the telegraph in the early 19th century marked the “birth of the age of modern communications” (para. 2). Alfred Vail, the co-inventor of Morse Code noted that the telegraph provided “several portions of the civilized world the power of holding instantaneous communication with each other, with a rapidity far beyond what has even before been attained” (as cited in Goheen, 1990, p. 185). The telegraph’s introduction changed communication in many areas and led to efficiencies in the financial markets and railway systems.
Railway Systems
Railway companies could be considered the first market for the telegraph. Among its many uses was train scheduling. Faster communication meant that passenger safety improved as trains could now avoid collisions. In addition, telegraph communication informed engineers when it was safe to proceed along a single track, thereby saving time and money as they did not have to wait until an approaching train had passed. Finally, the telegraph informed train engineers when they needed to stop to pick up passengers and cargo.
Business and the Rise of Financial Literacy and Efficient Markets
When first introduced, people viewed the telegraph “as a technological curiosity rather than a useful new communication device” (Lax, 2009, p. 11) and business, political leaders and the press did not embrace it. The opinion of the telegraph changed, however, when people realized the speed with which information could travel. For example, in 1844, news of the birth of a son for Queen Victoria was reported via telegraph to a wide audience within forty minutes of the original announcement from the palace.
Ontario’s Ministry of Education (2011) defines financial literacy as “having the knowledge and skills needed to make responsible economic and financial decisions with competence and confidence” (p. 3). The adoption of the telegraph meant that businesspeople could obtain better and more current shipping and market information for major business centers such as Boston, New York, Buffalo and Chicago, as well as other large U.S. cities from major Canadian newspapers in Montreal and Toronto.
In addition, the telegraph succeeded in making communication less expensive, which allowed businesses to obtain information from distant markets. By reaching outside his/her local network, a merchant could purchase the best quality products at the lowest price, leading to the development of a competitive and efficient market structure.
There are also many examples where the telegraph improved business efficiency. For instance, manufacturers and suppliers were now aware of market conditions throughout the supply chain, and manufacturers used the telegraph to notify a customer if there was a delay in completing an order. Fishermen obtained market information and provided notification of their daily catches to potential buyers. This notification was critical due to the perishable nature of the product. The telegraph also helped the meat packing industry co-ordinate the distribution of its perishable products to minimize loss.
The increase in communication facilitated by the telegraph resulted in the expansion of the New York Stock Exchange and its recognition as a national market. International money markets also benefited from the telegraph as it facilitated the flow of funds across Europe and the rest of the world. Finally, since the 19th century world still operated on the gold standard, information provided by the telegraph helped to ensure that the world market could absorb an increase in the supply of gold.
Conclusion
Carey noted that “the railroad and canal regionalized markets; the telegraph nationalized them” (as cited in Lax, 2009, p. 15). One could also conclude that the information provided by the telegraph led to the international markets of today. The telegraph provided less expensive and instantaneous market and shipping information that enhanced the financial literacy of 19th century businesspeople leading to better decision making and the creation of more competitive and efficient markets.