Book Excerpt: From ‘The Company Town’

Here are the first pages of a chapter on Gary, Indiana entitled “The Magic City”:

Made-to-order cities are the spectacular civic by-product of the new industrialism. Accustomed though Americans of this day are to rapid accomplishment, not one who visits the suddenly created city of Gary fails to experience a new thrill of amazement.
—Graham Romeyn Taylor, Satellite Cities (1915)

In 1904, Elbert H. Gary determined that U.S. Steel, of which he was chairman, was in need of vast new expansion. The huge trust had been created only three years before, when banker J. P. Morgan, Carnegie Steel executive Charles M. Schwab, and others had pulled together “the combination of combinations,” embracing such large outfits as Federal Steel

U.S. Steel Chairman Judge Elbert Gary. Credit: Library of Congress

and Carnegie Steel, and representing 65 percent of the American steel
industry. And already, demand for steel had outpaced U.S. Steel’s resources,
benefiting its competitors. “Judge” Gary, as he was always called thanks to his two terms as a county jurist, delegated the corporate expansion to Eugene Buffington, president of the subsidiary Illinois Steel. And like George Pullman a decade earlier, Buffington and his colleagues decided to build on the edge of Chicago’s spreading metropolitan region.

The corporation considered locations in Waukegan and South Chicago, but the final decision favored 9,000 acres on the Lake Michigan shore across the state line in Indiana. The barren site offered plenty of elbow room at a good price, along with water, railroad access, and proximity to the Chicago labor pool. The corporation went on to build the largest steel mill in the nation there for a new unit called Indiana Steel, along with facilities for corporate holdings American Bridge, American Sheet and Tin Plate, American Car and Foundry, American Locomotive Works, American Sheet and Wire, National Tube, and Universal Portland Cement.

And it built a new city to support the works. Gary, Indiana, as the judge allowed the community to be named, would come to be the largest company town ever constructed in the United States. Gary’s warp-speed incarnation led its promoters to dub it “the Magic City”—a moniker that others, including the mixed-industry town of Middlesborough, Tennessee, had tried to claim but that seemed to fit Gary best of all.

Like most steel men, U.S. Steel’s executives were not eager to become
involved with housing for employees. “We are manufacturers, not real estate dealers,” the head of a large Pittsburgh steel outfit haughtily announced in 1908. “The most successful places in the United States are those farthest removed from suspicion of domination or control by an employer,” averred Buffington. At first, company executives thought they could simply lay out the grid, supply a sewer system and gas lines, and let the community itself take care of the actual residential construction. Before long, though, the corporation was driven to build many residences, since undeveloped lots weren’t selling particularly well and home-building hadn’t taken off. In the end, U.S. Steel built “half a city,” in the words of writer and social reformer Graham Romeyn Taylor. This inclination to abstain from residential building meant Gary was dissimilar from many company towns that had come before, including Lowell, Pullman, Hershey, and even southern textile towns or the towns of the coal belt.

In his article for The Survey, a journal published by the Charity Organization
Society of the City of New York, a social-welfare group, Graham Taylor wasn’t altogether flattering toward Gary. But neither could he help but be impressed: With a population nearing 50,000 only nine years after the first brick was laid, Gary was “probably the greatest single calculated achievement of America’s master industry,” in Taylor’s opinion.

Business Lessons From the Legendary Hormel Strike

Hormel striker Ray Goodew (at right) with wife Billie and daughter Sandy Titus.

When Austin, Minnesota workers at Geo. A. Hormel & Co. went out on what would come to be seen as THE strike of the decade 25 years ago come this August 16, signs that read “Jay Hormel Cared” began appearing on the front lawns of strikers and supportive townsfolk. The suggestion: Company attitudes toward the area and the workforce had changed for the worse since the benevolent days of a previous generation of company executives, including Jay Hormel. Was the crisis really as simple as that?

Well, in a way, yes.

In the 1980s, I lived and worked in Austin as part of a labor consulting firm that supported the strikers. I had previously been to many company towns—a category that surely included Austin—from Roanoke Rapids, North Carolina to Gary, Indiana. But I had never reflected that much on the phenomenon. Twenty-five years later, I have researched and published a historical survey of America’s company towns. That work casts interesting perspective on the choices made by businesses past and present.

Over the decades since the early 19th century, there have been a lot of American company towns—perhaps as many as 2,500. (When she learned that I was writing a book on these communities, a historian at one New England industrial museum remarked: “Oh, how many volumes will it be?”) And as you might expect, U.S. company towns vary greatly. But at the extremes, there are two distinct models: The benevolent, paternalistic town, typified by chocolate man Milton Hershey’s Hershey, Pennsylvania and today’s Corning, New York, hometown of high-tech glassmaker Corning Inc.; and the “Satanic mills” model, where workers are treated almost like prisoners and exploited in every way imaginable, from being paid low wages for brutal labor to being required to shop at the company store. The clearest examples of the latter model were in coal country, from such burgs as Harlan and Jenkins, Kentucky to Trinidad, Colorado.

As recently as the 1970s, Austin clearly followed the benevolent, paternalist model. It took a militant 1933 strike and years of labor militancy, but by the 1940s the company and its workforce had settled on a social compact that included profit-sharing, incentive pay, a pace of work determined not by company foremen but by the workers themselves, and Hormel Foundation support for area charities. “If a man is going to work for anybody else, it’s hard to beat Hormel,” one worker told an industrial-relations researcher in the 1950s. Seventy-five percent of Austin residents owned their own homes in that decade, and virtually all workers possessed recent-model cars.

But many Hormel managers were never altogether content with the arrangement and by the 1980s, the increasing power of low-wage, antiunion companies in meatpacking seemed to persuade Hormel management that the social compact should be radically altered.  Even though their company was highly profitable, if they didn’t cut Austin workers’ pay dramatically, Hormel executives argued, these low-wage outfits would run them out of business. So they opted to move closer to the “Satanic mills” model that I have described above. They weren’t alone: Across the Midwest, once-prosperous meatpacking towns are now the scenes of trailer-park blight, crime, and poverty.

However, one thing becomes clear as a result of an in-depth look at industrial-relations practices across America’s company-town past. Pure economics are never the sole determining consideration in managerial decisions about human relations. It helps to be rolling in money, of course. But such factors as the national political climate, the availability or scarcity of a needed labor force, and concern for positive public relations and consumer brands are all taken into account in corner-office policy-making. And then there’s just good business sense: Fair dealing, good behavior, and mutual trust are key to making markets possible; why shouldn’t they likewise be key components of human-relations policies?

Chocolate man Milton Hershey and student. Credit: Hershey Community Archives.
 There’s great diversity and a wide range of profitability among the progressive companies that built America’s benevolent company towns. These outfits are as various as Hershey Foods, which for years has supported an academically respected school for orphans via a trust backed by all of the company founder’s personal stock-holdings; Kaiser Industries, a welfare-capitalism pioneer whose 8.6-million-member Kaiser Permanente Health Plan is an outgrowth of the low-cost medical coverage provided to the company’s shipyard workers in the 1940s; Pacific Lumber, recently reorganized as Humboldt Redwood Co., an environmentally responsible, lumber-harvesting outfit and proprietor of the pin-neat town of Scotia, California, where workers have historically received low rent, full medical benefits at a company-run hospital, above-market wages, college scholarships for their kids and more; and, as mentioned before, Corning Inc., which has funded urban revitalization and local educational institutions in its upstate New York hometown through years both fat and lean.

In 2009, Hormel enjoyed net sales of $6.5 billion, and earnings per share were up 22%, according to the company’s annual report. Yet the events of 25 years back remain etched in many Americans’ memory. In an attempt to turn the page, Hormel tries to pretend that nothing ever happened—as if it did not unilaterally reduce its workers’ wages and require the deployment of the Minnesota National Guard and a legion of other police to break a strike that had become a national cause celeb among labor supporters. A two-tier wage structure put in place following the strike is still in force. But if Hormel really wants reconciliation with the past, a good place to begin would be with a reconsideration of the enlightened policies it forsook in 1985.

For another look at the Hormel events check out Minnesota Public Radio’s report:



"Mad Men" vs. "The Man in the Gray Flannel Suit"

Gregory Peck in the 1956 Twentieth Century Fox film, "The Man in the Gray Flannel Suit"

The working day as depicted on AMC television’s Mad Men: Executives and copywriters arrive at the Sterling Cooper offices at mid-morning and begin boozing at midday. Their labor consists of meetings to brainstorm about potential ad campaigns, meetings with clients to figure out what’s wanted or to pitch a potential advertising theme, and phone calls. White-collar types and clericals alike seem to be done by 4:30 or 5 p.m. – just in time to sprint over to Grand Central for a Metro North train back to the ‘burbs.

Today’s 80-hour-workweek drudges can’t help but be amused – and probably envious.

But was working life really like that? Some clues can perhaps be discovered in Sloan Wilson’s well-known best-seller from 1955, The Man in the Gray Flannel Suit (Four Walls, Eight Windows, 2002).

Wilson wasn’t writing about the Madison Avenue set, of course. When we first meet the author’s fictional protagonist, Tom Rath is employed at the small Schanenhauser Foundation but contemplating a move to the public-relations department at United Broadcasting Corporation, an outfit that seems modeled on NBC. The foundation, it seems, doesn’t pay enough for the Rath family to move out of its little Westport, Connecticut house – a place marked by “a thousand petty shabbinesses,” from the conspicuous crack on the living-room wall to the dog scratch on the front door. With a salary increase at United Broadcasting, the Raths might upgrade to spiffier quarters or even develop some property that Tom inherits.

After an initial stint as a speech-writer for United’s president, Tom is offered a more prominent, and demanding, position at the network. But there’s a catch: The hours are hardly Sterling-Cooper-esque. “Running any big outfit is incredibly hard work,” Tom muses to his wife. He worries that he could be expected to perform like his boss, who “never thinks about anything but his work, day and night, seven days a week, three hundred and sixty-five days a year.” Tom, on the other hand, acknowledges, “I could never do it, and I don’t want to.”

Fortunately, the United president proves to be understanding and offers Rath a less-demanding position. So the implication is that not everyone was made to put in backbreaking hours.

And what about the booze? United’s PR men – cousins, after all, of the Mad Ave. men — don’t seem to hit the bottle particularly hard at the office or over lunch. In the Rath social set, boozing it up is relegated to suburban cocktail parties, which Tom’s wife Betsy regards as “an exhausting exercise,” beginning at around 7:30 p.m. and continuing sans dinner until 4 a.m. Moreover, much of the cocktail-party conversation seemed to revolve around moving out of the current neighborhood or “escaping to an entirely different sort of life – to a dairy farm in Vermont or to the management of a motel in Florida.” Rather than lubricating the creative impulses, hooch in the world of Gray Flannel seems to inspire reveries of escape.

Further comparisons between the world of Mad Men and reality as we knew it are facilitated by the arrival of a new book, The Man Who Sold America: The Amazing (But True) Story of Albert D. Lasker and the Creation of the Advertising Century (Harvard Business Review Press). I’ll tackle those comparisons in an upcoming blog posting.