Broken Cluster: Second Phase of Textile Industry Decline
And now the second episode in our textile sector soap opera. When an agglomeration starts unraveling, economic developers are pulled in. That is a theme of this episode of the soap opera.
Until 1919 New England cotton textile manufacturers responded tactically, but mostly ignored the first phase decline. State government and local chambers had come under short but intense pressure, and then moved on: these [early] fears dissipated after 1900, and … the interregional competitive atmosphere changed … . Northern investment in southern mills ceased completely. When in 1912 Melvin Copeland completed his authoritative study of the industry, he wrote “No new southern branches have been established for several years, and one hears no suggestion that any are contemplated.” (Wright, 1986, p. 135)
So after the 1890–1900 scare New England textile manufacturers had, during a period of high demand and prosperity, either ignored or put up with competition from southern mills. New England textile-related employment stabilized, to a large degree because of a narrowing of southern wage differentials due to supply constraints in southern labor markets, and worldwide increase in demand for cotton-related products did the rest. Uniforms for World War I armies were the frosting on the cake. “It was all Good!” And then it wasn’t.
Almost immediately at war’s end, the bottom fell out of New England’s textile industry. Demand collapsed as new synthetic fibers (innovation) became popular and low-wage international competition hit profits hard. Restrictions on immigration after 1920 cut off cheap labor on which New England industry depended (French Canadians). Wright blames the collapse of America’s “tariff wall” that had sheltered both the South and New England. But lower-cost southern mills were better able to withstand lean times (Wright, 1986, pp. 147–8). Unwillingness of New England cotton textile manufacturers to invest in New England facilities matched by the willingness of New England textile machine tool firms to invest in southern textile firms intensified post-World War I New England textile sector disruption. New England cotton textile manufacturers, on the other hand, blamed unions for inflating costs. They lobbied state governments for relief from unemployment taxes, perceived rightfully as a serious barrier to productivity improvements. Unions cited benefits from higher-wage, highskilled union workers—advancing arguments congruent with today’s “advanced manufacturing” dialogue. The unions were more successful.
While the nation as a whole increased manufacturing employment (+2.2 percent, 1923–29), New England manufacturing employment dropped from 1.25 million to 1.1 million (-12 percent). In Massachusetts textile employment fell by 17 percent.9 “Nearly two-fifths of factory jobs in cotton disappeared during the twenties as plant closures spread through the commonwealth’s mill cities. Massachusetts also saw substantial employment losses during this era in woolen and worsted textiles, textile machinery and boots and shoes” (Koistinen, 2005, p. 3). “By 1930 the South exceeded the North in both numbers of plants and employment … By 1935 North Carolina and South Carolina each had capacity exceeding the leading New England state, Massachusetts” (Markusen, 1985, p. 134).
Capacity dropped in absolute terms for the first time. Some mills simply terminated operations or declared bankruptcy. Others relocated to the South. A niche for high quality production remained, however, allowing the most adept producers to continue in the region … but New England’s textile manufacturers operating with old, often obsolete equipment were … vulnerable [when product demand collapsed]. (Rosenbloom, 1998, p. 14)
Southern ED becomes the problem
As the twenties wore on, New England proceeded through its “hard landing”. The complex realities became lost and attempts to reform unemployment tax failed; and the media, unions, textile firms and the business community became polarized and the dialogue changed. Blame shifted to the South’s oppressive labor conditions, cheap labor and tax subsidies from southern governments. The fact that nearly a million spindles moved during the twenties from New England to southern mills only cemented in the minds of many New Englanders that the problem was New England mills fleeing to South—runaway plants. Further proof was that northern capital investment in southern mills restarted.
Koistinen (2002), however, succinctly asserts that New England textile manufacturers did not “flee” New England for southern climes, but were driven out of business—into bankruptcy—by the lower-cost competitors of the Carolinas and the South. During these years, Southerners (not Northerners) “founded, managed and financed the heavy majority of the textile companies” in the South. To be sure, he continues, some New England companies did move looms and spindles to the South (while maintaining their New England plants). Markusen counters “that a six-month strike in New Bedford in 1928 is believed to have crystallized textile mill owner decisions to leave” (1985, p. 135). Koistinen counters that New England mills were simply non-competitive: they shut down; they did not move away. This is further supported by Wolfbein’s Decline of a Cotton Textile City (Wolfbein, 1954). If so, the twenties were not characterized by runaway plants. But such is hindsight.
“Southern” ED was credited with luring firm after firm from New England to the Carolinas with state- and chamber-led promotions/advertising coupled with tax abatements. Unlike the 1900 period, however, it is true they did. The argument, however, that the Carolinas were a low-tax business climate was correct but overstated. The Carolinas at that time were two of only eight states in the nation that had a corporate income tax. Any favorable municipal property tax advantage was substantially mitigated by the state income tax. The Carolinas’ chief underlying strength was always the availability of low-wage labor—not a favorable tax climate. A 1949 survey of 88 new plants that had moved to the South (not just the Carolinas) during this period concluded that the firms “were usually not impressed by local concessions” and were more responsive to an “abundance of raw materials, untapped consumer market demand, and [surprise], the availability of a large, cheap and docile labor force” (McLaughlin and Robock, 1949, p. 112).
Part of the reason the business attraction–recruitment–tax abatement program (Lepawsky, 1949, pp. 57–70) dominated New England media headlines was that southern politicians and economic developers publicly and loudly “claimed credit” for their employment growth and northern investment. Southern economic developers, in their conceit or naivety, sincerely believed they were responsible for firms relocating to the Carolinas—and let everybody and their brother know how good they were. Their logic seemed reasonable: promotion programs and employment growth overlapped, and there were anecdotes galore. Gloating and bragging in the media magnified the perceived effectiveness of southern business attraction–recruitment–tax abatement efforts. Given the rather low opinion of the South held by northern media and opinion leaders, the idea that the latter were eating New England’s lunch rubbed salt into textile-induced wounds. By decade’s end, New England’s textile deindustrialization had become the New England Textile War.
Reaction of New England’s ED
Perhaps a more interesting tale was how New England responded to perceived southern economic development imperialism. Obviously, New England chamber industrial bureaus proved unable to stem the outflow of spindles and looms from New England plants—or do anything meaningful for textile firms that either went bankrupt or were closed by their owners. In 1921 the Boston Chamber of Commerce, Bureau of Commercial and Industrial Affairs published a booklet, The Industrial Supremacy of New England, which defended New England, its industries and business climate from perceived attacks by outsiders. It was more a “rally around the flag, everything is still ok” message: “Massachusetts has actually kept pace for a century industrially and in population … and Boston, its metropolis, has outdistanced safely some of its old-time rivals such as Baltimore.”10
In 1922 a manufacturers association, the Associated Industries of Massachusetts (AIM), began a decade-long campaign to counter claims that Massachusetts was in decline by generating favorable statistics and publicity. Through a series of reports and press releases throughout the 1920s AIM kept up a constant effort to present the Massachusetts economy in a most favorable light. When the New England economy reeled with its first series of plant closings, business leaders organized a “New England Week” in the summer of 1924. During this week a plethora of “industrial exhibitions, factory tours, public meetings and radio and motion pictures” featured the quality goods produced by the region’s firms and stressed that the region was still in sound economic shape. This effort was mostly focused on Massachusetts’s domestic audience, and should be considered as a business retention initiative.
The results of the business week were pleasing to the organizers, and they formed a permanent organization to continue these and other initiatives to promote and publicize regional success. Joining with many local chambers of commerce (which led the formal effort), utilities, railroads and business of all sectors in 1925, they set up a six-state regional council. In the following year (1926) the six New England governors (along with their chambers of commerce) gathered in Poland Springs Maine to formally empower the nation’s first public–private, multi-state EDO: the New England Council (NEC), which exists to the present. In the years after its founding, the NEC mounted a multi-faceted campaign.
[T]he organization: a) encouraged local manufacturers to adapt the latest management techniques and use laboratory research to aid in product development; b) sought to increase [private] financing for small regional companies, especially those producing technically innovative goods; c) promoted the area’s recreational attractions; and d) encouraged recovery efforts in localities hit by plant closures … The NEC mounted a wide-ranging and sophisticated public relations drive … use of the most up-to-date management and marketing practices as key instruments for improving the competitiveness of area manufacturers … the Council worked to create the impression that, despite problems in some industries, the region as a whole was prosperous, forward-looking, and a “good place to live, work and play.” … Thus the organization proudly announced that in 1929 it had issued 851 separate items on the economic progress of New England … reprinted in three hundred newspapers and periodicals in thirty-seven states. (Koistinen, 2005, pp. 4 and 10) If this were not sufficient, in 1928 the NEC successfully acquired a board seat on the newly formed American Industrial Development Council (AIDC).
Through the twenties New England sub-state governmental response was to work cooperatively with their local chambers of commerce. The earliest specific governmental response was the 1929 formation of the Massachusetts Industrial Commission, whose purpose was to “encourage the growth of commonwealth industries”. The agency appears not to have been well funded and, to our best understanding, mostly restricted itself to data-gathering and publication of collateral material concerning the state’s manufacturing assets. It was, after all, a Depression-era EDO. Still, Massachusetts had created its first formal state-level governmental EDO, and the textile war was arguably the chief factor.
Ron W. Coan 