WAR: THE UNSPOKEN ECONOMIC DEVELOPMENT STRATEGY
To think of war as a conscious ED strategy is outrageous and ridiculous—war kills and destroys. But it does also create and prompt disruption, aka innovation. The old saw that circulated during the seventies was the federal government, i.e. federal investment and transfer payments provided the Sunbelt not only with infrastructure, employment and population, but also with a new and fast-growing set of sector gazelles. The truth is that for the most part World War II, the Korean War and the Cold War drove federal investment. The federal government was the transfer agent, the arms dealer of regional change. Congress and the President expended an estimated $70 billion from 1941 to 1945 in the West—half of that went to California, which alone secured one-tenth of all federal expenditure in that period (Nash, 1985, p. 19). The section heading above may be crudely put, but the reality is that war presents both dilemma and opportunity for a jurisdictional economic developer—and WWI-era economic developers across the nation saw their opportunities and took them. The simple, brutal observation is that war prompted and facilitated American regional change in our transition era.
Industrial Decentralization
Industrial decentralization has been broached in our previous chapters. It has already been observed that Big Cities garnered more than their disproportionate share of war-related facilities investment and war contracts—they had an initial near-monopoly on war production facilities. The South captured more than its fair share of military facilities, and a good deal of manufacturing as well. The West in 1941 had only 8 percent of the nation’s value-added manufacturing, an incredibly low base which yielded extremely high investment/growth rates—but the raw numbers are still staggering.1 The real story goes beyond that: war production (and military facilities) jump-started, transformed, the jurisdictional economic base of most western cities with up-to-date, cutting-edge processes, equipment and hot-button military products. Pittsburgh made the steel, but Los Angeles made the planes and missiles, and Silicon Valley and Dallas designed the software/chips.
The Defense Plant Corporation (DPC) provided capital for 96 percent of new rubber plants, 58 percent of new aluminum plants, 90 percent of new magnesium plants and 71 percent of aircraft manufacturing facilities—almost all of which was west of the Mississippi. The DPC alone built 344 industrial plants in the West during the war, at a cost of nearly $1.9 billion (1940 dollars). Included were new complete steel mills in Provo Utah and Fontana California—the only ones west of the Mississippi. The DPC also erected the world’s largest magnesium plant, 16 miles from a little city (of 8400) in Nevada. A second processing plant costing $200 million was built in 1941 by the Reconstruction Finance Corporation (RFC) at the behest of Senator McCarren and the Las Vegas Chamber. The city’s population doubled during the five WWII war years, and at their height in 1944 the plants employed 15,000 workers, literally in the middle of the desert. The Metals Reserve Corporation invested in mines and metal production in California, Idaho, Nevada, Colorado and Utah. In Utah alone, by the middle of 1942, the military built ten bases, an R&D facility, three training facilities, huge supply depots, and repair and maintenance facilities;2 and stationed 60,000 military personnel and employed another 60,000 civilians (Nash, 1985, pp. 21–4).
In this war boom the cities/states that prospered most were those that housed existing industries. Seattle was already home to Boeing and possessed a naval shipyard; Los Angeles and Wichita with their existing aircraft industry; Houston built upon its chemical and energy sectors; and San Francisco/San Diego, with its military bases and logistics operations, exploded. Honolulu was going to be the home base staging area for any Pacific war regardless of what was, or was not, there. Gulf Coast cities were impossible for German U-boats to get to. The Air Force (General Davenport Johnson) as early as 1940 decided that “the difficulty of continuous flying training is in direct proportion to the distance north of … the 37th parallel” (Abbott, 1998, p. 9). The Transportation Act of 1940, passed at the behest of FDR and western/southern legislators, modified ICC railroad rate-setting that discriminated between regions— challenging for the first time in a half-century Pittsburgh Plus hegemonic rail shipping rates.
Western states built nearly twice as much combat equipment as would have been the case if supply contracts had been allocated in proportion to exiting industrial capacity … Its thirty two officially designed metropolitan areas received 88 percent of Western war contracts, absorbed 69 percent of federally-funded industrial facilities, and 41 percent of new military facilities. (Abbott, 1998, pp. 9, Table 3)
Industrial decentralization and military facility siting was only part of the story. If you are an economic developer and you don’t shoot your rifle into the air, nothing will fall down. If a city wanted a facility, factory, housing or contract it had to fight against other cities that were competing. The strategy usually centered on local chamber leadership, coordination and programmatic implantation of a long-term commitment to work with state congressional and military bureaucratic leaderships to encourage military approval, congressional authorization and budget appropriation. This was an iron, military–industrial triangle—at its best, an economic development iron triangle. A military–government agglomeration produces relationships across a number of service/ manufacturing sectors and firms.
From the local level sites were identified, acquired, cleared and even developed to facilitate the investment. Lobbying could take years. At its core, chasing military investment was a cluster/agglomeration strategy that any city, including one in the middle of a desert, could employ. Its spectacular success resulted from a reality that military/government investment was often a “platform agglomeration” or “cluster generator” that spun off companies, sectors, occupations, knowledge and even industries for decades to come. A platform agglomeration can create a culture—a way of life, a way of thinking. Key participants in a platform cluster are research/university (RAND) and research entrepreneurs/gurus such as Robert Millikan and Theodore von Kármán at Cal-Tech in the case of Southern California.
Each investment became “infrastructure’ for future innovation and investment. Perhaps the key to it all was hard, sustained commitment to the strategy and a local consensus to do what it takes, as long as it takes to make it work. That commitment certainly was made by San Diego and Los Angeles, and by other cities such as Houston, San Antonio and even Colorado Springs and Hattiesburg Alabama. Lotchin (1992, p. 353) cites a goodly number of other metro competitors who have also embraced this strategy, most of which are Sunbelt (exceptions include Hartford CT, Springfield MA, Bath ME and Rock Island and Quad Cities IL. Victory was not automatic. North Dakota and Wyoming failed despite, for example, the former setting up a business organization (the North Dakota War Resources Committee) and a pure business-led group (the Greater North Dakota Association), which hired a full-time lobbyist and scheduled regular meetings and tours with military decision-makers. On the other hand, Nevada’s Senator McCarran proved most effective.
The “Los Angeles Plan” demonstrated the type of commitment required to compete in these years. The plan revolved around the chamber and its Washington lobbyists. A formal record-keeping operation kept the chamber aware of which plants among LA’s 6000 factories could be converted to war production. The chamber maintained a contract with the Defense Distribution Service to keep that government agency informed of potential defense contractors in the area. This program became a model for other communities, and was part of the infrastructure of the military-fortress strategy. To curry favor, Los Angeles held special war bond referenda to finance construction of five US Navy ships. Los Angeles pursued the aircraft industry, which in 1939 employed about 20,000 workers. By 1943 it expanded to nearly a quarter of a million in Los Angeles County alone. Douglas, Hughes, North American and Lockheed located most of their national production in the Los Angeles metro area. UCLA created a new engineering program to meet the technical needs of the aircraft manufacturers.
Long Beach copied Los Angeles and expanded on its program. The Long Beach Chamber incorporated two subsidiaries—the Associated Defense Industries of Long Beach and the Long Beach Manufacturers—to carry out initiatives.
San Diego, San Francisco and Oakland were no shirkers. Their chamber-led programs diligently stalked/targeted key infrastructure initiatives such as airports and “defense highways.” The San Francisco Downtown Association financed a $150,000 contribution to the Salt Lake City (Utah) Chamber to secure federal approval for constructing a “Victory Highway” between those two cities; they competed with the Los Angeles Chamber that had established an office in Salt Lake City to build the same highway to Los Angeles (Lotchin, 1992, pp. 133–6). At the conclusion of the 1940 San Francisco Golden Gate Exposition, the Navy Department purchased the island which housed the exposition and built facilities that became part of the city’s wartime $3.99 billion in war contracts, $364 million in federally funded industrial facilities and $452 million in new military base facilities. Manufacturing employment during the war increased by over 100,000. The Bay Area built an estimated 26 percent of all ships constructed during the war (Abbott, 1998, p. 4).
Los Angeles was not alone in enjoying aircraft industry-related largesse. As early as 1916 surplus capital generated by the area’s oil and gas industry served as venture capital for locating aircraft manufacturing in Wichita Kansas. Over the next decade, entrepreneurs like (oilman) Jake Moellendick, Walter Beech, Lloyd Stearman and Clyde Cessna started new aircraft facilities.3 By 1929 a small Wichita “cluster” of ten aircraft firms employed 2000 workers and produced over 1000 planes (26 percent of the nation’s production). Most failed in the Depression, but Beech, Cessna and Stearman kept going, producing about 300 planes annually—and then came World War II. As early as September 1940, Wichita plants had military contracts worth $20 million. Employment soared from 2000 to more than 13,000 in less than a year, and then nearly quadrupled again to 60,000 before 1945. Effective lobbying in Washington by the newly formed Kansas Industrial Development Commission kept the aircraft contract spigot flowing. One of Wichita’s plants produced the Enola Gay, the B-29 which dropped the first atomic bomb (Shortridge, 2004, p. 252). Wichita’s population grew by 46 percent to 168,000 in 1950.
Phoenix offered the military a number of advantages, including year-round training in desert conditions and a protected inland location safe from enemy attack. With little fanfare the Phoenix business community and chamber adopted their version of San Diego’s public–private intergovernmental strategy to acquire military/defense related facilities (Carl Hayden handled the congressional end): “Business leaders offered many inducements and every form of cooperation.” By 1942 three army and six air bases (plus defense production plants) had been installed in the Phoenix metro area. Bradford Luckingham attributes subsequent Phoenix postwar expansion to “a multiplier effect” where early production plants “attracted others. Predominant were light and clean industries, especially electronics firms which flourished in the low humidity climates,” not clashing with the city’s critical tourism sector (Luckingham, 1983, p. 310).
Federal Government as City-Builder
Accustomed to nineteenth-century adventures of western Privatist city-builders, during WWII we meet up with city-builders such as the Defense Department and the Atomic Energy Commission (AEC). The earliest city-building example on a large scale was Henderson Nevada—a suburb, sort of, of Las Vegas. Henderson was a semi-desert/ small town where in 1941 the Defense Plant Corporation required Basic Magnesium Inc. to construct worker housing. At war’s end about 15,000 lived there, and in 1953 it was incorporated as a city. Today Henderson is a Las Vegas blue-collar suburb whose population exceeds 250,000—a “boomburb” of the seventies and eighties. Another example of federal military city-building was Richland Washington, located along the Columbia River.
Richland was built in 1943–44 to accommodate DuPont, then General Electric, plutonium from uranium-238 factories. The city-building was conducted by the ever-friendly US Army Corps of Engineers, who, after the 1943 harvest, evicted the local asparagus farmers, giving them 30 days to move out. Both companies jointly constructed the Hanford manufacturing facility, following which the Corps “attractively” designed accompanying housing and neighborhoods. At its peak during the war 51,000 lived there. Residents described early Richland as:
a carnival (with music played over the public address system), as a concentration camp (with barracks and guarded fences) and a gigantic bus station (where you wouldn’t … leave your luggage unattended) … Most of the workers (residents) left, pursued by “termination winds” that drove great clouds of dust … (causing) mass turnover in the workforce. (Abbott, 1998, pp. 22–3)
Fortunately, Richland enjoyed a “second wind.” After the war nearly 22,000 residents called it home. Today, Richland, with its still operating Hanford Plant, has matured into “the atomic age equivalent of a homey small town” of nearly 50,000.
Richland, of course, was not the only small town created to manufacture the atomic bomb. The most famous example of atomic bomb city-building is, of course, Los Alamos New Mexico—35 easily walkable (sarcasm) miles from Albuquerque. The site was chosen by such noted urbanists as General Leslie Grove and Robert Oppenheimer, because it was … well … nowhere (for its isolation). The predecessor of the AEC constructed the town—a closed community owned, managed and guarded by the US Army and now the AEC. Los Alamos (which means “cottonwoods”) is presently an elite, well-off community of 12,000, the most highly educated in America—nearly 12 percent of those above 65 being millionaires. It has become the poster child for knowledge-based economic development.
The Federal Government Jumpstarts Airport Development
In 1918 the US Postal Service with government-owned planes and army pilots offered the first air mail service. No private operator responded to Postal Service bid for services. Congress mandated Postal Service use of private carriers (1926) and installation of a national air navigation system, while prohibiting direct federal airport funding. Subsequent private airport development was rudimentary: runways leveled but not graded; a few buildings at one end and a few lights. Commercial air activity depended on federal contracts to deliver the mail (Altshuler and Luberoff, 2003, p. 124).
Entrepreneurs attracted to early commercial flight typically flew the planes—they didn’t form businesses; and conventional capital investment in this young, crash-prone sector was difficult to justify—like space travel today perhaps. An aircraft industry developed during the twenties, but aircraft design/technology in this period was little more than big engines on wings—with a propeller tossed in. The pilot’s seat could literally be on top of the gas tank. Customers were intrigued, but trains arrived on time and traveled on foggy nights. Into this private sector void jumped chambers of commerce.
The potential inherent in air travel and commercial flight pressed harshly on the tender sensitivities of our competitive urban hierarchy. “Be the first on your block to have an airport” was certainly one motivation behind chamber enthusiasm, but “you’d better not be the last on your block” was another. “Atlanta leaders mobilized successfully to ensure that their city, not Birmingham, would be the terminus for southeastern airmail service,” and Congressmen delivered the pork of Postal Service contracts to firms in their jurisdictions (Altshuler and Luberoff, 2003, p. 124). Dallas and Fort Worth argued for decades (until 1973) on airport-related issues. In Los Angeles, literally a dozen groups developed competing proposals for siting LAX. The victor, a site in the Inglewood area northwest of downtown, exposed what would be a major problem with 1920s’ siting decisions—they were too close to settled areas and would quickly be enveloped as the jurisdiction grew. Still, as late as 2003, 12 of the nation’s 31 “large hub airports” sat on expanded 1920s’ original sites (Altshuler and Luberoff, 2003, pp. 125–7, Tables 5.1, 5.2).
New Deal programs (WPA) pumped nearly $440 million into airports (estimated to be about 75 percent of 1930s’ airport capital investment). LaGuardia Airport was built using WPA funds. In 1938 the Civil Aeronautics Act (CAA) asserted federal oversight over the fledgling industry and, among other powers, set rates, airmail rates and standards, and restricted entry of new competitors. In short order commercial flying, a vital sub-state infrastructure, was transformed into a utility-like sector. The CAA established a grant program for airport construction. World War II transformed a commercial sector into a military sector critical to national survival: “During World War II, the federal government spent about $3.25 billion developing military airfields (about half of which it turned over to the states and localities after the war) and another $400 million improving civilian airports for wartime military use” (Altshuler and Luberoff, 2003, p. 125).
Federal military-related airport development wasted little time in becoming a critical local economic development focal point. Aviation-related industries and an aviation infrastructure were by wartime absolutely vital necessities for a community of almost any size. Communities without airports had to construct them in light of the huge increases in both passenger and commercial travel, and those communities with an existing airfield dramatically expanded capacity. Chicago provides a sense of the economic development-related disruption caused by World War II federal airportrelated activities. Chicago’s Midway Airport (10 miles outside of downtown and the nation’s busiest commercial airport in the 1940s) had to be either massively expanded or a new airport developed. Four sites contested for a new airport. A site owned by the army, the Douglas Aircraft site (17 miles from the business district and requiring substantial highway construction), beat its rivals after the army was convinced by local Congressmen to donate the site to the city. Cities across the nation could tell similar stories—and that is how much of our current urban airport infrastructure came into being.
Ron W. Coan 