Company Towns, Civic Infrastructure, and Economic Development

Introduction

Some cities develop organically because of natural endowments or geographic location; in contrast, the company town is created entirely by design.?In the United States, the company town phenomenon is geographically dispersed in such areas as Appalachia, the Western United States, and in industrial towns in the South and East.?Typically, there is an exploited natural resource, such as a mineral deposit or natural power source, and a new community is constructed proximate to that resource (Reid 1985).?What defines a company town is that the company is the one who starts the community, pays for its initial development, and then has an outsized influence over the community.

There are several economic rationales for this approach: utopian social experimenting in reaction to urbanization caused by the industrial revolution, creating a labor market monopoly, improving company productivity by reducing turnover (Fishback 1992).??The result is often the same: industrial paternalism embeds itself in the community which inherits a particular local political culture dependent upon the company to provide for its needs.?Few areas provide insight into the interactions between the capitalist means of production (land, capital, and labor) and the role of technology and corporate attitudes “in forming the physical and social environments of communities” than the company town (Alanen 1979).?The hypothesis of this paper is that company town policies adversely affect a community’s local political culture which inhibits a community’s civic infrastructure which then negatively effects a community’s future economic diversification and growth.

This paper will be organized into the following sections.?First, the concepts of industrial paternalism will be explored.?Second, a general description of the history and rationale behind company towns will be provided.?Next, how civic infrastructure is instrumental in economic development will be reviewed.?Finally, conclusions will be drawn linking these two concepts.

?Industrial Paternalism

White (2004) describes Industrial Paternalism as a one-sided business relationship that can be best understood by exploring three concepts:?differentiation, deference, and dependence.?Differentiation is simply that there are different groups in the organization and community, i.e., owners/management and labor/everyone else.?How the superior views the subordinate and how the subordinates are supposed to view their superiors provide the basis for paternalism; essentially, the employer looks upon and treats their employees like children and the employees are supposed to view their superiors as sources of authority and be dependent upon them for the community’s social and economic survival.?This hierarchical relationship is extended to the residents of the company town.???

The concept of deference, as defined by Newby (1975) is “the form of social interaction which occurs in situations involving the exercise of traditional authority.”?Deference legitimizes and institutionalizes differences between groups, in terms of political and economic power, and this legitimization is the means dominant groups use to exert their influence.?An extension to this line of reasoning is that deference must be given not just in the work sphere, but in all spheres of interaction.?The concept of differentiation (that there are two groups or classes – workers and owners) must be carefully balanced with the concept of identification (all working for the same company) which bind groups together.

Another concept is that of the gift relationship or dependence.?The giving of a gift (e.g., a job, charity contribution, or a donation to a community institution) from a superior to a subordinate confirms the differentiation and the authority relationship.?The subordinate is no position but to receive the gift and reinforces the identification with and dependence upon the company, i.e., creating deeper social and moral obligations to the company.

There are eight features of paternalism and the unequal power relationship between the employer and employee (Abercrombie and Hill 1976 and Norris 1978):

1.?????Paternalism is largely an economic institution with an identifiable class of owners and ownership/management concerned with organizing labor as a means of production.

2.????This ownership/management class holds political power

3.????Paternalism is collective, whereby the subordinates are viewed and treated collectively.?Labor is simply an input into an industrial system that can easily be exchanged for another willing participant.

4.????The workings of the ownership/management class seek to alleviate the living conditions that the ownership/management class impose upon their workers.

5.????Paternalism can extend beyond individual firms and become institutionalized, perhaps similar to how feudalism or slavery were economic systems.

6.????Paternalism seeks the total involvement of all aspects of the individual.?There is no distinction between this relationship in or outside the workplace.

7.????The power relationship between superiors and subordinates are unequal.?The workforce is conditioned to be deferential and dependent.

8.????There is an asymmetry of exchange with the paternalist receiving most of the exchange benefit.?

? With an understanding of industrial paternalism, these features can be applied to the context of the company town.

?The Company Town

There were a few models of production at the beginning of the Industrial Revolution.?One was the house production model, where a household would be responsible for producing a certain amount of product.?This eventually gave way to the much more efficient factory model.?One of the features of company towns are that they tend to be located near resources, such as coal and other mineral deposits; or near natural power sources, such as rivers – and these sources are often located in geographically isolated areas with few residents, far from urban population centers.?Any local population would be insufficient to provide a viable workforce for this economic concern.?Therefore, a workforce would need to be transplanted into that area (Reid 1985).?Or, new factories could be located in urban centers which could provide a workforce.?Eventually these cities developed into urban slums with horrible living conditions.?These urban social ills fostered discontent among the masses who could revolt, such as the cases in Continental Europe.?Achieving social stability within the rapidly modernizing industrializing environment was necessary.?Hence the concept of the company town was born.?In the early 19th Century, utopian socialist Robert Owen imagined the establishment of industrial settlements that would improve living conditions (Burke 1971).?Further, a number of “enlightened industrialists” took the company town concept but adapted it to increase their profitability (Benevolo 1967, Garner 1992).

Storm and Kasperski (2017) identify three social contract typologies between the superiors (capital and management) and subordinates (labor) in a company town that correlate to the type of business the company is engaged in.?This social contract is related to the company’s “technical and economic features and extends into cultural manifestations such as town planning, architecture, and ways of life.”?

? The economic social contract is most related to extractive industries.?This social contract has harsh economic vulnerability and few possibilities for the employees to balance the power dynamic between them and the company.?The family social contract is most related to manufacturing and processing industries and reflects a patronizing family rationale, paternalistic hierarchy, mutual expectations of loyalty and care between the employees and the company.?Finally, the accountability social contract is most related to governmental and quasi-governmental entities.?It is detached from private enterprise profit seeking and marked by the employees’ commitment to a larger goal associated with patriotism.

Company towns share several characteristics.?Commonly they were towns built, financed, maintained, and operated by the company. ?The following section will briefly describe these characteristics topically.

?Housing and Community Design

The company town was marked by design similarities across different communities, mostly with the Garden City urban design.?The dominant dwelling space was a two-story house, mostly to attract married men who would be more permanent employees due to their familial obligations.?Most of these drab, homogenous units were rented to employees (Post 2005) with few opportunities for private property ownership.?There were also clear differences in the types and quality of houses for general workers and management/professional personnel (Mulrooney 1991).?In many company towns, the company would sponsor such amenities such as community bands and sports and recreational teams.

?Development Horizon

The company town was built in such an economical way due to the uncertain life span of the company’s presence.?In other words, the community-built environment was constructed in such a way as not to outlast the natural resource being extracted (Mulrooney 1991) or an industry/product life-cycle.?Many of the community facilities, such as health care centers, were not built for permanence or to integrate into the broader community once the company closes; they were viewed as having a finite life-span rather than being a long-term investment (Littlewood 2014).

?Social/Economic Characteristics

One of the notorious features of a company town was the company store that liberally extended credit to employees for their household needs, further binding employees to the company by means of debt.?The economic conditions of the company town were such that families could not thrive on company wages alone and had to rely on creative ways to earn extra money (Lalone 1996).?

While religion was encouraged, often pastors were part time (Post 2005).?The company would also donate land for churches and subsidize the operation of the church, e.g., helping with buildings, salaries, and money for the congregation.?This was the company’s way to encourage piety, submission to a higher power, and sobriety (Drobney 1996).?

Another social feature of company towns is segregation. Workers were often heterogeneous, meaning that the company would import cheaper immigrant labor.?Eventually, some company towns developed small ethnic or racial enclaves (Post 2005).?Similarly, there is a social pecking order within a company town.?On top are the company management and professional staff.?Below are mid-management and skilled labor staff.?Next are those individuals who work within the community but are not directly employed by the company.?Below them are what would generally be considered public-sector employees.?At the bottom of the social order are blue-collar or unskilled labor.?In company towns, management or professionals were often placed in a more desirable part of town with nicer homes, while labor was segregated to another part.?These five groups will typically be the recipient of different types of housing and community quality in a company town (Porteous 1974).?This segregation extends to other community institutions such as churches or schools (Porteous 1974).?This blatant segregation dismantles any social capital that may be built in the community.

?Education

The company would provide limited education opportunities for the community’s children as the company viewed the employees’ children as future workers (Reid 1985).???The companies would build schools which serve as a focal point and source of identity for a community (Drobney 1996).?However, the company would hire teachers and treat them like any other company employee (Post 2005).

?Contentment

Some workers were able to accept “paternalism as part of their working environment and used it to their advantage to better their lives.”?Which leads to the concept of contentment.?The company’s interests were served when the residents and employees were content, “not to better them individually or collectively outside the realm of employment” (White 2004).?And, if employees’ time was occupied with familial obligations along with community recreational and social opportunities, then residents would be both content and not have the time to complain against the company (White 2004).

?Community identity

In Germany, Volkswagon was able to create and transmit the desirability of working for the dominant company through community institutions.?The company was able to craft an identity whereby residents felt that they had it good and enjoyed a privileged place in society (Moonesirust and Brown 2021).?This concept of identifying and associating with the company further bound the employee to the company.

?Political Paternalism

Economic paternalism can extend to political paternalism if those who are economically dependent upon a company are compelled to vote a certain way (Abercrombie and Hill 1976).?Porteous (1970) wrote that the truest form of the company town is one that remains unincorporated.?

Institutionally, there was little to no civic government in the company town.?Allowing residents a voice in the community’s future would not serve the company’s interests (Post 2005).?Reid (1985) writes that the paternalist industry “emphasized the workers’ status as employee over that of citizen,” and that by controlling the local government institutions, the company was able to “present politics as subsidiary to company life.”?Oftentimes, foremen and other management types would organize workers to vote for company candidates (Reid 1985).?In Townsite, Newfoundland, Canada, a local school board reserved 3 of the 12 positions for company appointees.?Townsite residents could make suggestions for how to improve the city which had to approved by the company.??And, the Townsite “City Council” and administrator were all company appointees and employees, managing the town to suit the company’s interests (White 2004). ?By controlling the supply of housing, the company was able to directly control who lived in the community.?Further, the threat of eviction acted as an incentive to go along with the company (Mulrooney 1991) thereby keeping any dissent or labor organizing activities to a minimum.??

Because there was little property ownership there was no taxation in the company town.?The company deducted housing rent from an employee’s pay to cover items such as heating and hospital service; other public services were provided by the company.?It could be conjectured that as the residents were not obligated to pay taxes for public services, then they had no opportunity to be engaged in community resource allocation decisions.?The result was that many employees in this paternalistic atmosphere became both socially and politically lazy (Porteous 1970).?Many residents who worked in company towns saw it as simply as the place where they worked and not a place to establish deep ties. (Littlewood 2014).?

?Civic Infrastructure Compared to Industrial Paternalism

Civic infrastructure, also used interchangeably with civic culture, is nurtured in communities where multiple efforts to address community problems with engagement have taken root and become part of the locality’s character or way of doing business (McGrath 2019).?It is defined as a community working together to solve a problem by combining their knowledge, skills, values, and motivation to achieve a desired result.?It relies upon a system of interconnected issues, people, institutions within a given community (Conner 2019).?Other similar definitions emphasize the collaborative nature of different groups of people coming together to solve common problems.?

The non-scientific, but still insightful, Civic Index consists of seven components of civic capital: engaged residents, inclusive community leadership, collaborative institutions, embracing diversity and equity, authentic communication, culture of engagement, and shared vision and values (Linkhart 2019).?Each of these components stand in direct contrast with the features of industrial paternalism.?The table below presents the differences between these two concepts

? Civic Culture/Infrastructure Compared to Industrial Paternalism

Civic Infrastructure Concepts Industrial Paternalism Concepts

Engaged residents Orders and directives from the company are expected to be followed both at the workplace and in the community

Inclusive community leadership The community is treated like a collective; Political power is with the owners/managers

Collaborative institutions Very few institutions are allowed to exist in the community.?Those that do have a large company influence

Embrace of diversity and equity Differentiation between groups (positional, racial, etc.), community segregation, a shared unifying identity with the company

Authentic communication Exchange asymmetry between residents/employees and the company; the company receives most of the benefits

Culture of engagement The company works to alleviate imposed working conditions

Shared vision and values The community depends upon the company to provide for its needs

? With the juxtaposition of these concepts, the question becomes how a poor civic infrastructure can affect future economic development.?Civic capital can explain economic performance differences over time and across geography (Guiso et al. 2010).?Putnam (1993) identified a correlation between a strong civic infrastructure and good government. “Some regions (of Italy) were characterized by a dense network of civic organizations and an active culture of civic engagement, whereas others were characterized by vertical patron-client relations of exploitation and dependence, not horizontal collaboration among equals.”?And, those communities with more civic infrastructure were wealthier.?“Wealth is the consequence, not the cause, of a healthy civics.”

?Discussion

Not all company towns were created the same.?Some pursued noble ideals with the goal of providing a quality community for their employee/residents.?Any distinctions were the result of the company owner’s philosophy and the company’s ongoing management approach (Moonesirust and Brown 2021).?N.O. Nelson founded the city of Leclare, Illinois, as a social experiment founded on the principle of cooperation: workers were provided with dividends from the company’s profits, the company designed the community to high standards, schools were built and programs implemented to improve the minds of the residents, and there was a sense of cooperation between the company and the community (Garner 1971).?Other company towns were extremely oppressive.

Federal legislation started to undermine the foundations of company towns (Crawford 1999).?New Deal legislation authorizing collective bargaining across industries started to chip away at the company’s power structure.?Expanded mortgage programs for workers allowed them an escape path from the company town.?Companies sometimes completely relocated their facilities overseas in pursuit of low cost labor.?Because of these trends, many company towns eventually started to liquidate their property and leave their residents with a legacy of the industrial paternalism that the company created (White 2004).

? Yeum (2004) conducts a most-similar case study between two different companies, U.S. Steel based in Pittsburgh, PA, and Sinnippon Steel in Japan.?The author concludes that the labor-management/community relation perspective of each company influenced how it behaved when it came time to react to a slowing product market.?U.S. Steel had poor relations, closed its plants, and left redevelopment efforts to the local government and private developers.?Sinnippon Steel was more participatory in redevelopment efforts and sought to diversify its business operations and reassign workers to avoid mass layoffs.?It becomes clear that some companies have more concern for the communities they operate in and the people they employ.

If and when de-industrialization occurs, it initiates a cascading negative feedback loop (Biles 2017).?Employment levels drop, properties are no longer maintained, secondary businesses close (such as retail outlets) which result in depressed housing values.?The loss of tax revenue, both industrial and residential, places a burden on the remaining tax base resulting in higher tax rates.?Higher income residents tend to relocate to other cities thereby hollowing out the community.?Local crime rates rise and school quality declines which further exacerbates the situation.

?Conclusion

The original hypothesis posed in this paper is that company town policies adversely affect a community’s local political culture which inhibits a community’s civic infrastructure which then negatively effects a community’s future economic diversification and growth.?By exploring the concepts of industrial paternalism it becomes clear that this system prevents little, if any, form of civic infrastructure, which has been shown to be the cause of wealth-creating activities in communities.

Future research could be conducted to quantifiably measure this phenomenon beyond a qualitative analysis.?While civic culture is difficult to quantify, measures of economic activity could be taken on prior company towns as well as the attitudes of elected officials.

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