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Owing Your Soul to the Company Store

Economists, preoccupied with theories of the corporation and the national economy, rarely ask what happens when a corporation monopolizes not only a product but the local work force, when a town is obliged to “consume” a company’s pollution, when one business controls a city by political intimidation. While such questions are largely ignored, local families and local owners increasingly become appendages of the absentee-owners, usually of national and multinational conglomerates. “He who was a leader in the village becomes dependent on outsiders for his action and policy,” Justice William O. Douglas said of this condition. “Clerks responsible to a superior in a distant place take the place of resident proprietors beholden to no one.”1

Large local corporations utterly dominate many towns simply by using their economic and political power, as Anaconda and Montana Power control the state of Montana, as seven paper companies own more than a third of Maine, and as hundreds of smaller corporations continue to control the company towns created by the expansion of new industries at the turn of the century. In mining, lumber, and textile regions, we still find many unhealthy, hazardous, grim and grimy company towns where citizens depend on one firm for their work, their homes, and often their daily shopping. “Saint Peter don’t you call me ‘cause I can’t go, I owe my soul to the company store.”

Political Domination

Pullman, Illinois, was built in the 1880s as a model town by George M. Pullman of the Pullman Palace Car Company. He invested $8 million in apartment buildings, parks, playgrounds, churches, theaters, arcades, casinos; the town won awards for its designs at international expositions. But Pullman in fact was tense with fear and suspicion, as company spies probed for tips on “union infiltration” or “dangerous” and “disloyal” employees. When the 1893 depression came, the company laid off workers, cut wages 25 percent, but did not reduce rents. After investigating Pullman in the 1930s, the economist Richard T. Ely concluded that “the idea of Pullman is un-American. It is a benevolent, well-wishing feudalism, which desires the happiness of the people but in such a way as shall please the authorities.”

Economists today apparently assume that towns like Pullman have largely disappeared. In fact some five million Americans now live in company towns—paper pulp towns in Maine, mining towns in the West, textile and papermill towns in the South. We frequently hear how one crop economies in poor countries can lead to political authoritarianism and economic instability, but American analysts often fail to comprehend that similar things can happen in parts of their own country.

Consider the town of Saint Marys, Georgia, nearly all of whose 1,800 wage earners are employed by the Gilman Paper Company and its business allies. Gilman interests control the city council, the town’s only real estate company, bank, and insurance firm, as well as all its lawyers. A populist insurgent, Dr. Carl Drury, recently challenged and defeated a Gilman-backed candidate in a countywide election for state representative. An assistant personnel manager at the Gilman mill reported that his boss “told me to go down to the bag plant, spend all the time and money I needed, and find out who was going to vote for Drury. All of the Drury supporters would be terminated.” The personnel manager refused, and was told, “Either you get that damned list or that’s it.” He quit. “It would have been suicide to stay after that,” he said. Another mill worker, however, wouldn’t anger his employer. “I have a wife, three children, and a mortgage. I am not going to jeopardize them just to give the mill a kick in the ass. The mill knows it and I know it.” After the election some people were fired or suffered business losses because they supported Drury.

Corporate domination, moreover, can occur in entire states as well. Everyone knows that DuPont is powerful in Delaware but few realize how powerful. The firm employs 11 percent of the state work force and manufactures 20 percent of the state’s gross product.2 The DuPont family controls the DuPont company through the DuPonts on the board of directors and through the family’s holding company, the Christiana Securities corporation, which also owns the company that publishes the state’s two biggest newspapers, the Morning News and the Evening Journal.

In Wilmington you find DuPont everywhere, not just in the DuPont Building, the company’s huge office complex. The Playhouse, Wilmington’s only legitimate theater, is owned by DuPont, and the Wilmington Trust Company, Delaware’s largest bank, is controlled by it. The recent county executive was a former DuPont lawyer, the father of Wilmington’s past mayor was a prominent DuPont executive. The state’s one congressman is Pierre S. du Pont IV; its attorney general is married to a DuPont and is the son of a DuPont executive; the recent governor, Russell Peterson, was a former DuPont research director. People connected with the firm or the family comprise a fourth of the state legislature, a third of its committee heads, the president pro tempore of the Senate, and the majority leader of the Delaware House.

One result is that the state legislature has failed to reform the tax system, which favors the DuPont firm and family by virtue of its extremely low property tax assessments and the lack of any tax on personal property owned either by individuals or business. In fact, a 1970 state law abolished one of the few progressive features of the Delaware tax system—the treatment of capital gains as ordinary taxable income. When Wilmington Medical Center, controlled by the DuPonts, recently wanted to move, the family made sure that a new center was built in the rich suburbs, not in Wilmington proper where poor people badly needed additional medical services. Five of the seven members of the county council, who helped make the site available, were either DuPont employees or members of the family.

Civic Welfare

As a result of the wave of conglomerate mergers in the late 1960s, many local enterprises have become branch offices of financial centers in places like New York City and Chicago. The acquiring corporation has national if not international interests, producing or selling goods in Birmingham, Alabama, or Providence, Rhode Island, but not wanting to become enmeshed in such places.3 For most of the branch managers who run the plants, the town is a temporary station on the way to success in New York or Los Angeles. “IBM is famous for never allowing anyone to take up roots…they’re constantly moving people around the country,” says New York Congressman Hamilton Fish, who has IBM facilities in his district.

The sociologist Robert Schulze, in a study of the managers of a big corporation, found that “their community roots were the most shallow if indeed it could be said that they had any community roots at all. The data led us to suspect that perhaps Cibola…was of no great importance to their lives.”4 Or as one corporate official told his local manager in Worcester, Massachusetts, “We couldn’t care less what happens in Worcester.” This indifference can have an effect on the life of the town, which often looks to the larger local firms to aid in local development. Their lack of interest can amount to a veto of new schools, housing, libraries, parks, hospitals.

When absentee-run firms do take part in civic affairs, they often mount rearguard actions to protect their own economic interests, threatening to leave the town or city, exercising a veto over proposals they dislike. Or they support local puppets who act in their behalf to keep down taxes—a kind of local imperialism which both paralyzes the civic will and engenders a hostility not unlike that which Chile must have felt toward ITT.

An early study documenting this pattern was conducted for a congressional committee in 1946 by Professor C. Wright Mills.5 Noting that by 1944 2 percent of all manufacturing concerns had employed 60 percent of our industrial workers, Mills asked, “How does this concentration of economic power affect the general welfare of our cities and their inhabitants?” To find the answer he studied three pairs of cities. In each pair was a “big-business city,” where a few big absentee-owned firms provided most of the industrial employment, and a “small-business city,” where many smaller, locally-owned firms comprised the community’s economic life. Here are some of his conclusions:

Big-business cities” witnessed sudden and explosive jumps in population, leading to real estate booms, speculation and unplanned suburban sprawl radiating around center city slums; the operating cost of municipal services was quite high. Growth in the “small-business cities” was more evolutionary and planned. Homes were better built, the city was better laid out, and municipal costs were lower.

A quarter of those employed in the “small-business city” were proprietors or officials of corporations; only 3 percent were self-employed in the “big-business city.” Plant shut-downs in bad times were obviously more catastrophic in a big-business city, since the local economy was so much more dependent on a few major firms.

Income was more equitably distributed in “small-business cities,” as an average of more than twice as many people earned over $10,000. Thus, while the “independent middle class thrives” in the small-business cities, it does not in the big.

From this evidence, as well as his study of such factors as death rates, the number of libraries, museums, recreational facilities and parks, per capita expenditures for schools and teachers, and frequency of home ownership, Mills concluded that “big business tends to depress while small business tends to raise the level of civic welfare.” Since Mills’s research there has been no comparable study of the relation between big business and urban life, while absentee ownership and the amount of aggregate economic concentration have increased along with the decay of American cities. In view of this, as well as the vast sums spent on the study of “urban affairs” in the universities, it is dismaying that Mills’s work on the local effects of corporate power has not been continued.

Industrial Pollution

There is little incentive to stop polluting when you control the local authorities who supposedly monitor you. Savannah, Georgia, and its mighty Savannah River, for example, have become garbage dumps for local industry. American Cyanamid, which produces among other materials the pigment to write the m’s on M&M’s, pours six million gallons of waste water into the Savannah every day, including over 600,000 pounds of sulphuric acid. The Union Camp Corporation, producing paper bags, dumps 37 million gallons of waste water daily. Union Camp has so fouled the air with its kraft pulp emulsions, according to two scientists at a local pollution conference, that the long-range community effects include:

  1. the town is a much less desirable place to live in;

  2. it offers less attraction to other new industries and commercial enterprises;

  3. property values and rentals in summertime areas have declined;

  4. reduced visibility causes hazards and inconvenience to travelers.

  1. 1

    Standard Oil Company of California et. al. v. United States, 337 US 293, 319 (1948).

  2. 2

    For an elaboration of DuPont’s control in Delaware, see J. Phelan and R. Pozen, The Company State (Grossman, 1973).

  3. 3

    Absentee-ownership flourishes in areas with weak unions, low-paying jobs, and lax environmental standards. For some states, this condition is becoming chronic. In Vermont nineteen of the twenty-two largest plants (by employees) are owned by outsiders; in New Hampshire, outsiders own sixteen of twenty. Fifty-five of the top ninety-nine firms in Maine are absentee-owned; and in seven southern West Virginia counties, twenty-eight big landowners own about one half of the land, with nineteen of the twenty-eight being out-of-state corporations. Nor is absentee ownership limited to domestic firms. American Association, Ltd. is a British multinational firm which owns 65,000 acres of land in eastern Tennessee. Insulated by distance and indifferent to adverse national publicity, it is even less accountable to the region it exploits.

  4. 4

    Schulze, “The Bifurcation of Power in a Satellite City,” in M. Janowitz, ed., Community Political Systems (Free Press, 1961). One study asked community leaders in three cities whether they thought branch managers were more or less interested in the community than were local businessmen; 95 percent, 79 percent, and 57 percent, respectively, said “less.” Cited in K. David and R. L. Blomstrom, Business, Society and Environment: Social Power and Social Response (McGraw-Hill, 1971).

  5. 5

    Small Business and Civic Welfare, Report of the Smaller War Plants Corporation to the Special Committee to Study Problems of American Small Business, US Senate, 79th Congress, 2nd Session, Doc. No. 135 (1946). See also a study that same year finding similar correlations between large scale corporate farming and farming communities, Small Business and the Community—a Study in Central Valley of California on Effects of Scale of Farm Operations, Report of the Special Committee to Study Problems of American Small Business, US Senate, 79th Congress, 2nd Session, Comm. Print No. 13 (1946).

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