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  • Failure, Part 2

    Posted by Mitch Townsend on April 19th, 2009 (All posts by )

    It was a vital national industry, employing many thousands. The plants, although state of the art when built, were outdated. Years of poor management and outright hostile labor relations had not helped. Foreign competitors were taking market share, and US companies were belatedly moving production facilities south or offshore. Would you like to contribute your tax dollars reviving this industry?

    I was speaking, of course of the New England textile industry. After a bit of industrial espionage, American entrepreneurs copied and improved British manufacturing techniques. In 1793, the English immigrant Samuel Slater built a mill in Rhode Island to use the Arkwright method pioneered by his former employer. Francis Cabot Lowell toured British plants, memorizing as much as he could during the day and sketching and writing at night in his room. He and his associates raised money in one of the first public stock offerings, and built a mill in Waltham, Massachusetts, in 1814. The mill took in raw cotton, and using water power, produced finished cloth. It was profitable from the first, and it looked promising as a venture on an even larger scale. Lowell died three years later, but his partners named their new planned industrial city for him.

    The siting was brilliant at the time. It took advantage of an existing system of canals around the falls and rapids of the Merrimack River, and was connected to Boston by the Middlesex Canal. The high point was in the decades after the Civil War, and then Lowell began to decline. The decline had been gradual at first, but the inescapable fact was that there was no longer any compelling reason to make cloth there. Water power was not available when the river froze or flooded. The mills were converted to steam power, then to electric power from coal and hydro, but the cost of hauling in coal by railroad put them at a disadvantage (Fall River and New Bedford, having good harbors, held out longer). When the Great Depression came to Lowell, it just never left. There is an excellent write-up of Lowell’s industrial history here.

    Canal side, Lowell

    The Wannalancit Mills, seen from across the canal, showing the water intakes. It is now used for office space.

    End of story? Not quite. Lowell is still no garden spot, but there was a bit of a revival in the 1970’s and 1980’s. The region was part of the high technology boom, and although Silicon Valley was the eventual winner, there were enough people with ideas to support a decent high tech industry. With financial services, health care, and biomedical companies in the area, some of the old mill owners’ houses are being refurbished.

    Lowell, Wang campus

    This was the “campus” of Wang Laboratories. It is now an office park. Someone in there could be cooking up the next big idea.

    The point is that no amount of money could have saved Lowell’s textile mills. Once the initial advantage of water power was gone, the end could be delayed but not avoided. Neither the human nor financial capital was destroyed, in the end. First, manufacturing spread throughout New England, and then to the Midwest, as the principles learned in Lowell were applied to other industrial processes. Farming was never a good idea in the acid, rocky soil of New England, and this was the start of the shift from agriculture to manufacturing in the Northeast. The mills were profitable for many years, and the profits funded other ventures.

    Francis Cabot Lowell’s company, the Boston Manufacturing Company, closed in 1930. At that time, the industries that would take its place were not even imagined. Would they have ever come into existence if money and effort were still being used to keep the mills alive? Detroit is in about the same situation that Lowell was in around 1900. If General Motors closes (as seems inevitable), people will still drive cars. After all, we still wear clothing long after the Lowell mills closed. There just may no longer be a compelling reason to make those cars in Detroit.

    (Previous: Failure, Part 1)

     

    10 Responses to “Failure, Part 2”

    1. Shannon Love Says:

      The major changes wrought by technology is that fewer and fewer places now have any kind of natural advantage. Geography and climate which once gave some lands advantages in agriculture, power and transportation now count for little. You can build a factory almost anywhere in the developed world (and much of the developing world) and have the same access to power and transportation as anywhere else.

      Today, it is the political terrain that determines a regions success or failure. High taxes, invasive and ineffective government, unions or their equivalent restraints of free work now make a region a good place to start a business. I don’t think a lot of formally successful places have realized this.

    2. david foster Says:

      Interesting post. But was Lowell’s continued success really dependent on water power? I don’t think the majority of the southern mills were water powered, at least not for long, and few of them had the advantage of water-based deliver of coal. True, the availability of steam (and later electric) power meant that the “moat” represented by waterpower was no longer available to them, but this did not by itself imply their demise…*unless* they had become unduly dependent on this moat.

    3. Xennady Says:

      No amount of money could have saved Lowell’s textile mills so when the Great Depression came to Lowell, it just never left.

      Great. Let me provide the modern free trade equivalent:

      No amount of money could have saved American manufacturing so when the second great depression came to America, it just never left.

      After all, the factories were profitable for many years, and the profits funded other ventures. In China, Mexico, Japan, South Korea, etc…

      Pardon my bitterness but I’ve spent most of my life in Michigan and I just can’t convince myself that free trade has benefited this state. When manufacturing in Michigan literally went south in the 1970s-80s many folks pulled up stake and (for example) went to Texas.

      Much tougher to pull up stake and move to China. Of course we could always pool our unemployment checks and invent the industries of the future!

      Just like the people of Lowell did, right?

    4. Shannon Love Says:

      Xennadym

      Pardon my bitterness but I’ve spent most of my life in Michigan and I just can’t convince myself that free trade has benefited this state.

      Free-trade was great for Michigan in the period of 1945-1965 when the American automotive and other heavy manufacturing held the competitive advantage and wanted to sell in as many places as possible. Free-trade only began to hurt Michigan when the unions and political groups in the state refused to adapt to changing times. When they block the use of new technology and new methods or organizing manufacturing, they sealed their fates. Unfree trade could have protected them from a decade or so but eventually their unwillingness to understand that the golden years of little competition were over is what ruined them not overseas competition.

      When manufacturing in Michigan literally went south in the 1970s-80s many folks pulled up stake and (for example) went to Texas.

      Which tells you the problems were with the states and not the country. Something to think about. Texas manufacturing is still growing even in the face of competition from China and similar places. If Texas can compete then places like Michigan could if they chose to.

    5. Tyouth Says:

      No amount of money could have saved Lowell’s textile mills so when the Great Depression came to Lowell, it just never left.

      Well, a bailout would have saved them (at outrageous cost). They would have even been able to even show a profit for the first quarter or two after getting billions of taxpayer’s money.

    6. Tyouth Says:

      “Much tougher to pull up stake and move to China.”

      X, it wouldn’t be as tough to move peoples’ frames of mind to accept the realities (disappointing though they would be) of the requirements that would make Detroit competitive with Japan, Korea and China.

      One can suggest that something similar has happened in auto manufacturing in Mississippi and other southern states. One might say that some have not gone to “China” but “China” has come to us. Free market reality calls for adaptation; as Shannon noted, post WWII reality has matured.

    7. Arthur Kelley Says:

      Textiles left Mass and went to the third world. Which, at the time, was the south. The south is no longer third world. Now, and for the same reasons, textiles are leaving the south and going to yet another third world. Textiles will always be a third world industry.

    8. Mitch Townsend Says:

      @ Arthur Kelley:
      I was listening to NPR when they were doing a sympathetic piece on textile mills closing in North Carolina. It was hard listening to it, knowing what was ahead for the town. One of the people they interviewed said he was sad about it, but noted the irony: he had come there from Fall River, MA, and his parents had lost their jobs when the mills moved to North Carolina.

      @David Foster:
      There were practical steam engines in use at about the same time as Lowell was laid out. The problem was efficiency. Early steam engines did not put out enough power per ton of coal to justify their use outside specialized applications. One of their earliest uses, in fact, was pumping groundwater out of coal mines, where the fuel was abundant on site and continuous operation was a requirement. Both water and steam power improved in efficiency throughout most of the 19th century. Lowell used a belt and wheel method of power transfer from the start, an improvement over the cogs and shafts used in Britain. The Lowell mills later went from breast wheels to water turbines, but this was about the limit for water power. They began using steam power first as a backup source and gradually as the primary source as it became more efficient. However, it was just as efficient anywhere, so the industry was no longer tied to the rivers.

      @Xennady:
      I should have elaborated on it more, but part of the reason the mills left was because of poor labor/management relations. The original planned community used Yankee farm girls as the labor force, with wholesome social activities and a form of chaperonage. Ford tried something similar. Later, the Lowell mills turned to immigrant labor, just as Detroit did. Labor relations deteriorated, culminating in the “Bread and Roses” strike in nearby Lawrence, which spread to Lowell. The unions at the mills were affiliated with the IWW, so there was not just pay and working conditions to consider, but a doctrinal hostility to capitalism.

      As I said, people still wear clothing and drive cars. There are valid reasons why the cloth is not made in Lowell and the cars are not made in Detroit. The failings of both management (product development cycle 2 years longer than Japan’s) and labor (the 1998 strike over quotas) look far too familiar when seen from Massachusetts.

    9. david foster Says:

      Mitch…exactly. Nothing prevented Lowell from using steam power and, as you say, they did. The real problem was that anyone *else* could also use steam, so Lowell lost a “strategic moat,” to use the somewhat-hackneyed but still useful expression.

      There was probably no *inherent* reason why Lowell could not have been competitive under these conditions (although southern mills did have the advantage of proximity to cotton supply)…similarly, there was no inherent reason why Wang Laboratories couldn’t have been a leader in personal computers…they had plenty of electronics and software design talent, along with plenty of money. But it is very rare that a company that is successful at one stage of a technology or an industry is successful at the next stage, and I’m afraid this may also be true of geographical regions.

    10. Lexington Green Says:

      “…this may also be true of geographical regions.”

      Not true of Boston, or London or New York.

      All had rises and declines, and recreated themselves several times over their history.

      Still, these are the exceptional cases.