NEW YORK'S ECONOMIC ENGINES: SMALL MANUFACTURERS AND INDUSTRY CLUSTERS
It was not only the size of Gotham that mattered; New York's tremendously productive economy, and the kinds of industries it attracted, fostered industrial racketeering.
The Mafia followed the money. Recent studies show that “men of honor” in Sicily were concentrated in the areas with the highest production of lemons and sulfur—the island's most valuable exports. The cosche (clans) were entrenched in Sicily's villages before modern industry could take hold. Their omnipresence retarded economic development on Sicily. In essence, the Sicilian Mafia cannibalized the rural island.36
By comparison, the New York families thrived by skimming only a small portion of the profits generated by the economic engines of Manhattan and Brooklyn. Although New York was famous for its mighty banks, it was also a place that built things and fed people.37
New York City had an enormous number of small, value-added manufacturers. In 1954, there were approximately 37,500 manufacturing establishments within the five boroughs. The industrial heartland states of Ohio and Pennsylvania put together had fewer manufacturers (32,000 total). New York's manufacturing firms were incredibly small though: more than 70 percent had fewer than twenty employees.38 The garment industry was particularly famous for its tiny shops—and its racketeers. The muckraker Jacob Riis observed that the garment subcontractor was simply “a workman like his fellows…with the accidental possession of two or three sewing machines, or of credit enough to hire them, as his capital, who drums up work among the clothing-houses.” Nevertheless, collectively, they produced the large majority of the women's cloaks and men's suits in the United States.39
1–3: Men moving racks of clothes in Manhattan's garment district, 1955. (Photo by Al Ravenna, courtesy of the Library of Congress Prints and Photographs Division, New York World-Telegram and Sun Newspaper Photograph Collection)
New York's small manufacturers crowded together in hives that were extraordinarily productive. “Is it not going too far to assume that congestion is an evil?” asked Edgar Levey, president of a title insurance company, at a municipal hearing. “Each trade is apt to huddle together in one center in as concentrated a manner as possible, the dry goods trade in one district, the machinery trade in another, the leather trade in another, and so on,” Levey explained. “Business people do this because it is to their advantage to do so.”40 Abe Feinglass, a union leader, made similar observations: “The fur industry was concentrated in a small area of 26th, 27th, 28th, 29th, 30th Street, 31st Street, and the whole area was fur because there is a need for being together, the auction, the lining people, the skin people, the fur people.” As Feinglass explained, there was “a unity of purpose that forces them together.” These men were describing, in their own words, what economists call “industry clusters” (famous examples include Hollywood's film industry, Napa Valley's wine industry, and New Jersey's pharmaceutical industry).41
New York's huge, concentrated consumer market supported a multitude of locally based, small service businesses and food companies. In the 1820s, Manhattan imported the modern restaurant in the form of a French establishment called Delmonico's. Middle-class and wealthy New Yorkers supported thousands of restaurants, cafés, and lunch counters. Moreover, less than 2 percent of New York's restaurants belonged to national chains.42
Southern and Eastern European immigrants collectively consumed large amounts of highly perishable foods, especially fresh fish, kosher meats, fruits, and vegetables. “Nearly 1 out of every 8 carloads of fruits and vegetables produced in the United States…finds its way to the markets of New York City to meet the needs of its millions of consumers,” reported the Department of Agriculture.43 Restaurants and retailers purchased most raw foods at centralized, wholesale markets within the city. As we will see, these became rich targets for racketeers.
NARROW STREETS AND BRIDGES
The proliferation of these kinds of industries and services within the environs of mid-twentieth-century Manhattan and Brooklyn led to widespread racketeering. New York City's seven million people and clustered industries overwhelmed its streets and bridges. Gangsters soon learned the importance of controlling the trucking and shipping of goods and materials.
As industries and workers gravitated to Lower Manhattan and the Brooklyn waterfront, they created transportation chokepoints. In 1875, the City Council warned that the “over-crowding of all the streets in this section of the city, with both pedestrians and vehicles, directly and indirectly connected with commerce, has become a grievous public evil, disastrously affecting all public and private interests.” After 1910, fully half the factory workers in the city toiled in firms located below 20th Street in Manhattan.44
In addition, by the 1920s, three hundred thousand automobiles were registered in New York City. Manhattan's outdated streets and bridges were inadequate for motorized traffic on this scale. The garment center between West 34th and 42nd Streets was chronically congested as trucks loaded piecework for contractors, and unloaded finished clothes bound for distribution.45
1–4: Traffic congestion on West 35th Street, 1927. Mobsters controlled trucking vital to New York's small manufacturers. (Used by permission of the NYC Municipal Archives)
Fast and reliable shipping through the city became critical for time-sensitive industries, especially clothing (as fashions go out of style) and food (as it spoils). Virtually all of the city's 37,500 manufacturers needed shipping companies to transport their goods to retailers. “The cost of transportation of merchandise of any and all characters, is a very sensitive point in the financing of virtually all of the most important business enterprises,” noted a police report.46 The Mafia leveraged these problems to its advantage. As we will see, the Cosa Nostra gained influence over the teamsters and longshoremen who moved goods through the city.
BULLYING THE LITTLE GUY
The small, locally owned businesses that proliferated in New York City were also much more vulnerable to gangsters than were large, distant corporations. For all their machismo, mobsters liked to pick on the little guys. They were easier to push around.
Small business owners were intimidated by the Mafia. New York's non-chain, independent stores were typically owned by families who still lived in the neighborhood and survived on thin profit margins. The Cosa Nostra could delay shipments of supplies, engineer labor problems, scare off customers, or physically threaten the owner and his or her family. When John Montesano got into a dispute with a mobster over his family-owned waste-hauling business, he quickly learned not to mess with mafiosi. “Don't you realize that they could put you out of business and they can hurt you in other ways?” warned a connected guy. “Don't forget, you have got kids.” Montesano quickly relented.47 “It was common knowledge that if you offended the Mafia you were dead,” explained Frank DiTrapani, a small businessman.48
Big business could counter the gangsters by pulling strings and hiring its own thugs. When the labor racketeer Max “The Butcher” Block was organizing for the Amalgamated Meat Cutters Union, he found that “it was big businessmen…who tried to get tough guys.” He complained that “cops gave us trouble because they were being paid off by the bosses.” So Block always started with the small, independent butcher shops. “The industries now have chain operations, and they're spread out all over,” Block later lamented.49
Nor was it just a matter of muscle. In the $60 million racketeer-plagued kosher chicken market, the A. L. A. Schechter Poultry Corporation was the single biggest company and, not coincidentally, the last holdout from the price-fixing cartel. With $1 million in annual revenues, the Schechter brothers could endure harassment, as when emery powder was poured into their trucks’ engines. When the industry was legally cartelized under the National Industrial Recovery Act during the New Deal and the Schechters were prosecuted for such new crimes as cutting prices, their lawyers could litigate the law's constitutionality all the way up to the Supreme Court, where they won a 9–0 decision striking
down the law in 1935.50
It is no accident that the Detroit Mafia never gained control over the Big Three auto plants. On the one side stood Walter Reuther, president of the United Autoworkers of America, a strong union with a well-deserved reputation for integrity. On the other side stood three of the most powerful corporations in the world. Mafiosi had little desire to confront either of them. To the contrary, it was Harry Bennett, the head of Ford Motor Company's Internal Security Department, who retained convicts to act as union busters on occasion.51
CONSPIRING AGAINST “RUINOUS COMPETITION”
Along with the stick of violence, the Mafia held out the carrot of restricting competition. Joe Bonanno was candid about his aim of limiting competition: “If two Family members are bakers, they are not allowed to own bakeries on the same block, for that would be bad for both their businesses. They would be competing against each other,” he explained.52
Bonanno's views fit comfortably with the prevailing sentiments of the business community at the time. From World War I through the New Deal, business leaders orchestrated a campaign to reduce competition throughout the economy. They often singled out the “ruinous competition” or “cut-throat business” in New York City. Businesses commonly used “trade associations” as fronts for efforts to restrict competition.53
Joining the chorus of the captains of industry were their counterparts in the labor unions. Though adversaries on other issues, business and labor agreed on the need to “stabilize” industries by artificially limiting competition. The International Ladies’ Garment Workers’ Union (ILGWU) declared that “only the strong and responsible associations of employers can be of assistance in stabilizing the industry.” The ILGWU decried the “situation that permits an easy entry into the business, and makes for the chaotic competition that has been the source of so many evils.”54
The Cosa Nostra engineered collusive agreements between trade associations and labor unions to limit competition. Bonanno boasted of his “connections” in the garment merchants association and the International Ladies’ Garment Workers’ Union and the trucking companies. “By putting all my connections in touch with one another, I could harmonize our activities in a mutually advantageous way,” Bonanno asserted.55 What Bonanno left out from his rosy account (and the collusive arrangement) are the would-be competitors shut out of the industry and the consumers who would have benefitted from lower prices. Nor does Bonanno mention the rank-and-file workers whose interests were often sold out by corrupt union leaders.
Trade associations with respectable names like the Brooklyn Fish Dealers Association, the Metropolitan New York Dry Wall Contractors Association, and the Boxing Managers Guild sprung up around the city. These were each fronts for organized crime.
RACKETLAND
By the time Sicilian “men of honor” arrived in New York City, there already existed an entire underworld of professional criminals. Gotham had long had a subculture of gonifs, confidence men, and extortion artists. Supporting them were professional fences for stolen goods, and the new specialty of criminal defense lawyers of varying degrees of ethics (more later on these “mouthpieces for the mob”). A popular booklet dubbed it all “racketland.” But the members of this criminal fraternity proudly called themselves “Good Fellows,” which mafiosi shortened to “goodfellas.”56 Indeed, many of the rackets that we now associate with the Cosa Nostra were actually variations of schemes used by earlier criminals.
The Cosa Nostra “bust-out” operation had its origins in arson scams of the early 1900s. Torching businesses to collect insurance was so prevalent on the Lower East Side that the press dubbed it “Jewish lightning.” In 1912, the New York City Fire Commissioner issued a report titled Incendiarism in Greater New York, which estimated that fully 25 percent of fires were due to arson. It called the area of East Harlem the “fire-bug” district where “more fires of a suspicious origin occur than [sic] in any other single territory in Manhattan.”57
The Mafia “protection racket” was a refined version of extortion ploys. In early Italian neighborhoods, “Black Handers” mailed letters to businessmen threatening harm unless they paid money. On the Lower East Side, merchants found their horses poisoned unless they paid tribute to Jewish gangsters.58 Extortion artists became subtle over time. “The fellow would go in there and simply remove his hat. It was understood that if the businessman didn't hand it over, they would retaliate,” said Peter Rofrano of East Harlem.59
Before mafiosi perfected them, “price-fixing territories” were organized by other groups. At the turn of the century, Chinatown tongs (quasi-fraternal organizations) helped to enforce a scheme to raise prices among Chinese laundries. When dissident laundrymen tried to cut their prices or encroach on the territories of other Chinese laundries, Chinese businessmen and their allies in the tongs sent agents to “persuade” the dissidents to honor the unwritten code of competition.60
THE POLICE DEPARTMENT
Crime syndicates flourished because the New York City Police Department (NYPD) as a whole did little to stop them. It was often difficult to separate the cops from the crooks.
The NYPD's large, decentralized patrol force became a font of corruption in the city. With sixteen thousand patrolmen by 1930, the NYPD was described as a “vast and complicated machine maintained in the City of New York.” Before computerized oversight tools like CompStat, supervision over this sprawling force was weak, and the opportunities for graft were vast. The police had authority to enforce any of the array of state and municipal regulations. Any cop on the beat could shut down a business for supposed regulatory violations, large or small, real or contrived.61
Patrolmen shook down small businesses for petty infractions. In 1894, the Lexow Committee investigation on corruption found that “men of business were harassed and annoyed in their affairs, so that they too, were compelled to bend their necks to the police yoke, in order that they might share that so-called protection which seemed indispensable to the profitable conduct of their affairs.” The Committee described the myriad ways small businesses were extorted:
Boot-blacks, push-cart and fruit venders, as well as keepers of soda water stands, corner grocerymen, sailmakers with flag-poles extending a few feet beyond the place which they occupy, boxmakers, provision dealers, wholesale drygoods merchants and builders, who are compelled at times to use the sidewalk and street, steamboat and steamship companies, who require police service on their docks, those who give public exhibition, and in fact all persons, and all classes of persons whose business is subject to the observation of the police, or who may be reported as violating ordinances, or who may require the aid of the police, all have to contribute in substantial sums to the vast amounts which flow into the station-houses.62
Seventy years later, the Knapp Commission (made famous by Frank Serpico) identified similar patterns. “The heart of the problem of police corruption in the construction industry is the dizzying array of laws, ordinances, and regulations governing construction in the City.”63
GANGSTER DOMINION OVER PUBLIC PLACES
The Mafia also learned how to game New York's sprawling, opaque, and unaccountable bureaucracy. By World War I, the city had 85,000 municipal employees; the number ballooned to 200,000 by the 1950s. Efforts by good-government progressives (derided as “goo goos”) to reform city agencies were frequently thwarted or backfired. In 1919, reformers lamented that “the effort to protect employes [sic] from removal for political reasons has resulted in giving them so much security of tenure that they have little or no motive to fear losing their jobs.”64 A later study found that “neither the city's civil servants nor Mayor…possessed much influence over the city's personnel system. In a sense, nobody did.”65
Perhaps the biggest failure of the city agencies toward organized crime was losing control over public property. On a congested island, taking dominion over public spaces was a means of power in itself. Time after time, the city lost control of public properties to gangsters. In 1922, a legislati
ve committee lambasted the Department of Docks for issuing berthing permits to companies that did not own any ships. Shippers had to make extortionate payments to shady companies just to berth on the docks. Issuance of permits to sell on city streets and marketplaces was a source of abuse, too. “It has been the apparently arbitrary power, which they give to the Commissioner to revoke permits and to approve transfers, which has facilitated the collection of graft and the attempts to do so,” concluded a committee on the wholesale food markets. Between 1930 and 1933, not a single person who applied for a newsstand license in the legal manner ever received one.66
NEW YORK'S FRAGILE INDUSTRIES IN SERVICES
All of these factors conspired to create fragile industries throughout New York City. Fragile industries can be defined as sectors of small businesses with characteristics that make them vulnerable to extortion and racketeering.67 Gotham had a wide spectrum of fragile industries that were preyed upon by gangsters. Small, local-service businesses were frequently targeted.
The most fragile was the pushcart peddler, who everyday fought for a spot on the street. An 1875 report warned that peddler overcrowding was “a great source of political corruption.” Pushcart owners paid graft to police to overlook regulatory violations and paid tribute to thugs to leave them alone.68 Mafioso Joe Valachi remembered the extortion of his own father by neighborhood thugs: “They would shake down the push cart peddlers…my father used to pay a dollar a week.”69
The Mob and the City Page 3
