The Company Town

by Hardy Green

  By the spring of 1935, bombings of union members’ houses, shootings of organizers, and a generally unrestrained campaign of violence led miners to conclude that it wasn’t safe to attempt organization in Harlan. Operators flagrantly violated Section 7(a) of the National Industrial Recovery Act, and the passage of the National Labor Relations Act in that year changed nothing. Foreshadowing the civil rights years, it took the U.S. Department of Justice to bring the mining companies around: In 1937, it prosecuted sixty-nine coal operators for engaging in a conspiracy to violate federal labor law. Kentucky state police were sent to Harlan expressly to protect union organizers. In 1938, Kentucky abolished the private-deputy system, and 65 percent of the formerly terrorized Harlan miners quickly signed up with the UMWA. At long last, the union won contracts covering 6,000 miners at U.S. Coal and Coke and six other firms. Other Harlan operators tried one final ploy—company unions. The phenomenon that had reached its peak elsewhere in the United States during the 1920s resurfaced at twenty-seven Harlan companies in 1937. In fact, in labor board elections held that year, seven such company unions won recognition as certified bargaining agents over the UMWA.44

  The years to come would see further union advances in wages and working conditions—along with more strike activity, including controversial clashes during World War II despite labor’s no-strike pledge. But the coal company towns were passing from the national stage.

  Several changes doomed the fortress/prison-style company town. New Deal labor legislation backed by the possibility of federal prosecution of flagrant scofflaws made widespread union organization possible. Key, too, was the end of the use of private deputies, upon whose depredations the operators had depended. Finally, the declining national demand for coal meant the number of employed coal miners fell from 15,864 in 1941 to 2,242 by 1961. Harlan County saw a mass exodus of onetime miners to Midwestern industrial cities. There would be further violent strikes in the 1960s and even in the 1980s.45 But the coal company town would play an ever-declining role in the drama.

  Still, something like the coal company town lives on in the copper-mining territory of the American Southwest.

  Perhaps the preeminent company in the region was for years Phelps Dodge Corp., now part of Freeport-McMoRan, the top U.S. copper producer in 2009. Originally a New York mercantile house created in the 1830s by two stern Calvinist families, Phelps Dodge long was guided by the Golden Rule, in the words of company biographer Robert Glass Cleland. Phelps Dodge developed what it saw as model communities in Bisbee, Morenci, Ajo, and Douglas, Arizona, and it offered workers company-welfare provisions such as hospital care, pensions, and voluntary insurance plans. But neither early company president James Douglas nor his son Walter, who succeeded him in the post, looked at all kindly upon union organization. In 1917, when the WFM and the IWW began a recruiting drive in the Arizona mines, Walter Douglas ordered a roundup of 1,200 union members by local vigilantes and the Bisbee sheriff. The detainees were then loaded into railroad cattle cars, trucked off to the middle of the New Mexico desert, and abandoned.

  The events hardly seemed appropriate in a country that had only recently entered World War I with the announced intention of making the world safe for democracy. President Woodrow Wilson ordered an investigation, conducted by a commission headed by no less than Felix Frankfurter, a future justice of the U.S. Supreme Court. But after hearing hundreds of hours of testimony about the events—and taking note of the U.S. military’s de facto custodianship of the stranded and suffering workers—the commission issued only a tepid report that recommended arbitration of disputes. Phelps Dodge executives were later indicted on federal criminal charges, but a trial court dismissed the charges.

  With the war’s end, an oversupply of already mined copper led to a slump in demand, idled operations, and industry consolidation. As sales revived in the 1920s, Phelps Dodge absorbed the holdings of rival Arizona Co., claiming absolute control over the Morenci area. It built an elaborate company store—in time, the multi-location Phelps Dodge Mercantile Co. would generate income in its own right—the lavish Hotel Morenci, and the whites-only Morenci Club featuring a bowling alley, library, and gymnasium. Although sales slumped again in the 1930s, the company anticipated prosperous years to come by building new housing and schools and a $100,000 hospital.

  Production revived with World War II. Open-pit work—involving the extraction of ore from a giant, tiered hole in the ground—had replaced underground mining in the 1930s. Basically, though, operations were the same: Thousands of pounds of rock were blasted loose and carted away, then crushed until fine, mixed with chemicals, and baked at 2,000 degrees to separate slag from copper. Mines and smelters in Morenci and Ajo ran full bore to meet wartime production demands, with a federal subsidy of $26 million to develop a new open-pit mine in Morenci. Uncle Sam’s watchful eye also allowed a union-representation vote in 1942, won by the Mine, Mill and Smelter Workers, which, however, did not win its first contract with Phelps Dodge until 1946. (Skilled-crafts unions already represented a small number of employees.) The successful negotiations made the local union president, charismatic David Velasquez, something of a legend among his fellow miners, and he would hold office for the next fourteen years.

  The company built hundreds of new housing units—with whites segregated from Mexicans by neighborhood—a swimming pool, a playground, a fifty-two-bed hospital, and a baseball diamond. It also constructed a new crushing plant, smelter, and power plant. By the war’s end, the company had spent $42 million on Morenci, which was becoming one of the most prominent company towns in the West. When some corporations were dumping their company towns—mining rival Kennecott, for instance, would sell its eight Arizona towns during the 1950s—Phelps Dodge seemed ever more committed to its wholly owned communities. In unincorporated Morenci, the company operated everything from the utilities to the bakery, and the mine superintendent hired teachers and other municipal workers and functioned as the town’s mayor. 46

  As the second-largest U.S. copper producer, Phelps Dodge at mid-century appeared to have moved beyond the rowdy ways of its youth, including its penchant for confrontations with labor. Its operations were as far-flung as Peru and the Philippines. Ajo, Arizona, would be perhaps the most carefully planned of its U.S. sites, with an Anglo sector that contained such public facilities as a company store and movie house and separate neighborhoods for Mexicans and American Indians. But strikes continued to be a regular feature of company life: In 1967, an industrywide walkout shut down production. Every three years thereafter, hard bargaining that often included a brief strike ended in a union contract. In these, there were no violent confrontations and no management attempts to evict or replace strikers. Phelps Dodge commonly shut down operations, using walkouts as occasions for retooling. Even more noteworthy, strikers continued to receive credit at the company store, where a purchase-rebate system provided a form of profit-sharing to many. (Phelps Dodge Mercantile also managed the company’s scrip system, known as “merchandise coupons.”)47

  In the 1980s, copper prices again fell, and Phelps Dodge laid off 100,000 salaried employees and furloughed its entire mining, smelting, and refining workforce. After five months, half of these employees were back at work, but management’s impulse to return to the days of labor confrontation and union-free operations was strong. In 1982, CEO George Munroe—a soft-spoken product of Dartmouth College, the Boston Celtics, and white-shoe law firm Debevoise & Plimpton—toured Ajo, Douglas, Bisbee, and Morenci, where he held a series of meetings with miners reminiscent of John D. Rockefeller Jr.’s 1914 visit to Colorado. But Munroe’s message was not exactly conciliatory: After describing the low wages of South American copper miners, he called for “a substantial and immediate decrease” in U.S. miners’ remuneration.

  The following year, 1983, other copper companies, including Kennecott and Magma, settled with unions on hard-times terms that stipulated no wage increases outside of cost-of-living agreements. Phelps Dodge, though, refused to g
o along with even this, calling for cuts in pay and concessions in benefits. When its thirteen unions—led by the Steelworkers, which had subsumed the Mine, Mill and Smelter Workers union—went on strike in June, the company continued operations in Morenci. At first, it depended only on supervisory personnel, but in August it urged strikers to cross their own picket lines and began hiring permanent replacements for all who stayed out.

  A near riot resulted. In a frightening confrontation, 2,000 demonstrators took on state troopers near the plant gate and threatened to overturn a bus of strikebreakers. Arizona Governor Bruce Babbitt got the company to agree to a brief moratorium on hiring replacement workers, but with federal mediation making no progress, in mid-August Phelps Dodge again began hiring—this time, aided by the arrival of the Arizona National Guard and hundreds more state troopers. Ten strikers were arrested and charged with felony rioting. Gradually, more and more replacements crossed the line, and the smelter resumed something like regular operations. Within months, the company announced that it was curtailing hiring, having recruited an entirely new and nonunion workforce.

  The Arizona events would provide the template for successful union-breaking tactics that would be replicated at numerous U.S. companies. “Greyhound followed us and used our techniques,” reflected Richard T. Moolick, company president and architect of the antiunion campaign at Phelps Dodge. A former geologist and product of the Southwest, the abrasive Moolick evinced none of the Ivy League and Wall Street graces that had eased Munroe’s way into the corporate suite. “Suddenly people realized, hell, you can beat a union,” Moolick went on. “We demonstrated that nobody was invincible.” Other imitative corporations came to include Continental Airlines, the Chicago Tribune, Hormel, International Paper, Eastern Airlines, and Caterpillar.48

  In 1985, with replacements constituting the entire workforce, Phelps Dodge workers voted to decertify their unions. The company had long since reclaimed its worker housing, evicting strikers during Thanksgiving week of 1983 and cutting off their medical benefits. Phelps Dodge’s Arizona operations were now completely union-free. 49

  Momentarily, copper appeared to be a terminally sick industry, with slumping prices along with less expensive and government-subsidized operations abroad putting a squeeze on U.S. companies. In 1985, the Wall Street Journal predicted that the U.S. industry would “be transformed permanently from a major world supplier to a marginal producer.” Nevertheless, Phelps Dodge, which had ended smelting in favor of lower-cost chemical-extraction and electrolysis processes, announced a return to profitability one year after its strike. And contrary to the doomsayers’ forecasts, by 1990 prices had risen and the company’s net income reached $455 million, on sales of $2.6 billion.

  Prices would fall drastically again in the late 1990s, nearly double by 2004 thanks to demand from China’s electronics and construction industries, then fall again in 2007, perhaps guaranteeing the takeover of Phelps Dodge by the smaller Freeport-McMoRan. That deal delivered the town of Morenci and other Arizona properties into the hands of new managers. The new company’s 2008 annual report announced a 50 percent cut in production in Morenci, and in January 2009, some 1,550 workers—half of the town’s labor force—were laid off.50

  What lies ahead for the town of Morenci, with its 1,132 company-owned houses, twenty-room Morenci Motel, and Merc general store? More of the same, as demand for copper waxes and wanes? Although it’s overlooked by many observers of the U.S. economy, Morenci offers solid testimony to the enduring presence of the dystopian company town in America.

  Meanwhile, less than three hundred miles from the Appalachian coal region, a separate company-town tradition emerged in the late 1800s and lasted into the late twentieth century: the textile towns of the Piedmont region, which runs from North Carolina down through Georgia. Some textile towns would outlast many coal towns and perhaps make an equally lasting mark on American culture. They were not as totalitarian as the coal towns—but neither might they be held up as the quintessence of the democratic American way.

  CHAPTER 4

  A Southern Principality

  We govern like the Czar of Russia.

  —A Carolina textile mill manager in the 1920s1

  He was just folks: a small, “round, ruddy-faced man with an arthritic limp who wandered the cavernous textile mill in a work shirt, back-slapping and jawing with workers,” in the words of one southern journalist. In formal portraits, he was a stolid and bespectacled figure in an off-the-rack business suit—seemingly a Rotarian bore you would never want to be seated next to at a dinner party. But he could be ferocious: In the 1930s, he stormed into Washington and, before a congressional committee, railed bitterly against New Deal “unjust economics dreamed up by a bunch of jackasses.”

  He was not a man of culture or even much learning, having dropped out of Davidson College at age nineteen to take a job as an executive in his father’s mill. Although his white-columned home in Concord, North Carolina, was spacious, it would be the envy of none of today’s hedge-fund billionaires. Clearly this was a man for whom the textile industry and work were everything.

  Such was his power in the near-feudal fiefdom of Kannapolis, North Carolina, that the Wall Street Journal once likened him to Monaco’s Prince Rainier. When the workers at Cannon Mills dared to go on strike, he got the governor to call in state troops to break the walkout and starved them into submission. “There was never a hint at compromise,” in the words of one historian.2

  But Mr. Charlie, aka Charles Albert Cannon, president of Cannon Mills Co. and the force behind the town in its glory years, was a benefactor in his way: Kannapolis was no backwater burg for cotton-mill rats. Along with its 1,600 tidy clapboard millworker houses and seven textile mills, the town was home to the company-funded Cabarrus Memorial Hospital, the Cannon Memorial YMCA, and the Daily Independent, owned by the Cannon family. With a population of 36,000 in the 1970s, Kannapolis was the largest unincorporated town in the state.

  All normal government functions—including utilities, police and firefighting, street maintenance, and trash collection—were within the purview of Cannon Mills. In this, it resembled the Appalachian coal towns that were, after all, only a few hundred miles away as the crow flies. Kannapolis, though, lacked the prison-camp attributes of the coal towns and more resembled the benevolent despotism of a Lowell or Pullman, albeit less luxuriously. Not exactly a utopia, Kannapolis was a tad like Scotia insofar as isolation made it a universe unto itself. Moreover, some profitable companies have made a practice of sharing their bounty with the hired help—but that wasn’t Cannon’s way, or for that matter the custom in the scores of southern mill villages across the Piedmont region. Not that Cannon Mills was short of bounty that it might have shared: Charles Cannon built the company into THE LARGEST MANUFACTURER OF TOWELS IN THE WORLD, as a massive illuminated sign atop the company’s Mill No. 1 declared.

  The mantle of company leadership descended on Charles in 1921, upon the death of his father and Cannon’s founder, James William Cannon.

  James Cannon started building his manufacturing empire in the late 1880s. A decade earlier, the blond, brown-eyed former errand boy for a Charlotte grocery store had, along with his brother David and two others, founded a general merchandise store in Concord, a town twenty miles northeast of Charlotte that had been home to cotton mills since the 1830s. This was a simple country store, and they were simple, rural people: James and his wife, Mary Ella, the daughter of a miller, rode around Concord in a small mule-drawn wagon, their bare feet hanging from the buckboard. Nevertheless, like many merchants, James soon branched out into buying cotton, and by 1888 he had a 4,000-spindle mill employing eight hundred hands. By 1892, Cannon was operating a second mill, at Cabarrus, and further plants followed in China Grove, Albermarle, Salisbury, and Mt. Pleasant. David became the president of the company, and James, who bought the cotton and raised the capital, served as treasurer.

  At first, Cannon produced only yarn, but the company soon began to sell
its own much-sought-after cloth—Cannon cloth—used to make clothes.

  In 1906, James, who had become president of the company, approached textile engineer Robert Dalton of the leading engineering firm of Stuart W. Cramer Co. “Meet me at Glass,” he told Dalton, referring to a whistle stop on the Southern Railway near Concord. Cannon had purchased six hundred acres of land there, and he had plans to build a new kind of textile mill—a terry-cloth towel factory, the first in the South. Cannon had made flat-weave towels in Concord, but the new plant would help popularize the absorbent fabric: Up to that time the rich had used linen towels, and poor folks resorted to flour sacks.

  Dalton drew up blueprints for the buildings and figured out what machinery would be needed. He helped Cannon arrive at $75,000 as the necessary capitalization. Cannon amassed the sum from his own savings and by turning to investors in Boston and Philadelphia. And he began constructing what would soon be named Kannapolis, home to a modern, electricity-driven cotton mill and a growing collection of millworker houses, which surrounded the mill in a circle. A five-room schoolhouse and a two-story, white-columned YMCA were completed in 1908.