Economies in Motion

A few years ago, The Wall Street Journal featured an article on an unlikely subject: an abandoned textile mill in New Bedford slated for a future as a giant grow house for medical marijuana. ^{Footnote 3} Founded in 1888, the Hathaway Mills’ history is deeply interwoven with the city’s maritime past. The first Hathaway immigrated to the United States in 1630, and, by the eighteenth century, the Hathaways had entrenched themselves as major local landowners and sea captains. Humphrey Hathaway (1765–1821) built ships and ran a whale oil refinery. His sons Thomas Schuyler (1796–1878) and Francis (1803–1869) grew his business into a major whaling and merchant trade operation. The two bachelors also reared the orphaned children of their brother, Nathaniel, who died in 1836. Francis (1829–1895) and Horatio (1831–1898), raised by their uncles, also eventually entered and expanded the Hathaway business. ^{Footnote 4}

New Bedford whaling, and with it the Hathaways, thrived. By 1823 New Bedford dominated the American whaling industry, and America dominated the world in whaling. ^{Footnote 5} By its peak, just before the Civil War, New Bedford had amassed 320 ships, and was generating 4.8 million dollars in earnings and nearly two hundred thousand barrels of whale and sperm oil each year. ^{Footnote 6} The Hathaways, along with families like the Bournes, Howlands, Rodmans, and Rotches, became one of New Bedford’s leading, multigenerational maritime business dynasties.

New Bedford’s whaling hegemony, however, was not long for the world. Trouble came from multiple directions. First, a mounting scarcity of whales forced ship-owners to pursue longer journeys in space and time, increasing both the costs and risks of whaling. ^{Footnote 7} Second, the Civil War, and the havoc it wreaked as ships got caught in the crossfire, delivered massive losses to the New Bedford fleet. ^{Footnote 8} Finally, the advent of modern petroleum drilling and refining, beginning with Edwin Drake’s 1859 Pennsylvania well, sent prices and demand for whaling lubricants and illuminants spiraling downward. An ideal whaling voyage of three to four years might have yielded around four thousand barrels of oil—but that much oil could be pumped from a single Pennsylvania well in just over a day. ^{Footnote 9}

Whalers like the Hathaways jumped ship with determined abandon. After its peak in the mid-1850s, the New Bedford fleet continuously shed some 4 percent of its ships each and every year for the next fifty years, leaving only twenty-three still operating by 1900. ^{Footnote 10} Whaling collapse quickly metastasized into full-fledged economic crisis on the South Coast. As one frantic 1861 city report put it, “Many houses are vacant, and shops and stores in great number are standing empty, and our mechanics and citizens are seeking employment elsewhere.” ^{Footnote 11} By the 1860s, urban revitalization had become the paramount issue in New Bedford municipal politics.

Presaging processes that would play out over and over again in countless industrial cities across America, mid-nineteenth-century New Bedford municipal leaders resolved that the only way to counteract industrial dissolution was to redouble efforts to make the city more attractive to capital. City leaders began a vigorous campaign of infrastructure development, welfare cuts, and debt-funded city improvements. ^{Footnote 12} New Bedford spent over $500,000, for instance, to introduce piped water to the city, not for its “sanitary benefits,” as one 1861 municipal report made clear, but because the needs of thirsty steam engines had rendered it a “great mechanical necessity”: “Cities, like men, flourish and prosper only by their own exertions.” Those who could “comprehend the present crisis in our affairs” would see the solution: “Encourage the introduction of machinery … Water! water!! ... an ample supply we must have or cease to prosper.” ^{Footnote 13} Nineteenth-century urban crisis would come to serve as midwife to industrial redevelopment.

The whaling crisis had another crucial consequence: it also released the immense labor reserves these ships had brought to Massachusetts. After all, early Massachusetts textile interests—the Lowell Mills, in particular—had struggled under the combined weight of high labor costs and relative labor scarcity. With workers still largely tied to agricultural pursuits, Massachusetts’ mills simply could not afford to pay enough to retain a permanent workforce. They were thus stuck recruiting young women from local farms on temporary contracts, paying them 80 percent over prevailing British pay scales. ^{Footnote 14}

New Bedford’s whalers, however, had largely skirted these constraints. After all, by its very nature, the whaling trade allowed ships to essentially trawl the seas for labor—picking up workers as they made their way from port to port across the globe. In particular, the Azorean and Cape Verde Islands of Portugal emerged as frequent stops for both provisions and people. Indeed, one sailor made the connection between supplies and potential shipmates all too cruelly explicit during an 1855 stop at the island of Fogo: “In an hour came off with 10 hogs, 4 goats, a dozen chickens and a bunch of bananas—capt. came back at 10 p.m. bringing three new Portoguese, to be added to the rest of the live stock!” [sic]. ^{Footnote 15} Labor recruitment abroad became an easy means of keeping ships adequately staffed, while providing migrants free passage to Massachusetts. ^{Footnote 16} Whaling’s collapse thus fostered local governments eager to do almost anything to spur industrial development while also providing potential textile capitalists with the massive labor force the peripatetic whale-ships of a generation previous had helped carry to New Bedford.

In the short term, these factors helped southeastern Massachusetts stanch the flow of outbound mobile capital. Whereas New Bedford whaling capitalists had initially redirected investments into western railroad, real estate, and petroleum interests, the city’s efforts seemed to make hometown investment more attractive. ^{Footnote 17} Horatio Hathaway, for instance, largely abandoned maritime pursuits in the 1870s, and instead spearheaded the effort to organize the city’s fourth textile operation in 1881—the Acushnet Mills—along with directors Gilbert Allen (a whaler), Jonathan Bourne Jr. (a whaler), William Crapo (an admiralty lawyer), Francis Hathaway (his brother), Thomas H. Knowles (a whaling merchant), William Robinson (a whale oil candle manufacturer), Loum Snow Jr. (a whaler), and Thomas Brayton (a Fall River cotton dealer). Only Brayton had no connection to the city’s whaling past. ^{Footnote 18} The Hathaway Mills, also founded by Horatio, was organized just seven years later. All told, in the fourteen years after 1882, a new textile concern was incorporated, on average, every year in the city of New Bedford. New Bedford eventually went from America’s largest whaling port to its leading producer of fine cotton cloth.

Textile ascendancy, of course, ultimately proved as fleeting as supremacy on the seas. Beginning in the 1890s, and climaxing with the sudden drop in cloth prices in the wake of World War I, an emerging southern textile industry steadily increased competitive pressure on New England mills. ^{Footnote 19} Wages were lower in the South, and Southern boosters also worked tirelessly to draw capital southward, advertising the area’s limited protective labor legislation, alluring tax incentives, and “docile” workforce. ^{Footnote 20} Some ninety-three Massachusetts mills shut down in the 1920s. ^{Footnote 21} The Hathaway’s Acushnet Mills Corp. was liquidated in 1929, and its factories torn down two years later. ^{Footnote 22} The transformation was impossible to miss: by 1927, 67 percent of American cloth originated from below the Mason-Dixon Line. ^{Footnote 23} Overall, the decade after 1928 saw 80 percent of jobs disappear from New Bedford textile manufacturers. ^{Footnote 24}

It was economic crisis on an unthinkable scale. Homelessness, unemployment, and literal starvation ran rampant. ^{Footnote 25} As the president of the United Textile Workers of America lamented in the fall of 1931, these former centers of New England’s industrial dominance had become places of “destitution … misery and degradation”: cities of hungry workers and empty factories—“sad, sad places.” ^{Footnote 26}

Just as they had in the late nineteenth century, however, government and business leaders quickly found ways to exploit economic breakdown. In New Bedford, the local Board of Commerce set up an “Industrial Development Fund” in May 1927, into which local business owners poured tens of thousands of dollars in an effort to bring mobile capital back to New Bedford. ^{Footnote 27} The parallels with the similar transition undertaken by whaling capitalists some half century earlier were not lost on them: “Many of us can go back and remember the lull after the city’s whaling industry died out,” one of many Development Fund circulars read, urging that, just as whaling captains were forced to embrace “the manufacture of textile goods, using the capital that had been earned in whaling,” they too would have to reinvent both themselves and their community. ^{Footnote 28} Constantly touring potential industrialists around abandoned mills, the Board of Commerce offered all the accoutrements of crisis as bait: free factory space, low wages, and, of course, plentiful, cheap, and desperate labor.

The state of Massachusetts, equally desperate to attract manufacturers to its shores, also jumped into the fray. In 1937 the newly formed Massachusetts “Development and Industrial Commission” produced a gold-bound, hardcover volume––addressed to all “manufacturers who desire to re-locate existing manufacturing plants or establish new industries”––entitled In Black and White: The Facts Concerning Industrial Advantages in Massachusetts. In the introduction, the department commissioner proudly declared it “a curious, yet easily understandable fact that the ebb and flow of economic factors have again placed striking advantages in the old Bay State” and that “MASSACHUSETTS, pioneer industrial state … again spells OPPORTUNITY to the ambitious and far-sighted manufacturer.” A quick perusal of the seven virtues Massachusetts offered to mobile capitalists made clear the state’s “curious” yet “easily understandable” attractions: “unexcelled labor supply,” “freedom from labor unrest,” and a “state government, mindful of industry’s needs, friendly and helpful towards its manufacturers.” Massachusetts had 275,738 residents seeking employment as of April 1937, In Black and White advertised with a sort of artlessly ironic pride: an estimated 70 percent of the labor pool. ^{Footnote 29} The state of Massachusetts continued to distribute these kinds of books and booster materials throughout the late 1930s and the 1940s, always emphasizing the desperate condition of labor and the friendly posture of the state as a means of inducing inward mobile capital migration.

These efforts were remarkably successful, at least on paper. Fleeing textile mills were soon replaced by fleeing small electronics and garment factories, escaping the union strongholds of New York, Chicago, and Philadelphia. In 1930 New Bedford had twenty-six officially incorporated cotton mills and no garment shops; by 1941, the city had only fourteen cotton mills but sixteen garment shops. By 1945 the disparity was even more visible. The city now had only twelve mills but twenty-two garment shops. ^{Footnote 30} Moreover, the number of officially incorporated factories only told half the story: New Bedford and Fall River were also frequent homes to “runaway” shops that simply came for a period of months—sometimes weeks—in order to escape the hold of the clothing workers’ unions on New York and to reap the profits of cheap, non-union labor. ^{Footnote 31} After all, when the Massachusetts Commissioner of Labor and Industries investigated wages in local garment shops in the mid-1930s, he found “rates as low as ten cents and even in one case five cents an hour, and hundreds of girls with weekly earnings under $5.00.” ^{Footnote 32} Once more, a potent mix of plentiful labor, low wages, and state accommodation helped Massachusetts transform economic collapse into a new economic regime: the mixed manufacturing economy.

The Hathaway Mills was somewhat exceptional in this regard. In 1934 local booster Seabury Stanton took the helm, and, despite the fact that, in his words, “many New England mills were closing their doors and liquidating,” he decided that there was still “a place in New England for a textile company that had the latest machinery and capable management.” ^{Footnote 33} The Hathaway Mills managed to navigate the Great Depression intact, and was able to reap the profits of a massive upsurge in cloth demand during World War II and the Korean War.

Success, however, came with unexpected consequences. By the postwar period, many of these local mills were profitable enough that they began to reemerge as potential sites of capital investment, of particular interest to the rising corporate conglomerates of the era. In 1955, the Hathaway Mills, for instance, was absorbed into the Berkshire Fine Spinning Associates of Adams, Massachusetts. The “Berkshire Hathaway” corporation now sported some seven plants; 500,000 spindles; 12,000 looms; 5,800 employees; and a yearly production of 225 million yards of fabric (see Figure 1). ^{Footnote 34} From there, the mill welcomed the attention of a young, upstart investor from Nebraska, Warren Buffett, who saw potential in the undervalued firm. In 1962 Buffett began buying into Berkshire Hathaway at $7 a share. By 1965 he had achieved a majority stake in the company. He summarily booted Stanton—who had long made clear his personal commitment to keeping the mill open in New Bedford—and began using earnings to help diversify his own business ventures, quickly buying up the National Indemnity Co., the Illinois National Bank, Sun Newspapers, and Blacker Printer Incorporated. In the eyes of many workers, it seemed like Buffett effectively ran the Berkshire Hathaway mill into the ground to make the Berkshire Hathaway conglomerate a rousing success. ^{Footnote 35} Indeed, Buffett’s most recent letter to Berkshire Hathaway’s shareholders reports a modest 884,319 percent growth in per-share book value since 1964. ^{Footnote 36}

Figure 1

The Berkshire Hathaway Mills of New Bedford, Massachusetts, ca. 1945–1965.

Courtesy of Spinner Publications, New Bedford, MA.

The Hathaway Mills was not alone. On the whole, Massachusetts firms did not simply “move” to new locales in the late twentieth century. Instead, as Massachusetts industry prospered in the postwar period, local manufacturing firms were hungrily brought into the fold of emerging corporate conglomerates, and their profits summarily drawn off and pushed into further conglomerate expansion, often outside of the United States.

There is no shortage of illustrative examples. New Bedford’s Calvin Clothing was acquired by Palm Beach Co. in 1968, which was later acquired by Merrill Lynch Capital Partners in 1985, then sold off to Crystal Brands in 1988, which was later acquired by Plaid Clothing Group in 1992; the plant was shut down two years later. ^{Footnote 37} Another local factory, Morse Cutting Tools, was similarly bought out by the Gulf and Western corporation in 1968. Deciding to forgo plant modernization, Gulf and Western instead redirected Morse profits into further conglomerate expansion, ultimately inspiring a 1982 strike with a somewhat novel demand: increased corporate investment (posters with “STOP MILKING MORSE!”—alongside a cartoon of a man with a “G+W” hat milking dollars out of a cow—littered the city). A year later, Gulf and Western announced plans to shutter the plant. ^{Footnote 38} For his part, Buffett abruptly ended Berkshire Hathaway textile production after two decades, simply telling stockholders in his annual letter that “in the end nothing worked and I should be faulted for not quitting sooner.” ^{Footnote 39} Over and over again, these local plants’ profits were funneled into conglomerate expansion, only to be shuttered once either their infrastructure or profitability had been exhausted.

Nevertheless, there were those who saw political opportunity in the sight of abandoned mills like the Berkshire Hathaway. As the chairman of the Associated Industries of Massachusetts put it in 1975, “Politically, industry’s hour has come. It is an opportunity born of adversity, of course—of ‘crisis,’ in fact.” He nevertheless declared it industry’s moment to fight “the heavy taxes, high fixed costs, entrenched bureaucracy…[and] the chaos of social programs.” ^{Footnote 40} Crisis politics was back at work.

Consequently, the collapse of the mixed manufacturing economy did not harbinger the end of industrial Massachusetts. In 1973 business leaders successfully lobbied for a series of “pro-growth” bills (dubbed “Mass Incentives”) intended to attract manufacturing and research and development firms to the state. The investment tax credit was tripled, tax credits were added for new hires, and the state instituted a loss carry-forward tax provision. ^{Footnote 41} By 1979 a group of high-tech companies, the Massachusetts High Technology Council, had successfully pushed the governor of Massachusetts to sign a much-hyped “Social Contract”—a quid pro quo agreement essentially exchanging 150,000 new jobs for a series of tax cuts. ^{Footnote 42} Ultimately, the so-called Massachusetts Miracle and the advent of “high-tech” Massachusetts was founded on a familiar mix of business subsidies, tax cuts, and welfare rollbacks. A new economic regime again emerged from the ruins of another.

With the now abandoned Hathaway Mills facing a future as a potential marijuana grow house, the mayor of New Bedford personally appealed to Buffett in December 2013 to “rescue” the building that served as the basis of his now multibillion-dollar conglomerate. Buffett was unconvinced: “I don’t know what you’d do with that place.” ^{Footnote 43} The mill was instead demolished in January 2014. ^{Footnote 44}