B005HFI0X2 EBOK (40 page)

FROM DIXIE TO THE SUN BELT

The greatest triumph of government-sponsored decentralization of production during the thirty glorious years was the incorporation of the South into the American mainstream. Before the New Deal the United States had been two countries—a developed or developing industrial core in the Northeast and Midwest, and a poor and primitive periphery in the South and West that served as a resource colony for the manufacturing region. The federally sponsored infrastructural and agricultural modernization of the South and West, followed by the civil rights revolution, turned these two economies into a single national economy for the first time. From Texas to California to Florida, the formerly impoverished hinterland gave way to the booming new Sun Belt. Immigrants, businesses, and investors poured into parts of the South and West that their predecessors in earlier generations had avoided. One southerner quipped, “Cotton is going West, Cattle are coming East, Negroes are going North, and Yankees are coming South.”
²⁵

In 1938, President Roosevelt explained to an audience in Fort Worth, Texas, one of the purposes of the Fair Labor Standards Act in creating a national minimum wage: “You need more industries in Texas, but I know you know the importance of not trying to get industries by the route of cheap wages for industrial workers.”
²⁶
Federal minimum wages, by making labor more expensive, forced southern planters to mechanize farming, while the farm-price-support system and federal aid to farmers helped them to carry out long-term investments in productivity. Many of the black and white farm laborers and tenants displaced by mechanization made their way to cities in the South and other parts of the country, where many found better lives even as some were trapped in urban poverty. In 1910, 89 percent of black Americans lived in the South; by 1960, that number dropped to 53 percent, with 39.5 percent in the North and 7.5 percent in the West.
²⁷

In 1920, nine of the ten largest cities were in the Northeast or Midwest. In 1990, six of the ten largest—Los Angeles, Houston, Dallas, Phoenix, San Diego, and San Antonio—were in the Southwest.
²⁸
A new technology, air-conditioning, accelerated the migration of Americans from the Northeast and Midwest to the booming states of the new Sun Belt like California, Texas, and Florida. But climate was less important as a factor than federal public investment. During World War II and the Cold War, the federal government built great numbers of army bases, air bases, naval facilities, and defense-production plants in the South and West. The Sun Belt was also the Gun Belt.

New Deal liberalism succeeded in its goals of raising the incomes of farmers and industrial workers and raising the wage and living standards of the South. Between 1919 and 1940, the income of workers in agriculture was only 47 percent of the national average; by 1950–1955 it had nearly doubled, to 76 percent.
²⁹
In 1930, per capita income in the South was only 55 percent of the national average; by 1960, it had risen to 78 percent of the national average.
³⁰

THE MOTORIZED HOUSEHOLD

While the electric grid, the interstate highway system, and the pattern of suburban development that they enabled provided striking icons of the second industrial era, the motorized appliances that colonized the postwar American household had an equally transformative effect on how Americans lived. The aesthetic conservatism of most Americans ensured that postwar houses would be built in styles that evoked one or another historical tradition—colonial, Tudor, or ranch style, the last based loosely on the hacienda architecture of Old California. But while most Americans chose not to live in futuristic metal domes like the Dymaxion house designed by the engineer R. Buckminster Fuller, behind the traditional facade the new American house had utility systems and devices that would have been found only in science fiction a few decades earlier.

Nothing changed life more than the convenience of indoor plumbing. At the beginning of the twentieth century, water had to be lugged into most homes from wells or creeks, at the risk of spreading typhoid or cholera. Ninety-eight percent of white households and 92 percent of black households in 1970 had running water in the home, compared to only 24 percent in 1890 (the disparity among blacks and whites in 1970 was the result of black rural poverty).
³¹

The self-cleaning oven and then the microwave, along with the dishwasher, the washing machine, and the drier, eliminated much of the drudgery of daily life. Between 1900 and 1975, the average time per week spent on meals and cleaning dropped from forty-four hours to ten, while the hours devoted to laundry fell from seven to one.
³²

In 1900, most families had to load stoves with wood or coal and lamps burned kerosene or coal oil. By 1950, more than 95 percent of households had electric lighting and central heating.
³³
Sixty-three percent of households had air-conditioning by 1987.
³⁴

Servants became as rare and anachronistic as vaudevillians and country peddlers. Thanks to labor-saving appliances, minimum-wage laws, and the restriction of mass immigration before its resumption in the 1960s, domestic servants became rare in the United States. In 1910, there were twenty million households and two million domestic servants. By 1970, only 1 percent of forty-six million households had a live-in servant.
³⁵

Postwar Americans enjoyed more personal space. In 1970, fewer than 8 percent of households had more than one person per room, compared to more than half in 1900.
³⁶
And they enjoyed more personal time. From an average work schedule for nonfarm workers of ten hours a day, six days a week, the workweek had declined to forty hours, thanks to greater productivity and New Deal labor laws.
³⁷

From the global level to the interior of the household, the second industrial revolution was reaching its maturity. Inhabiting a new structure built on the foundations of electricity and oil, ordinary Americans experienced a generation of unprecedented progress and prosperity.

THE VIRTUAL NIRA

The institutional as well as the physical underpinnings of the American economy were rebuilt in the New Deal era between the 1930s and the 1970s. According to conventional histories of the New Deal and the postwar era, the associationalist arrangements of the NIRA were forgotten following the Supreme Court’s destruction of the NIRA and AAA in the midthirties. Liberals, it is said, reconciled themselves to a combination of free enterprise and Keynesian demand management.

Nothing could be further from the truth. Keynesian demand-management policies were pursued inconsistently under presidents Truman, John F. Kennedy, and Johnson and hardly at all under Eisenhower. Nor was the postwar economy based on free markets, as those are usually defined. The major sectors of the economy were either organized as government-backed cartels or dominated by a few oligopolistic corporations. Unions were concentrated in the same sectors.

Following the demise of the NIRA in 1935 and the AAA in 1936, the Roosevelt administration and Congress quickly created a number of “mini-NIRAs” and “mini-AAAs” in a number of sectors of the American economy. As we saw in the previous chapter, an NIRA-like cartel was set up in the oil industry. Another miniature NIRA was created in the bituminous coal industry by the Bituminous Coal Conservation Act (the Gaffey Act) of 1937, which created an NIRA-like commission to supervise labor standards and prices. The Agricultural Adjustment Act (AAA) was ruled unconstitutional by the Supreme Court in
United States v. Butler
(1936), a year after the Court struck down the NIRA. But aspects of the AAA were reincarnated with the help of the Soil Conservation and Domestic Allotment Act of 1936, the Agricultural Marketing Act of 1937, and the Agricultural Adjustment Act of 1938.

With the exception of bituminous coal, oil, and agriculture, which was highly regulated and subsidized, most of the government-sponsored cartels were found in essential infrastructure industries where price volatility and ruinous competition could not be tolerated. As we have seen, the Public Utility Holding Company Act of 1935 replaced private electric-power consortiums with regional, publicly regulated utility companies. The Civil Aeronautics Act of 1938 created a price-and-entry cartel, labor standards, and a supervisory commission, the Civil Aeronautics Board (CAB). The Interstate Commerce Commission (ICC) cartelized the trucking industry with price-and-entry regulation. In telecommunications, the seven-member Federal Communications Commission (FCC) allocated radio and later license facilities, regulated rates, and oversaw the regulated monopoly of AT&T. Following World War II, 15 percent of the US economy was regulated by these agencies and others, including the Securities and Exchange Commission (banking and finance), the Federal Power Commission (natural gas, hydro dams, and nuclear energy); the Department of Agriculture’s Farm Bureau (agribusiness); and the Federal Maritime Commission (shipping).
³⁸

Far from being an embarrassing aberration, the NIRA was the unacknowledged blueprint for the prosperity of the Golden Age between World War II and the 1970s. Resurrected in the wages and hours laws of the NLRA, the price supports and subsidies of the agricultural sector, the infrastructure industries with price-and-entry regulations, and the oligopolies of the industrial sector with de facto tripartite bargaining among business, labor, and government, together created what might be called a “Virtual NIRA” structured much of the American economy after World War II until it was partially dismantled between the 1970s and 1990s.

THE AGE OF OLIGOPOLY

In concentrated manufacturing sectors like automobiles, steel, and rubber, employer-union agreements and the power of the dominant oligopolies to set prices made formal mini-NIRAs unnecessary. As in the depressions of the nineteenth century, the Great Depression produced greater concentration of industry as surviving companies devoured victims. Between 1947 and 1968, the share of value added in manufacturing of the two hundred largest industrial corporations in the United States rose from 30 percent to 41 percent, while their share of total corporate manufacturing assets increased from 47.2 percent to 60.9 percent.
³⁹
In 1976, the combined gross income of the three biggest industrial corporations—Exxon, General Motors, and Ford—exceeded the total income of all US farms, including government subsidies.
⁴⁰
In the same year, two companies—AT&T and General Motors—employed 2 percent of the US civilian labor force.
⁴¹

Television was dominated by the Big Three (CBS, NBC, and ABC) and the automobile industry by another Big Three (General Motors, Ford, and Chrysler). In steel, there were United States Steel, Republic, and Bethlehem; in chemicals, DuPont, Allied Chemical, and Union Carbide; in food processing, General Foods, General Mills, and Quaker Oats; and in jet engines only two major companies, General Electric and Pratt & Whitney. Observing the scene at the time, Adolf Berle and John Kenneth Galbraith agreed that most of the midcentury American economy was largely planned, by the public sector in the regulated industries and by private management in the industries dominated by corporate oligopolies.
⁴²

Many firms in the industrial sector benefited from large-scale privatization of government property after World War II. A significant portion of America’s postwar 1945 industry consisted of privatized government factories. During the war, the Defense Plant Corporation, a branch of the RFC, funded the construction of numerous industrial plants.
⁴³
At the time it was dissolved on June 30, 1945, the corporation owned 10 to 12 percent of US industrial capacity. This included 96 percent of the capacity of the American synthetic rubber industry, 90 percent of capacity in the magnesium industry, and 58 percent of capacity in the aluminum industry, as well as significant portions of the capacity in the iron and steel, gasoline, machine tool, and radio industries.
⁴⁴
The War Assets Administration, succeeded by the General Services Administration, oversaw the sale of these assets to the private sector at a fraction of their actual cost, providing a massive transfer of public resources to private industry. Among the beneficiaries of the government sell-off was the rubber industry. During the war, the federal government spent $700 million building fifty-one factories to produce the ingredients for synthetic rubber. These government factories were sold to private industry by the middle of the 1950s.
⁴⁵

America’s oligopolistic corporations were both stable and prosperous. Between 1954 and 1976, fewer than five of the one hundred largest industrial corporations lost money, with the exception of a two-year period.
⁴⁶

Private R&D in the United States was dominated by a small number of large, oligopolistic companies. In 1974, three-fourths of all industrial R&D was performed by 126 companies with more than twenty-five thousand employees. The four companies with the largest R&D efforts were responsible for 19 percent of all industrial R&D.
⁴⁷

The Brandeisian strain of liberalism did not die out completely. During World War II, the need for government-business cooperation prevailed but, following the war, the Truman administration adopted a vigorous antitrust policy. By 1949, nearly half of the one hundred largest industrial companies, including Alcoa, DuPont, and US Rubber, were confronted with antitrust prosecutions.
⁴⁸

The Celler-Kefauver Act of 1950 ordained that, to avoid antitrust prosecution, businesses could not engage in horizontal mergers with firms in related businesses. The consequences of this law for American business and the American economy will be discussed in the next chapter. Here it is enough to observe that trust-busting provided a minor counterpoint to the main theme of big business and industrial concentration in the 1950s and 1960s.