The Company Town (25 page)

The strike served as a catalyst for a national “red scare,” with the U.S. Justice Department under Attorney General A. Mitchell Palmer raiding political meetings and arresting nearly 10,000 alleged radicals across the country. The government deported dozens of recent immigrants. Meanwhile, the steel strike lagged under the combined corporate-government attack, and the union called off the walkout in January.
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With that conflagration over, both the company and the city of Gary looked ahead to the 1920s, which they saw as fat times. In reality, the two were headed in different directions: The city, already a flawed effort, would by the end of the decade enter a period of decline; the steel industry would revive after the Great Depression and emerge in a period of unmatched productivity and prosperity.

As the original city infrastructure no longer sufficed, Gary authorities called for a raft of new building, including new streets and sanitation facilities and a new civic center. The city went so far as to contract for a professional city plan that would allow improved transportation, street layouts, and zoning—but the move came to a halt when U.S. Steel, the railroads, and real estate interests showed a distinct lack of interest. Even so, a building boom brought new skyscrapers, office buildings, hotels, and apartment buildings. The large Gary State Bank Building was erected at the corner of Broadway and Fifth Avenue; not far away were the twin Gary City Hall and County buildings.

In addition to being the home of the Gary Works, the city was becoming a commercial center for the region. By the end of the 1920s, there were 1,300 retail stores employing 4,000 workers. The presence of 1,800 hotel rooms facilitated convention business, and thirteen movie houses provided distraction from the world of toil.
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For steelworkers, the long workday gradually shortened despite the company's best efforts to fight off change. The U.S. Labor Department reported in 1920 that the twelve-hour shift was still as prevalent as it had been in 1910, while 25 percent of blast-furnace, Bessemer, and open-hearth workers were enduring seven-day weeks. Christian reformers at the Interchurch World Movement issued a voluminous report criticizing the long hours. U.S. Steel responded by circulating a pamphlet written by Reverend E. Victor Bigelow of Andover, Massachusetts, calling demands to shorten the workday “the hobo doctrine . . . [that] glorifies leisure and denounces toil.” In 1921, U.S. Steel stockholder Charles M. Cabot of Boston financed an engineering report that considered the impact of switching to a three-shift system of eight-hour days. It found that although the change would raise costs, it would also result in a better finished product. U.S. President Warren G. Harding endorsed the Cabot report and called steel men to the White House to discuss the matter. But once again
Judge Gary and U.S. Steel were unmoved: The corporation issued its own study showing that 60,000 more workers would be needed to make the change, and besides, workers didn't really want shorter days if that meant lower wages. U.S. Steel's seeming callousness and disrespect for a presidential request roused a further storm of public protest—and adoption by 1923 of a three-shift day across the steel industry.
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Gary's foreign-born workers still smarted from the harsh verbal attacks they'd received during the 1919 strike. Even those who had fought for the Allies or marched in the World War I-era patriotic parades had been branded as radicals and Bolsheviks. By 1920, immigrants represented 60 percent of the city's population of 55,000, with the largest groups being Polish, Slovaks, Serbs, Croatians, Italians, Greeks, Russians, and Hungarians. Some returned to Europe and warned their compatriots against coming to America. Then in 1924 Congress passed a law restricting further European immigration. The company turned to African-American émigrés from the Deep South—more than 2,000 were employed in Gary by 1920, and by 1930 they represented 18 percent of the population, the largest percentage of any northern industrial city. The Gary Works recruited workers from Mexico as well: Mexicans held 19 percent of semi-skilled jobs by 1928. Throughout the 1920s, steel production increased in Gary, where there were more than 24,000 industrial workers by 1930.

Meanwhile, the old problems continued: In 1922, the Indiana state housing department called conditions in the city's South Side among the worst in the state, citing overcrowding in the area's shacks and unsanitary conditions. The following year, a U.S. Labor Department report also decried South Side conditions. Gary began condemning some of the worst slums, but end-of-the-decade prosperity meant a further rise in population and even worse congestion. African Americans settled in what became known as the Central District—the old Patch and a new area created by draining the Little Calumet River. Segregated, slum housing predominated. Mexicans settled nearby in some of the worst housing in town; most of these newcomers were young, unmarried men employed as laborers at the steelworks.
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The corporation, which had built 1,250 housing units and advanced $4 million in building loans to employees before World War I, withdrew
from construction altogether. In the 1920s, private interests built 14,000 new residential units.

Parts of Gary were becoming increasingly dangerous. In 1925, the city experienced thirty-two murders, a rate that encouraged comparisons to Al Capone's Chicago. Businesses complained that it was impossible to get theft insurance for properties along Broadway south of the Wabash tracks.

The company's executives seemed to take as a given the town's uneven development—pockets of prosperity surrounded by larger pockets of poverty. Through the end of the 1920s, the corporation wielded considerable power in the city. Its power base was a gentlemen's organization known as the Commercial Club, and among the many company officials holding posts in the city government was mill assistant superintendent Ralph Rowley, who between 1910 and 1935 served continuously on the city council, was council president, and controlled the city budget after 1913. Land Co. chief Horace Norton, who was also head of the town's chamber of commerce, was a top leader of the city's Republican Party, which remained dominant even though its policies hardly favored the Catholics, immigrants, and blacks who constituted half of the population. In 1925, the victorious mayoral candidate Floyd Williams was backed by both the corporation and another increasingly powerful force, the Ku Klux Klan.

Judge Gary also took a keen interest in city affairs and during his occasional visits had many words of advice for Gary's political and economic leaders. He would tour the city with his wife and bask in the way his name was featured in many institutions' titles, including the imposing new Gary National Bank Building. In 1927, though, Gary died, a victim of the heart troubles that had plagued him for some years.
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In 1932, Myron Taylor, a tall, stern-faced, and equally formal gentleman of patrician ancestry, took over as chairman and CEO of U.S. Steel after serving for several years as part of a ruling triumvirate that included J. P. Morgan and financier George F. Baker. Although Gary and Taylor were both lawyers, their business careers differed greatly, mirroring the changing times. Judge Gary had risen as a skilled merger-and-acquisitions man, but Taylor's specialty was in helping streamline and rationalize operations at long-established companies, including textile firms in Lowell
and Newburyport, Massachusetts. With the onset of the Great Depression, Taylor brought in younger managers who encouraged innovation in finance, production, and employee relations.

In 1934, U.S. Steel's Chicago-area plants, including the Gary Works, turned out as much steel as was generated in all of Germany, the world's number-two steelmaking country. But behind that startling statistic lay an unhappy reality: Many U.S. Steel plants were obsolete and expensive to run. The company's managerial approach was antique, as centralized as the Vatican, and practically oblivious to such essential matters as cost accounting and technical innovation. Taylor responded by closing some obsolete facilities and forcing a merger of the corporation's two big subsidiaries, Carnegie Steel and Illinois Steel (which included the Gary Works), forming Carnegie-Illinois, but he also pioneered a change in employee relations. At first this involved developing a company union, an organization Judge Gary had shown no interest in. But following the 1933 National Industrial Recovery Act with its pro-labor Section 7(a), Taylor brought in a leading exponent of employee-representation plans, Arthur H. Young of the Rockefeller-subsidized Industrial Relations Counselors Inc., to produce such a plan for U.S. Steel. “Word has been passed around that company unions will suffice in meeting the requirements of 7a,” reported industry trade journal
Steel
. Questioned by a U.S. Senate committee, Young strongly advocated for the U.S. Steel program: “The works council plan is a supplement to the Golden Rule as given to us by the Carpenter of Nazareth,” he declared.

The company-union approach backfired. Under John L. Lewis, the new industrial-union umbrella organization, the Congress of Industrial Organizations, placed a priority on steelworker unionization, turning the task over to its Steel Worker Organizing Committee (SWOC). And SWOC adopted the crafty approach of encouraging militants to take over employee-representation plans. Many aggressive union leaders emerged within the supposedly tame groups, including at the Gary Works. By the end of 1936, it was evident that the company unions were either dysfunctional or surprisingly confrontational.

Moreover, the Depression and Franklin Roosevelt's New Deal had prompted a new union mobilization nationally—most notably in auto
production, which witnessed sensational sit-down strikes in Flint, Michigan. Taylor saw that the unionization of steel was probably inevitable, and after a series of private meetings with Lewis came to terms. By March 1937, Carnegie-Illinois had signed a tentative pact with SWOC that recognized the union as the bargaining agent for the company's workers and granted a $5 hourly wage along with the eight-hour day and forty-hour week. Within two months, the union had 110 contracts covering some 300,000 workers at U.S. Steel and other companies. Unionization was hardly complete—major holdouts included Bethlehem and the other “Little Steel” companies—but a corner had been turned at the Gary Works and other U.S. Steel plants. Perhaps not entirely coincidentally, that corporation's share of the nation's steel output rose from 35.4 percent in 1936 to 36.6 percent in 1937.
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The World War II years continued the expansion at the Gary Works. The federal government poured money into the steel industry, especially into new facilities near Pittsburgh, but Gary benefited as well with a $12 million expansion. By 1945, the Gary Works, with a raw steel capacity of 5.72 million net tons, was the most productive of U.S. Steel's facilities and the largest steel plant on Earth. By the late 1950s, production at Gary would approach 8 million net tons. Other companies grew as well, including Bethlehem's Sparrows Point works, which would pass the Gary Works to become the largest steel mill in the world in the 1950s.
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But steel towns were another matter. Bethlehem regarded the town of Sparrows Point as expendable, and in time most of it would be demolished to make room for factory expansion. In Homestead, the company tore down perhaps a third of the town during World War II to construct five new complexes. In Gary, the problem was instead a matter of neglect: In the 1930s, the U.S. Census Bureau had classified as substandard 20 percent of the city's white-owned housing and 50 percent of its black-owned housing. U.S. Steel encouraged the building of federal housing during the decade, on the grounds that it could house steelworkers making less than $1,000 per year, of whom there were many, according to company spokesman Norton. The federal government
financed hundreds more units built during the 1940s and early '50s, but many sections of town continued to be slums.