How important is competitiveness? Consider history of Fall River and New Bedford mills

Border City Mills, a cotton textile company founded in Fall River in 1873. (Digital Commonwealth image)

It’s rare for a work of academic history to brim with as much contemporary relevance as Manufacturing Catastrophe: Massachusetts and the Making of Global Capitalism, 1813 to the Present. Through 200 years of manufacturing in the South Coast communities of Fall River and New Bedford, Shaun Nichols outlines cycles of growth and decline in multiple industries.

Current debates about “competitive” tax policy, immigration, the financial sector, worker shortages, and quality jobs all find counterparts in the ups and downs of whalers, spinners, weavers, sewers, and assembly-line workers of the past. While history offers no clear prescriptions, Nichols (a South Coast native with a Harvard Ph.D., now a professor at Boise State University) raises compelling and uncomfortable questions about regional economic development.

The story goes beneath familiar images of areas “left behind” by late 20th century deindustrialization, presenting instead a regional economy that has attracted new industries and jobs multiple times, with different effects on the wellbeing of its residents.

New Bedford and Fall River became prime sites for textile mills after the collapse of whaling in the mid-19th century. After the mills shut down in the interwar period, garment shops came in, replaced over the course of the post-World War II decades with light electronics and parts manufacturers. As these factories gradually shed jobs or wound down, however, the South Coast had trouble attracting a slice of high tech, and it now pins its hopes to varying degrees on arts, tourism, logistics, and offshore wind.

In other words, the crisis of deindustrialization is not the end-point of the story, but the low point of a cycle. By Nichols’s account, that cycle is driven by the story’s villain, the abstract figure of “mobile capital.”

A global economy, in which capital is free to move to more profitable investments, creates the ever-present possibility of a regional industrial crisis—if factories relocate toward cheaper labor, for example. This possibility generates pressure to keep and attract industry, and therefore jobs, by placating business demands for friendlier policies. Meanwhile, business owners have little incentive to invest in local industry for the long haul: Better to keep one foot out the door, either as an idle threat or just in case the winds change.

Mobile capital is a fickle provider, always tempted to chase outsized speculative returns in new places instead of keeping a good thing going at home. In the 1920s, faced with seemingly inevitable problems of overproduction and competition from the low-wage South, owners opted to liquidate textile mills instead of upgrading them, even after an initial wave of liquidation left the remainder profitable.

In bowing to the possibility of crisis, the mill owners created a real crisis for Fall River and New Bedford, which the communities patched up by attracting garment shops with cut-rate incentives. This is the next phase of the cycle, in which the pool of unemployed workers and capital that has been left behind can bring in new players. But beggars can’t be choosers. As Nichols shows, garment factories were sweatshops prior to New Deal labor standards and unionization.

On the flip side, prosperous businesses with good jobs are precarious. Following a boom in the 1960s, multinational conglomerates and private equity schemes “milked” area factories for profits that could be plowed into high-return ventures elsewhere, ultimately allowing the new facilities to depreciate just as the mills had. (Readers with MBAs will recognize this technique as a version of the “growth share matrix” approach to portfolio management, developed by the Boston Consulting Group.) As Massachusetts debates the role of private equity in the Steward Health Care debacle, and the possibility of regulating the sector more tightly, it is worth reflecting on the current episode as part of a longer and wider history.

Being a historian, Nichols does not argue that the past provides any blueprints for the future. However, he does give a very clear word of caution: Do not try to attract jobs to the region with corporate giveaways and cuts to social spending. As he puts it in closing, “these are time-tested tools to foster short-term growth and cannibalize long-term prosperity.” Given the currency of “competitiveness” as a policy keyword under the Healey administration, this argument is a needed reminder to think twice about what kind of competitiveness we want, and at what cost.

Not all incentives are created equal, of course. In Confronting Decline: The Political Economy of Deindustrialization in Twentieth-Century New England, David Koistinen distinguishes between strategies to attract businesses and strategies to spur development. The line is not hard and fast, but there’s a difference between (for example) Fall River’s fifteen-year tax exemption agreement for Amazon, and New Bedford’s attempts to take advantage of the local fine arts campus by making living and working space affordable (a more difficult task since the New Bedford location’s departure).

Nichols doesn’t argue against the latter kind of strategy in general. However, he does see the South Coast’s biggest attempt at it—the development of UMass Dartmouth—as an ambitious failure, producing an overskilled workforce in an area ill-positioned to take high-tech jobs away from the entrenched knowledge economy infrastructure of Greater Boston.

He might have gone into more detail on this question, as those involved in regional development are well aware of the needs both to lean on local strengths and to avoid reliance on quick-and-easy low-wage job growth. In recently defending the economic role of UMass Dartmouth in the South Coast, for example, economist Michael Goodman, an advisor to the university’s chancellor, pointed to distinctive programs related to its coastal location (as well as Portuguese language and culture, a result of the history narrated in Manufacturing Catastrophe).

Beyond just the South Coast, the MassINC Policy Center (part of MassINC, which publishes CommonWealth Beacon) has promoted the development of all of Massachusetts’s former industrial hubs – the state’s so-called Gateway Cities – over the past two decades. Their 2020 report on equity in development emphasizes the importance of building local “small-business ecosystems” to support jobs in a range of service and nonprofessional sectors employing a lower-skilled and less white workforce, instead of just “borrowing size” from urban-centered, capital-intensive, and less diverse industries like tech. These are points that they and Nichols presumably agree on, and it suggests that they are aware of some pitfalls Nichols has highlighted. Whether those points are sufficiently incorporated into the actual development of the Gateway Cities, and whether current and proposed development policies address them effectively, would be a helpful debate to open up.

Of course, Nichols’s focus is on the past. Does the South Coast’s history offer positive alternatives, or just bad news?

Manufacturing Catastrophe suggests the question could be rephrased as: What must happen for business, labor, and the state to cooperate? The moment of optimism in Nichols’s story occurs at the tail end of what historians call the New Deal Order, or the “Great Exception,” from the 1930s to the 1960s, in which it seemed that a capitalist economy could exist under the regulation of a strong state, with the cooperation of strong unions, providing enough growth for broad-based prosperity.

What this looked like in practice was a triangle of concessions. The state offered development incentives, and business leaders had acknowledged civic commitments. Unions accepted the tying of wages to profitability, and businesses accepted the need to bargain. Unions supported the opening of borders to trade and immigration, as long as the government promoted (and business adopted) fair labor standards abroad. Needless to say, this delicate balance broke down over the course of the 1970s and 80s under a variety of pressures.

Today, your average local elected official considering how to attract jobs to their area is likely to ask: do we really have a choice? Doesn’t capital have the upper hand, especially in relation to local and even state government? What political forces could rein it in?

While it is responsible for a historian not to shape the narrative too much toward practical conclusions, Nichols could have laid out an explanatory model in clear terms. This wouldn’t need to be a formal model, but one that would distinguish the abstract features of the industrial cycle from the historical peculiarities of any given turn of the wheel. He could then say how far he sees the various cycles as comparable or not, whether any historical conditions are likely to recur, and what people might be able to do to shape the future.

Doing so would have allowed Nichols to address more squarely the question of how to build a vibrant postindustrial economy, which bedevils the South Coast in the present, and which lies at the heart of the one-time deindustrialization narrative he rebuts.

Yes, deindustrialization and reindustrialization have taken place many times in one place. But demographic transition, the rise of the service economy, the concentration of higher education, and long-term productivity gains in manufacturing all combine to produce the possibility that the conditions governing capitalism from the days of the textile mills to the “last days of the working class” in the 1970s have passed on irrecoverably.

Nichols does refuse nostalgia for past times, arguing that factory jobs are not inherently good, and that only well-compensated work with legal protection and organized representation is truly worth fighting for. Regional planners typically seek to retain industrial jobs for this reason, but new jobs could just as well be unionized health care positions as offshore wind.

Right now, however, the prospects for that kind of work outside privileged areas are unclear. Millions of corporate dollars are flooding Massachusetts to convince voters that gig workers shouldn’t have basic employment protections. Organized labor, while regaining strength in already-unionized sectors (and making a stab at expanding to places like Starbucks), is still weak overall. The federal government is declining to allow asylum seekers to contribute to the economy, exacerbating an already-existing state budget crunch, while the fiscal base of most municipalities is under increasing pressure. Federal support for green energy jobs is a boon, but those jobs can’t go everywhere.

In the end, Nichols’s story does imply a practical upshot: If business is out of control, and if the state’s hands are tied, that means the burden is on workers and voters to organize each other to improve their lot.

This article first appeared on CommonWealth Beacon and is republished here under a Creative Commons license.

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