Abstract
Confronting Decline provides an account of how various economic actors organized to influence policymaking in response to deindustrialization in New England in the 1920s, ‘30s, and ‘40s. David Koistinen focuses on the decline of cotton textiles in Massachusetts, as cotton was the sector in which New England suffered the most serious job losses owing to the cheaper labor costs in the American South after World War I. The author argues that these responses fall into three categories: retrenchment, federal assistance, and economic development. Of the three responses, Koistinen argues that only economic development succeeded in arresting New England’s long industrial decline by demonstrating how the region’s economy turned around when it became the hub of an advanced electronics industry in the 1950s and ‘60s.
Chapter One provides an overview of the decline of the cotton textile industry after World War I. Chapters Two, Three, and Four provide rich and well-researched accounts of various individuals and groups involved in pushing for each of the three main responses to deindustrialization. Chapter Two focuses on retrenchment, detailing the manufacturers’ push for tax reduction and relaxed regulation on working hours and explaining how labor and reform groups supported the former and rejected the latter. Although allowing longer working hours would increase workers’ income, and improved competitiveness would slow job loss, union leaders stood firm to avoid pushbacks on other social legislations for fear of derailing their effort to push for further reforms in areas such as workmen’s compensation, unemployment insurance, and old-age pensions. Unions supported tax cuts for manufacturers to keep jobs in the region with far-reaching ramifications, inadvertently triggering local government spending cuts and shifting the tax burden to non-manufacturers. Despite substantial tax cuts for manufacturers, downsizing and plant closures continued in the 1930s.
Chapter Three focuses on federal assistance. It tells the story of how businesses, unions, and government attempted to work together to regulate the market to avoid the race to the bottom and the endless cycles of pay cuts, job losses, and declines in workers’ living standards that would trigger economic stagnation. The failure of voluntary output controls among producers prompted the industry to support legal control by setting national standards in areas such as working hours, wages, collective bargaining, and capacity regulation. Early legislative efforts failed to solve the problem, as demand remained weak, and more legislative battles followed. Despite the growing influence of organized labor in the favorable political climate under the New Deal, later legislation fell short of equalizing wages and working conditions in different regions, and New England mills continued to shut down.
Chapter Four details economic development initiatives by documenting the formation and operation of the New England Council. The author provides a nuanced account of the enthusiastic individuals involved in the effort and of how the region’s political leaders were brought in to deal with the conflicting interests of different industries and to conceal the dominance of business leaders in this initiative. The idea was to use the region’s technical expertise to improve the competitiveness of the region’s industries. It became apparent that service-sector companies, such as banks and utilities, were more committed when these companies, not the industrialists, were willing to provide funding to support a foundation to give technical advice to local industries.
Chapters Five and Six focus on a particular economic development initiative that involved making capital available to small businesses. Chapter Five details the difficulties faced by small businesses in securing capital and credits in the 1920s and discusses the establishment of the American Research and Development Corporation (ARD) and the obstacles that had to be overcome for the ARD to be allowed to provide venture capital to small technology firms.
Chapter Six tells the story of entrepreneurs establishing small electronics companies in an attempt to commercialize new technologies from their work in research facilities. The other part of the story concerns the commercial bankers who helped them expand. Despite the great potential of this industry, it was difficult to obtain financing because lenders could not understand the new technologies; and they were also plagued with poor management. The reluctance to lend to these high-technology startups ended when a loan officer of a Boston-based bank understood the industry’s potential due to personal ties. By the 1950s, Boston commercial banks were competing with each other to lend to these startups. These commercial banks were essentially functioning as venture capitalists by providing crucial management services beyond loans, like consulting and referrals. The author makes a convincing argument that New England’s economic revival, brought on by the emergence of advanced electronics industries, was spurred by the easy financing not available in cities such as Los Angeles or New York that also had numerous high-technology startups. The role played by development agencies in making these loans available, however, is not clearly established. Based on the author’s description, it appears that the banks found themselves left with no choice but to engage in higher-risk lending to these startups, since their existing sources of revenue and deposit from the textile mills had dried up.
While this success story may be used to support economic development initiatives in confronting industrial decline in the United States and around the world, one cannot help but wonder if this was not a historical accident unlikely to be repeated elsewhere. The lucrative contracts for these niche products were generated by a unique combination of the rapidly growing American economy and the expansion of the space program and the military during the Cold War. Financing efforts to develop high-technology industry have been tried by many deindustrializing economies. Unfortunately, industrial revival of this sort has been the exception rather than the rule.
In Chapter Seven, the author examines responses to the continued decline in manufacturing in New England in the decades after World War II, with businesses pushing for retrenchment, unions and liberal reformers pushing for greater federal assistance, and the state government becoming increasingly involved in regional economic development initiatives even as the political climate became more conservative. The author argues that the interests of various economic actors remained the same from the 1920s to the 1980s, thus resulting in the same responses being pursued by the same types of actors. One cannot help but notice that one set of actors in economic development initiatives prominent in the 1930s and 40s was missing in the later decades, though. They were the leaders whose businesses, namely insurance and banking, used to be tied to the prosperity of the region’s economy. Perhaps as financial globalization reduced their dependence on any particular locale, these business leaders expended less energy on regional economic revival, with the void being filled by state and local governments whose revenue continued to be locally based.
Confronting Decline is an excellent resource for understanding the key actors and major events in the attempts to slow or reverse deindustrialization in New England in the first half of the twentieth century. Koistinen’s painstaking research into the archives of this period paints a nuanced picture of the numerous efforts to halt industrial decline while mapping these efforts into three kinds of initiatives and attempting to assess the outcome of each. It provides a useful framework for future study of responses to deindustrialization in the United States and abroad.