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THE LOCALIZATION OF INDUSTRY

HOW IT STARTS; WHY IT GROWS AND PERSISTS

By Dr. MALCOLM KEIR

ASSISTANT PROFESSOR OF INDUSTRY, UNIVERSITY OF PENNSYLVANIA

"PILL-ALLEY "

ILL-ALLEY" is the college slang for a certain stately elm-arched street lined with colonial mansions. The name "Pill-Alley" is a recognition of the large number of doctors who live along that one avenue. The old college town is by no means the only place that shows evidence of the singular tendency for professional men to hang their shingles one beside the other. Nor is this peculiarity confined to the professions, for a similar liking for the neighborhood of their rivals is shown by retailers, wholesalers and even by manufacturers. Dentists as a rule hive in one office building, opticians open their shops along the same thoroughfare, department stores crowd about some one vantage point, wholesale leather dealers jostle each other in their neighboring warehouses, and wholesale wool merchants congregate near a common marketplace. Manufacturers, too, show the same tendency. More than three fourths of the collars and cuffs made in the United States come from Troy, New York; silver plate to a like degree is manufactured at Meriden, Connecticut; tanning is centered at Milwaukee, Wisconsin; and Paterson, New Jersey, is the home of silk manufacturing. So the story goes; a large number of the great and small industries of the United States are not scattered broadcast over the entire country, but are confined to one narrow locality. This fact is contrary to what common sense would seem to dictate, for apparently a business would be most assured of success where it had no competition in the immediate neighborhood, but in reality industry seems to thrive best where it throngs most. It is worth while, then, to find out how localization starts and grows, and what advantages it offers.

Some localized industries have started as a response to resources either in raw materials and power, or in unskilled labor. Others originated in particular places because they were near to their market, while a few by virtue of a monopoly control were permitted the choice of a desirable strategic location.

The presence of raw materials has been a potent factor in giving rise to localization. For example, Chesapeake Bay is

the greatest bed for oysters to be found in America, and, as a result, the metropolis of the Bay, Baltimore, does more than two thirds of the oyster-canning business of the United States. One might generalize and say that, as a rule, the preserving industries localize near the source of their materials. This explains the salmon canneries of the Columbia River, the wine plants of California, the grape-juice factories of northeast Pennsylvania or northwest New York, the sweet-corn canneries of Maine, the tomato canneries of New Jersey and the slaughterhouses of Chicago.1

Not only perishable raw materials, but also those that are bulky, heavy or fragile, tend to collect factories near the point of origin of the crude stock. Thus Pittsburgh, near the fragile coke of Connellsville, manufactures with this fuel eight per cent. of America's rolled steel; likewise in the Lehigh Valley heavy rock is transformed into the Portland cement used to build skyscrapers in New York and Philadelphia and other cities along the Atlantic coast. Similarly Muncie, Indiana, near to abundant supplies of natural gas for fuel, is one of the largest national centers of glass-making. The fruit jars known by housewives all over the United States are manufactured there. Accordingly, in many different places raw materials of various kinds have been responsible for the fame of a locality in the industry that reshapes those raw materials into a more serviceable form.

It has frequently happened that industries called to particular places by resources in materials have remained where they started long after the local supply of crude stock has disappeared. The rubber-using factories of Massachusetts, Rhode Island and Connecticut may be taken to illustrate the point. In young America, when commerce was a source of large profit, many curious products from out-of-the-way regions of the world were carried to New England ports. Among other commodities, rubber from the Amazon entered Boston, Massachusetts; Providence, Rhode Island; and New Haven, Connecticut. The presence of this raw material gave rise to rubber-using industries in or around all three of these cities, the goods made ranging from overshoes to fountain pens. Yet crude rubber is seldom seen to-day on the docks of these maritime cities, for most of it now comes into the United States by way of New York. Despite the fact, nearly all the rubber overshoes, boots or arctics made in the United States are produced in the locality between Providence and Boston, because this was the original

1 Thirty-three and one third per cent. of the nation's slaughtering is done at Chicago.

VOL. VIII.-3.

region of import. A half-dozen plants now belonging to the United States Rubber Co., as well as the factory that turns out Waterman's fountain pens, are all in one narrow valley adjacent to New Haven. The Woonsocket Rubber Company is within hailing distance of Providence, while the Hood Rubber Company is representative of scores of others that girdle Boston. Likewise the plated-jewelry industry centered in the Attleboroughs of Massachusetts, just outside of Providence, Rhode Island, is there in response to the fact that gold and silver from Spain, Portugal and the West Indies once were borne into Providence by home-bound commerce carriers. Since the European war opened, attention has been called to the predominance in firearms manufacture of three Connecticut cities; namely, Bridgeport, New Haven and Hartford. These cities are now famous for rifles and revolvers because at one time western Connecticut produced a grade of iron from local ores that was better fitted than that found anywhere else for making weapons or edge tools. In all of these cases, the rubber mills, the jewelry factories or the firearms plants, the present-day greatness of the industries entirely overshadows the fact that they came to the regions originally because raw materials were easily secured at those points.

Water power is a resource that is responsible for drawing many industries into compact units around desirable power sites. Accordingly, we find that one third of the knit underwear made in the United States is furnished by a string of towns in the Mohawk Valley from Cohoes to Utica. This is due to the circumstance that the first knitting machine run by power was set up at Cohoes to take advantage of the large amount of power available at that place. American writing-paper manufacture centers at Holyoke, Massachusetts, because the reduction of rags to pulp requires a large amount of power, and the Connecticut River at Holyoke furnishes the greatest water power in New England. The falls and canal systems at Holyoke fixed the attention of engineers upon water-propelled mechanisms, and out of their studies improved turbines arose. As a consequence, Holyoke entered the field of machinery manufacture, so that later when Niagara was bridled, the great turbines that turn Niagara's energy into usable power were made at Holyoke.

The large number of rapids and falls in the Merrimac River attracted to its banks the largest cotton mill in the world at Manchester, New Hampshire, the largest wool mill in the world at Lawrence and one of the principal cotton manufacturing

cities of the United States at Lowell; no other stream in the world turns so many textile spindles as the Merrimac. Power then, as well as raw materials, is responsible for the origin of many localized industries.

An unused labor supply also frequently calls together a group of mills to take advantage of the opportunity to exploit this labor. Wherever an industry has collected a large working force of men, a situation favorable to industries using female labor is created because the wives, sisters, daughters or cousins of the male workers are glad of the chance to get a job whereby they may increase the family budget or attain individual economic independence. Hence silk mills have invaded the coal-mining districts to such an extent that Scranton, Pennsylvania, is second only to Paterson, New Jersey, in the manufacture of silk. Allentown, Pennsylvania, in the Lehigh Valley cement district, ranks abreast of Scranton in the silk industry because cement-making employs the men of the family while the silk mills give occupation to the women or girls. Industries of this sort are called parasitic because they utilize a labor force collected by some other activity.

It is apparent that some localized industries originated in a resource, or in an unused labor supply. Others have started because a large market near at hand gave the necessary incentive. The potency of a market in establishing a localized industry is seen in the case of the manufacture of agricultural implements. This industry has followed the grain belt westward; once along the Atlantic, then in interior New York and now in the middle west, manufacture and market have always coincided. Starting in Chicago, because that city has easier access to all the great agricultural states of the upper Mississippi valley, the industry has so expanded that to-day Chicago can claim a fourth of the entire nation's product.

But more than resources, more than labor, more than markets, more than any other cause for the start of a localized industry, we must recognize the power of chance. Fortuitous accident has been responsible for the feeble beginning of now strongly intrenched industries more than any other reason we may assign. Westfield, Massachusetts, now manufactures over two thirds of our whips because one irate farmer, incensed by his neighbors' pillage of his willow hedge to belabor their horses, cut the willows himself, bound them with twine and sold them to the erstwhile plunderers. That started an industry that has since made the town conspicuous. The position of Lynn in the shoe industry, the center of a circle of towns manu

facturing a fourth of the shoes worn in the United States, is partly due to the chance settlement there of a Welshman named Dagys, the most skillful shoemaker in the colonies. If Dagys had happened to go to Providence or New Haven, doubtless one of these cities rather than Lynn would now have Lynn's honorable station. German Palatinates, fleeing to America, but skilled in the art of knitting, by chance found congenial religious refuge in Penn's settlement of Philadelphia. Once established on our soil, they set about their accustomed trade and soon made Germantown (part of Philadelphia) famous throughout the colonies for its stockings. To-day, as a result, Philadelphia manufactures more hosiery than any other place in the country. So the list of illustrations might be lengthened, but it would prove only more conclusively that accident is the most influential factor in determining where a localized industry will come into being.

One other factor, however, must be mentioned; namely, monopoly. In modern industry we are familiar with the spectacle of one corporation or group of allied companies gaining such ascendancy over the whole trade that arbitrary decisions replace the usual give-and-take of competition. The will of one compact unit becomes the law for the whole industry. It is obvious that such a monopolistic control may choose the most desirable locations for its plants, and concentrate its efforts in a few most advantageous places. The limitation upon the number of factories and the large output in a few selected towns or cities bears a close resemblance to localization of industry. For instance, all of the oil-refining done in America is carried on in a half-dozen great plants, some on the Atlantic coast, some in the Central West, and some along the Pacific. Similarly, sugar-refining is confined to a few strategic points. The manufacture of shoe machinery is likewise confined to one town (Beverly, Mass.) in the heart of the greatest shoemaking district. In every case, the localization is entirely artificial and could be annihilated by an adverse court decision or the expiration of patents. Before the Standard Oil Company gained its supremacy, there was no localization of refineries; the American Sugar Refining Company is responsible for the localization of its industry, and if there were no United States Shoe Machinery Company, every machine-tool center in United States would have the possibility of entering that trade. So localization induced by monopoly is only as permanent as the parent corporation that gives it birth. It is undoubtedly economic and profitable, but if competition were given full sway, monopoly-localization could not endure.

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