Report by Hannah Martin

 

In 1953, Arthur Morgan published Industries for Small Communities, a book designed to make people aware of the importance and feasibility of establishing small industries in small communities. The one hundred and seven page volume was distributed by Community Service News as a companion to his 1945 entrepreneurial handbook, A Business of My Own. Both books emerged from Morgan’s long-term investigation and experimentation with the successful development of small communities. Industries for Small Communities focuses on the people and businesses of Yellow Springs, Ohio, the home of Antioch College. He was introduced to the village when he was named president of the college. He served as its president from 1920 to 1936, during which time he essentially saved the college from the brink of collapse, before moving on to work with the Tennessee Valley Authority (TVA) (Bernstein 2015). While working with the TVA, Morgan built the town of Norris. Norris did not exist before the TVA, and was created solely to house the TVA’s workers. What made Norris different was the well-rounded experience beyond simple housing and employment enjoyed by its residents. In 1943, he taught a correspondence course on small communities at the federal penitentiary in Ashland, Kentucky; it was this course that introduced a conscientious objector and future leader in alternative economies, Bob Swann, to Morgan’s ideas (Swann 1998). In the same year, Morgan founded Community Service, Inc., and its newsletter, Community Service News.

Morgan’s goal, through his life’s work and in the 1953 publication specifically, was to shift the prevailing mindset regarding small-scale industry. Then, as now, what Morgan termed “bigness” was glorified and small communities were rapidly losing young people to urban centers. Still, he knew that small businesses existed across the country, and that the communities that housed them could be vibrant and fulfilling places to live. Furthermore, small industries are vital to the success of the American economy as a whole; such independent firms serve as “laboratories and experiment stations” where progress can be made with relatively low risk (Morgan 1953, 13).

Early in the book, Morgan works to challenge the reader’s presuppositions about what factors make small communities successful:

 

“The distribution of small industries in small communities over the country is very uneven. … There appeared to be no difference in human quality which would account for such diversity. … The chief reason seemed to be social custom and the imitativeness of people.” (17)

 

He recognized that what most would consider a key to successful new ventures, pure creativity, is rare and not entirely necessary. The “impulse to imitate,” on the other hand, is widespread, and is often all that is needed to build a successful small industry (18). The problem is that people are unable to imitate what they cannot see.

Having identified this problem, Morgan affirms that small industries matter and make an impact beyond mere profit margins. Locally-owned businesses have local interests in mind, and they are likely to involve their employees more directly in the vital functions of the business (16). Most would agree that members of any community have a need to feel that they are more than just small gears in a larger machine over which they have no control; Morgan posits that small industries are best equipped to meet this need.

Still, Morgan finds that the development of successful communities is a result of more than simply building industry: “It means building a total life and environment in which interesting and competent people [would] like to participate” (25). When workers feel secure in their employment and invested in their work, they might risk purchasing a home, and they are more likely to put down roots in that community (16). That feeling of security and investment is related not only to interesting employment, but also to the worker’s involvement in community life: are there other like-minded people there? Are they seen as intelligent and important pieces of that social fabric? Do engaging activities exist outside of the 40-hour work week? Answering and acting on these types of questions is important for attracting and retaining employees and their families.

After establishing the need for and function of small industries as well as the relationship between them and the community at large, Morgan describes the various industries in Yellow Springs. He talks about their services and their business success, but he goes beyond reporting empirical facts. Several pages each are dedicated to discussing the businesses’ origins, their strategies for finding markets, and how they have changed over time. The personality of the business is emphasized, much more than their financial or capital achievements. Careful to avoid idealizing Yellow Springs or the idea of small industry, Morgan makes sure to include businesses and firms that have moved away from the town or have failed entirely. Some ceased to exist simply because their owners moved on to other fields or otherwise retired. A few relocated because of size constraints, facilities, or a change of management.

In these chapters, Morgan puts his own theory of replication through visibility to work; Industries for Small Communities uses fifty-four of its one hundred and seven pages to describe the industries in Yellow Springs, explaining how they found their markets, and why the ones that relocated or failed did so. Half of the book becomes a “local encyclopedia” of sorts for Yellow Springs, rich in the knowledge and experiences of area businesses. Because of its publication through Community Service News, the book reached community organizers across the country, potentially leading to the growth of small industries in those regions. If Morgan had been able to publicize his work through the internet, it might have attracted a wider audience, making the collection of industries bolstering a diverse set of small communities feasible.

Even without the ease of research facilitated by the internet, Morgan includes a smaller case study in a chapter describing Berne, Indiana as part of his argument that successful small communities and industries can exist anywhere. Berne is another small town “as far from a large city as it is possible to be in that state” (81). Settled by Swiss Mennonites, it relied heavily on farms for its economic production. Like Yellow Springs and many other small towns, it was losing its young people to urban areas with wider job prospects. The community needed a way to retain its young people, but didn’t have raw materials or “special skills.” Young women knew how to sew, so they started a business making boys’ play clothes (83). Despite the creative marketing of the Winner brand clothes (an engaging safety campaign packet was included in each purchase) and the success of the production line, young people were still leaving. The community mobilized again to identify and act on other opportunities for import replacement, one of the more successful being a leather furniture industry that exists to this day (84).

What Berne had that so many other small towns did not was merely “ordinary, intelligent, devoted people getting together and doing their best,” rather than particularly excellent leadership or luck with nearby resources (84). The industries in Berne are generally in the field of mass production, while those in Yellow Springs naturally lend themselves to small-scale enterprises. This difference did not impact the success of Berne industry; such an example “gives evidence that even such fields are not closed to honest, intelligent thrift and energy,” according to Morgan (85). Seeing these two examples of successful industries in small communities originating from different circumstances and involved in a variety of business sectors highlights that there is no one-size-fits-all approach. There are as many ways to be successful in small business as there are possible businesses themselves.

To be sure, small industry, today or in 1953, was not without problems. There is a generally unmet need for specialized services such as accounting, marketing, information technology, etc. among small business owners. Additionally, small businesses face the problems of succession, tax laws, war contracts, and the stock market, to name those identified specifically by Morgan.

Without using the exact term, Morgan calls for translocal collaboration. The specialized services needed are all available somewhere, but if management spends the majority of its time searching for these solutions, the rest of the business will be neglected. Often, even when the service can be identified, the cost is prohibitive (90). If, however, small businesses from across a region cooperated with each other, coming together to solve these problems amongst themselves, the whole network would benefit (92). To deal with the issue of succession, Morgan proposes thinking of businesses not as a “piece of personally owned private property,” but as part of a community’s commons (93). Again, he does so without using the term “commons,” but the seed of that concept is there. Morgan observes that local businesses contribute to the welfare of the community, and the development of each enterprise involves more than just the individual or family who directly owns it. He doesn’t offer any real solutions to address what happens to businesses when the original owner retires and no “heirs” step up to take over, but his argument begins to build a framework for potentially radical systems of ownership.

Modern solutions to the problems Morgan was theorizing about include the work of George Benello, a supporter of worker cooperatives, such as those in Mondragón, Spain. Benello brought the concepts of Mondragón, a network of cooperative businesses that share surplus and some forms of labor, to the United States (Krimerman 2015). This model spread: the ACEnetwork in Athens, Ohio, was directly inspired by Mondragón, which they describe as a network that “generated new businesses and increased quality of living for low income people within the surrounding community” (ACEnetwork 2020). The ACEnetwork provides “incubator” space for small businesses, warehouse, production, and kitchen facilities for those businesses, and resources for the business owners. A similar organization in Massachusetts, the ICA Group, focuses on “centering worker voice, growing worker wealth, and building worker power” through alternative staffing, and supporting transitions to worker ownership, often working specifically with child care providers (ICA Group 2020). Worker cooperatives and networks that share resources in the way that Morgan begins to encourage are still largely niche movements. Still, in the wake of the 2008 financial crisis, cooperatives have increased in popularity, particularly for industrial communities in the Midwest (Dubb 2009).

Despite the drawbacks to small industry, Morgan emphasizes that “one general principle concerning size of human organizations can be well maintained — it is that size should be no greater than is necessary for the general good” (italics original to the author) (96). On a small scale, economic stresses are “mere public irritants,” whereas on a larger scale, the same stress can threaten the entire social fabric of a region (98). Large organizations, industry or otherwise, have a tendency to move away from the central tenets of democracy as they increase (100). Morgan describes various economic checks and balances on large scale organizations, (government supervision, labor unions, investor interests, public criticism) but acknowledges that they are far from perfect, and “balances of power have the way of becoming unbalanced” (98).

For example, Morgan uses the comparison between American and Canadian policies regarding interstate branch banking “as an illustration of the fact that public policy should be guided by consideration of total social values, not simply by current financial profit to those in control…” (101). In 1953, the US did not allow interstate branch banking but Canada did. So, in Canada, there were four or five major banks with various branches, whereas in the US, there were local, in-state banks. Morgan identifies these independent banks as being better equipped to “deal with local business on the basis of first-hand acquaintance and final responsibility.” Such independent banks were affiliated with larger banks in urban centers which provided the advantages of bigness while retaining the local service and understanding of the community it was in. Morgan asserts, correctly, that if interstate banking were allowed in America, the country’s banking system would look much more like Canada’s.

In 1994 the Riegle-Neal Interstate Banking and Branch Efficiency Act was passed, repealing the Bank Holding Company Act of 1956, and allowing for exactly what Morgan argued against in his analysis of bigness. The 1956 act gave the Fed veto power over bank expansions by requiring that bank holding companies register with the Federal Reserve Board and comply with supervision (Mahon 2013). This essentially prevented holding companies from buying or establishing bank branches in different states, which was allowed to an extent under the McFadden Act of 1927 (Richardson 2019). The 1994 act allowing interstate branch banking also regulated banking nationally. It was largely opposed by small banks who would likely have agreed with Morgan when he wrote, “big-scale national advertising, high-pressure selling, large banking and credit facilities, chain stores and certain entrenched habits of sharp dealing, put small business at a disadvantage” (85).

On the final page of Industries, Morgan gives his readers an assessment of the America he saw in 1953:

 

“America is still a long way from achieving a philosophy of community, or a clear picture of what qualities make a good community, or an understanding of how to manage affairs to bring out the kind we do want. … Yet certain fundamental conditions are becoming clear. … One of these essentials is varied occupational opportunity… Another essential is income which will sustain a good standard of living.” (107)

 

Given that Morgan’s predictions for banking were true – when interstate branching was allowed, the idea that America could only become “economically great” through financial consolidation became public policy to the detriment of small community-oriented banks (101) – what can be made of his assertions about the future of American small communities and their industries? Have more small communities improved their job opportunities through home-grown industry? How many companies pay their employees living wages? Is there a coherent philosophy of community? If there were to be more collections of “industries for small communities,” would there also be an increase in the proliferation of those industries?

According to a 2018 fact sheet published by MIT, “no state’s minimum wage coves the cost of living based on estimates of the living wage tool” (Nadeau and Glasmeier 2018). This doesn’t dive into the details of which workers are being paid at least enough to cover the cost of living, but, at least from a policy standpoint America has not taken care of its workers. The 2008 recession hit small businesses hard, to say nothing of the potential impact of the 2020 COVD-19 pandemic, or the various economic downturns throughout the second half of the twentieth century. Additionally, our increasingly globalized world is encouraging manufacturers to move production overseas, participating in the “race to the bottom” that is proving devastating to underdeveloped countries’ environments and economies (Olney 2013).

Unsurprisingly, employment opportunities for Americans have shifted between occupational categories in the time since Morgan published his ideas about small industry. Between 1910 and 2000, the proportional employment in the “professional, technical, and kindred” category increased from approximately 4% to approximately 23%, while farm laborers decreased from approximately 17% of the labor force to close to 1% (Wyatt 2006). Service workers, clerical workers, salespeople, and managers increased, while operatives, laborers, and private household service workers all declined significantly in that same period. The category of craftsmen and foremen decreased, but only by one or two percent. The impact of such employment on small communities is difficult to glean from statistics alone. Also missing from the puzzle is the geographic spread of these workers; it is hard to know if they form networks of support within a single community. If they do, the statistics can’t tell us those stories.

The 2006 article in Monthly Labor Review does not provide information on the number of businesses at which these workers were employed, but this data suggests that the categories of workers which Morgan would be targeting in his push for small industries are very much alive and well. Craftsmen, managers, professionals, technical workers, salespeople: these are all employees still needed by local business and industry. Morgan would likely not have been able to predict the boom in information technology that those of us in the twenty-first century have experienced, however, Morgan’s theories can still be applied to these new fields of labor and business. And it is exactly that information technology that makes perhaps the easiest concrete actionable item he advocated and enacted – making small industry visible and available for replication – a much more feasible undertaking.

 


References

“ACEnetworks FAQ.” ACEnetworks, accessed June 22, 2020.

Bernstein, Mark. “Arthur Morgan: A Mover of Earth, A Pourer of Concrete, A Shaper of Minds.” The Arthur Morgan Institute for Community Solutions (2015).

Dubb, Steve. “Mondragon Co-op Model Gains U.S. Adherents.” Democracy Collaborative. July 6, 2009.

Krimerman, Len. “Coming Alive In Dangerous Times (1961-1983): Chapter 3.” Grassroots Economic Organizing. August 31, 2015.

Mahon, Joe. “Bank Holding Company Act of 1956.” Federal Reserve History, Minneapolis 22. 2013.

Medley, Bill. “Riegle-Neal interstate banking and branching efficiency act of 1994.” Federal Reserve History. 2013.

Morgan, Arthur Ernest. “Industries for Small Communities.” 1953.

Nadeau, Carey Ann and Amy K. Glasmeier. “Bare Facts About the Living Wage in America 2017-2018.” Living Wage Calculator, MIT. August 30, 2018.

Olney, William W. “A race to the bottom? Employment protection and foreign direct investment.” Journal of International Economics 91, no. 2 (2013): 191-203.

Richardson, Gary, Daniel Park, Alejandro Komai, and Michael Go. “McFadden Act of 1927.” Federal Reserve History. 2019.

Swann, Robert. “Peace, Civil Rights, And The Search For Community: An Autobiography.” Schumacher Center for a New Economics. February 1998.

“The ICA Group Theory of Change.” The ICA Group, accessed June 22, 2020.

Wyatt, Ian D. “Occupational changes during the 20th century.” Monthly Lab. Rev. 129 (2006): 35.