Why Local Money Matters: The Middletown Story

By James Fallows

The two big lessons my wife and I keep encountering in our travels are these: First, the profound economic and and cultural effect of immigration even in places where you might not necessarily expect that. For instance, the Somali, Sudanese, Nepalese, Bhutanese, etc presence in Sioux Falls, South Dakota, that my wife described yesterday.

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And second, the importance of locally based money and corporations in making some cities very different from others that merely have branch-office status. That was the theme of this report from Holland, Michigan, and this one from Rapid City, South Dakota -- the latter about an Indian / Congolese / South Dakotan family that converted a franchise Radisson into an eco-hotel that mainly bought from local suppliers.

Here is a report from a reader named Dennis Foley, who now lives in Holland but grew up in a similar manufacturing-centered small Midwestern town. That was Middletown, whose big local industry there was Armco steel, now AK Steel. Foley describes the difference Armco made, and what that means in today's corporate environment. I turn it over to him:

I grew up in Middletown, Ohio. Birthplace of Jerry Lucas. But, more importantly, the home of Armco Steel, now the location of an AK Steel plant. AlthoughMiddletown had several paper mills, the largest employer by far was Armco Steel. Armco invented continuous rolling of steel, which transformed the production of steel, making it more uniform and less expensive. That invention was inspired by the process of making paper into rolls. Middletown was a company town.

During my youth, the benevolence of Armco toward the community was evident everywhere. As an example, I was the recipient of the George M. Verity Scholarship, named for the founder of Armco. Baseball diamonds were donated by Armco. Sports teams were sponsored by departments at “the mill”. There were free matinees for kids underwritten by Armco on Saturday afternoons at the local theater. Armco’s headquarters were in Middletown and all of its executives lived in Middletown.

At some point in the sixties, things started to change. The company was incorporated in Delaware for tax purposes. The headquarters were relocated out of town. The company started to diversify into things like train car leasing. Executives no longer lived in town. Importantly, absentee ownership changed everything. [The Middletown works recently.]

When I was growing up, the air and water in Middletown weren’t the greatest because of the paper and steel production in the city. But the owners of those companies had to breathe that same air and drink that same water that my family did, and they worked to improve it. Same for the schools and the parks and the roads. When those executives became absentees, Middletown became just another page in the ledger book, and the town began a decline that continues today. That decline was accelerated by wealth that the enterprise created ending up in a different town—New York or some other wealthy enclave.

That leads me to another observation. I lived for a time in Mattapoisett, Massachusetts, which is on Buzzard’s Bay, near Cape Cod. [Below, from New England Boating.]

Mattapoisett is a small port, with a history of building whaling ships, including the Acushnet of Moby Dick fame. Mattapoisett is a few miles from New Bedford, the home port of the Acushnet. In the heyday of whaling, New Bedford was the wealthiest city in America. Most of that wealth flowed through New Bedford into Newport RI and New York. Some of it still remains in Nantucket.

Today, New Bedford is a depressed area. There is a lesson to be learned from New Bedford about reinventing a community and reinvesting in a community. (Actually it’s about NOT reinventing and reinvesting.) New Bedford was a thriving community whose future potential was squandered, whose resources of location and people were plundered. The absentee owners didn’t enrich the community.

Back to Holland, there is a tradition of giving back to the community. You used Ed Prince as one example. [The late industrialist, who was a significant force behind the "snowmelt" project and the renovation of downtown.] But also people like me. I’m a designer and I volunteer in the city for various organizations, like being on the board of the Holland Area Arts Council. I have found that my neighbors are very generous with their time and talent. It’s also true that wealthy Hollanders give money to civic enterprises.

I’ve often thought that if what occurs voluntarily in Holland could be institutionalized, towns like Middletown and New Bedford would do better. For example, could a community resource tax be levied on businesses to provide the niceties and forward thinking that separate Holland from Middletown and New Bedford?

I hope this note is helpful in some way. I’d like for other communities to have what we have in Holland. 

The point the message ends on is the challenging one: whether there is any way to recreate the beneficial effects of local ownership (which also has its drawbacks), in the globalized-capitalism age.

Two other closing items before we shift to Sioux Falls. First, the effect Dennis Foley describes about Middletown -- that Armco execs had to breathe the same air as everyone else -- is a major force for environmental action in China. No matter how rich or powerful, no one can escape the air. Second, why the stock certificate at the top? When I was a kid, my fervent Republican small-businessman Uncle Joe gave me as a birthday present a few shares of Armco stock, worth maybe $50, to whet my interest in American business. Mainly I remember the beautiful engraved stock certificates, which I still have somewhere. This partial image from Scripophily. I have also put up a companion posting, with maps, on our Esri-geoblog site.

This article available online at:

http://www.theatlantic.com/national/archive/2013/09/why-local-money-matters-the-middletown-story/279443/