Company Towns are Back!


Remember company towns? In the 19th and early 20th century these towns were owned, financed and managed by private companies, mostly big industrialists trying to ensure a sufficient supply of labour while limiting the social unrest that was common in the large, polluted and polarised cities of that time. With the rise of the welfare state, company towns were either ‘normalised’ or demolished. But with the recent political, economic, technologic and social changes they are re-emerging.

Matevž Straus

Razvan Zamfira

Posted Jul 16, 2019 in Work Article from Scenario 05:2017

In the 19th and early 20th century, when industrialisation was proceeding at full force in Western countries, many big industrialists looked for new ways to tap into the unexploited human potential that was being wasted in the diseased, polluted and miserable cities of Europe and North America. To do so, they established ‘company towns’, socially-engineered cities owned and managed by the companies themselves, where the working class was offered basic standardised housing, healthcare, education and amenities such as grocery shops, hairdressers and clothing stores outside the smog and grime of industrialised urban areas.

The amenities on offer, nowadays often taken for granted in the Western world, were a luxury for the working class in the 19th and early-20th Century. In Friedrich Engels’ The Condition of the Working Class in England, written in 1845, the famous Marxist philosopher describes illustratively the misery of industrial workers, not only in Manchester (one of the world’s leading industrial centres at that time, ed.) but across Western Europe. Engels depicts in detail the cities’ alarming sanitary conditions, bad state of dwellings, lack of education, ill-kept streets, low morality, crime, intoxication, prostitution, and omnipresent poverty and illness:

“So short-sighted, so stupidly narrow-minded is the English bourgeoisie in its egotism, that it does not even take the trouble to impress upon the workers the morality of the day, which the bourgeoisie has patched together in its own interest for its own protection!” Engels writes of the absence of empathy and care for the lower classes.

The Bata Way

In comparison to Engels’ grim description, company towns provided something very different. Often associated with utopian idealism, big industrialists thought of the towns as a way to reduce the negative consequences of industrialisation and ensure uninterrupted production in their factories.

The Czech shoe company Bata is a good example of how industrial companies did this. In the 1930s, long before Communism entered the Czech Republic, Bata went on a mission to “shoe the world”. To do so, it built 55 company towns around the world, all structured around “The Bata System”. It was a centralised vertical system of control aimed at the entire production cycle – from the processing of raw materials to selling the finished product, covering not only the production of shoes, but also social welfare, architecture, urban planning and social behaviour. Bata became synonymous with a way of standardised life. Bata towns had shops selling Bata shoes, grocery stores selling products from Bata farms, and Bata sponsored cinemas and theatres where workers could enjoy a film or a play during their evenings and weekends. The towns had sport facilities for workers, and even schools for children to study in and be formed as young Bata men and women. By supplying the local recruited workers all their needs, the company attempted to foster a high degree of fidelity among its employees. By also controlling all the production facilities, Bata, and other companies that followed a similar model, had a bright future ahead of them.

Despite their initial success, however, company towns did not last long. The first wave of troubles for the company towns of Western Europe and North America already emerged at the end of the 19th Century with the crisis in industrial relations – company towns not only took care of all aspects of workers’ life, but often also meant a ban on unionisation, as well as the company’s full control over workers’ personal expenditures. Company towns were a standardised golden cage.

Secondly, the welfare state programs that were launched in many Western countries during the 20th century opposed the idea of company towns. For example, in 1932, the Roosevelt administration attacked company-sponsored housing and company-operated social programs and demanded higher wages for workers. As wages increased, the state established housing, health and education programs that eliminated the need for company-subsidised services of the same kind. With increased state intervention, the need for company towns vanished. Some were partially ‘normalised’ and others demolished. The Bata model also came to an end. After World War II, governments in Czechoslovakia, East Germany, Poland and Yugoslavia nationalised Bata factories and merged them into the new socialist welfare state, while the Western assets gradually rebuilt themselves – the company towns, however, were all abolished.

Small but global: The 21st century model

Today, more than half a century after the demise of the original company town, a contemporary version of it is back. The compromise between labour and capital embedded in the welfare state, which has enabled the masses to live a dignified life, receive education, social programs and health care in a society characterised by ever-increasing prosperity, is being challenged. In many Western countries, welfare state programmes are being reduced. National governments are losing their decisive and sovereign power to transnational authorities, while companies that used to play by the rules are now participating in setting these rules. Adding to this, many of us as citizens are no longer content in consuming goods and services – we want to participate in the creation of the products and services we use daily. If the flagship companies of the 20thCentury were large factories, producing physical objects, the flagship companies of 21stCentury are less and less dependent on the physical aspects of their products. Not only the technological firms such as Google and Facebook, but also companies like Nike, Adidas, LEGO and Samsung are monetising immaterial aspects – the brand, the promise of a lifestyle, social status and personal satisfaction. This is changing the way work is done. New ideas no longer emerge within the four walls of factories and offices. Today, you could say that our cities have become our workplace, where we collaborate, create and prosume.

In a 2016 study of 12 small towns that are home to some of the world’s largest corporations (e.g. Adidas, Samsung, IKEA, WalMart, LEGO, Volkswagen), the authors of this article explored the new arrangements between business, local governance, city marketing activities, and open innovation approaches that have emerged in these towns. The study showed that urban governance in the modern company town functions as a tool for enabling, supporting and facilitating innovation-, research- and design-oriented production. Since these are all long-term, incremental and subtle processes, the company not only influences the decision-making for its own benefit, but for the benefit of the urban area, which, it is hoped, will in turn benefit the company. The approach to urban governance in company towns is strategic and holistic. Since it is the main employer and economic actor, the results of its activities are easily observed and monetised.

Take the example of Wolfsburg, created in the 1938 by the Nazis to accommodate Volkswagen’s car plant. In the 1990s, Volkswagen needed to restructure its business as it was becoming uncompetitive and was lacking innovation. The restructuring resulted in severe structural crises and close to 20 percent unemployment in Wolfsburg. Yet Volkswagen decided to help the city – the automaker proposed and enacted a new structural reform under the name AutoVision, which eventually lowered unemployment levels, created a new start-up milieu, and helped grow the city’s almost non-existent service economy. This was mostly done through Wolfsburg AG, a public-private partnership between the city of Wolfsburg and Volkswagen AG. Today, this joint venture is involved in developing co-working and shared-office spaces for start-ups, as well as providing education, healthcare, and leisure activities, and is one of the main real estate developers in this German town. The City of Wolfsburg is currently one of the richest cities in Germany with numerous automotive and e-health start-ups surrounding Volkswagen.

In a comparable manner, LEGO is co-creating a “Capital of Children”. Originating in a small Danish town, Billund, LEGO is preparing a new master plan for the town that will develop the areas between Billund airport, existing LEGO production sites, Legoland, Lalandia, the city centre with LEGO House, and a new housing area, and connect them with a series of parks, new infrastructure and common visual identity. The goal is clear – to create the “Capital of Children”, which will attract a creative workforce and foster innovation in this city-wide-LEGO-lab.

In Sweden, IKEA is reviving its small Swedish birthplace. For several decades, IKEA’s main selling point has been cheap prices, practical storage solutions and average design quality. As IKEA is reinventing its brand, business model, and management structure to adapt to the market changes and the increased demand for vintage, handmade, and customised products, Älmhult – the town with the first IKEA store – is becoming increasingly important. If for decades the city of Älmhult was reminiscent of a Fordist company town (characterised by mass production and standardisation, ed.), it is currently transforming into a spatial embodiment of post-Fordist IKEA: “the home of home”, a showroom of IKEA values and IKEA concept, a proof of IKEA’s Swedishness.

Even larger cities have flirted with the idea of contemporary company towns. When, in 2013, Las Vegas became the home of online footwear store, its downtown started resembling a start-up company town. The company’s CEO, Tony Hsieh, argued:

“I would say that putting my time into the neighbourhood is actually the best thing I could be doing for the company right now”, and initiated the Downtown Project. Its aim was to bring 10,000 upwardly mobile, innovative professionals over five years and create “a city as a startup” in which new business ideas could emerge as a result of unplanned collisions. In only one year, it had set up 30 real estate companies, purchased more than 15 buildings, and started work on 16 construction projects, while 15 tech start-ups had committed to relocating to the downtown. By investing in over 300 businesses and employing more than 900 people, it resembled an urban utopia. Yet its results are disputable: work in progress for some, a total failure for others.

Future proof or bound to fail?

In many ways, contemporary company towns resemble the social and economic pioneering attempts of their historic precursors, for instance when it comes to supporting or managing affordable housing, leisure activities and facilities, living labs, organised traffic and mobility, social programs and health care. These cities nevertheless also have distinct post-Fordist (standardised mass production and consumption, ed.) characteristics. Where the company towns of the past were primarily a way to ensure a sufficient supply of labour for large industries, the modern company town focuses on fostering innovation through a holistic approach to urbanism, governance and social services. Based on the idea that innovation cannot be contained within offices and factories, the 21st century company town attempts to act as the incubator, accelerator and testing ground of new products and ideas. Moreover, the company is often involved in local politics and plays an important role in decision-making – often in the form of strategic partnerships with local government, indirect or direct support of its representatives, and other subtle or less subtle agenda-setting initiatives. All of it is done with the aim of ensuring that urban development is not only in line with the company’s growth plans, but that it supports and facilitates them.

The re-emergence of company towns indeed raises eyebrows. Historical examples of riots and strikes are not forgotten, and for some, the company town should remain a cautionary tale of the dangers of overzealous industrialism. Among the most famous examples of this are the Pullman Company Town in Chicago. Created by the railway magnate George Pullman in 1880 during the railroad boom in the United States, this company town initially offered workers quality housing at affordable rent at a time when such things were a rarity for industrial workers. But once the railway company’s economy started struggling, Pullman laid off hundreds of workers and cut wages for the rest without lowering the rent they had to pay. This sparked protests and strikes and eventually led to the demise of the Pullman Company Town.

Surely, no one is interested in seeing the mistakes of the past repeated. But what makes many even more cautious of the revival of the company town are the contemporary excesses — both real and imagined — of powerful, un-democratic and profit-driven corporations, who already hold considerable sway over both local and national goverments. It is important to remember that the ideal of historical company towns was a holistic assemblage of welfare programmes, never single-issue charity side-projects. Moreover, company towns were never large – and applying the company town approach to entire metropolitan areas is bound to result in a fiasco.

With all that said, does the modern company town represent a utopia or a dystopia? Probably neither. Future company towns will be just one form of numerous models of social, economic, and political urban organisation and will answer to the needs of some companies and their employees, while other types of cities will reflect different arrangements between society and businesses. The competition between these different models will drive mobility and flows of capital, which in turn will contribute to constantly changing social and urban organisation. If anything, the city of the future will not be uniform.

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