The Company Town (20 page)

Judge Gary's personal history reads like a pop-psychology case study. His childhood took place in an atmosphere of repression marked by occasional bursts of self-expression. Raised on an Illinois farm by a strict Methodist family, he spent much time in Bible study and was told that no unnecessary work should be done on Sunday. His father was a spare-the-rod authoritarian who beat young Elbert with a belt—once for allowing a family cow to stray into a neighbor's pasture and eat his corn, another time for using forbidden curse words. Work, study, obedience, and punishment were the cornerstones of his youth, reported biographer Ida Tarbell. But Elbert would stand up for his rights if need be: “I never allowed a teacher to punish me if I didn't think I deserved it,” he told Tarbell as he related a tale of false accusation. On that occasion, he seized a brandished ruler from the teacher and broke it before she could land a blow.

He enjoyed being clean, his mother said, and wearing his Sunday-best clothes. (Photos taken of him later in life invariably show a dandyish, balding gentleman with a trim moustache and stiff white collar, not dissimilar in looks from Parker Brothers' Monopoly game tycoon.) But Elbert knew when it was time to remove such garments and put on his informal duds. That meant his dress things lasted much longer than those of his brother. In all matters, Gary seemed to learn that getting the proper balance was key: Acknowledge authority and traditional values, but assert yourself when you believe you should. Even a bit of personal display, within limits, can earn the approval of others.

Gary was fourteen when the Civil War broke out, and he soon left the Wesleyan Methodist college where he was studying and enlisted. But he was shortly mustered out to be with his family, as his brother had returned wounded from the fighting. By 1865 Gary had begun to study law, and within three years he'd become a clerk in the Illinois Superior Court and gotten married. He developed a reputation for rectitude: Gary did not drink, smoke, or allow racy stories to be told in his presence. Before long, the young man had become mayor of his small village of Wheaton, where he joined the successful effort to make it a Prohibition town, free of alcoholic beverages. In 1882, he ran for a county judgeship and won, serving two four-year terms.

By 1892, he had been a lawyer for twenty years and was president of the Chicago Bar Association. He was approached by John W. “Bet-a-Million” Gates, a renowned steel man and gambler, to help combine five companies into Consolidated Steel and Wire Corp. Gary joined the company's board and later assisted in another consolidation, that of American Steel and Wire Corp. At every turn, he was earning a wider reputation for his skill as a patient and trustworthy bargainer who knew how to get what he wanted. In 1894, when Gates became president of Illinois Steel, he made Gary general counsel of that enterprise. Four years later, financier J. P. Morgan appointed a surprised Gary—a man who knew a lot about mergers but almost nothing about making steel—president of the new combination of Federal Steel.

The next combination would be U.S. Steel, of which Gary became chairman of the executive committee and Charles Schwab, the flamboyant former president of Carnegie Steel, became president. But the two struggled. Initially, the idea was that the executive committee would make all the fundamental decisions and the president would be in charge of day-to-day administration. But Schwab was not one to be led by others. After all, he had been one of the prime movers behind the creation of U.S. Steel—putting the bug in Morgan's ear at a testimonial dinner, working out details during a midnight meeting in Morgan's study, getting a price for Carnegie Steel from Andrew Carnegie during a round of golf, and drawing up a list of other properties that would make the giant trust into a “rounded proposition.” However, it was becoming ever clearer that Gary rather than Schwab was the one to whom Morgan turned—that whatever Gary desired would receive the financier's support.

Gary favored stability and a low corporate profile, while Schwab was never reserved about his inclination to battle workers and unions. More problematic was Schwab's penchant for high living. He began building a giant New York City chateau for himself, modeled on the fanciful Loire palace Chenonceau. He gambled and celebrated the high life in Monte Carlo, drawing tabloid headlines—and withering criticism from his old colleague Andrew Carnegie. In the end, the patron's decimating fire resulted in Schwab's nervous breakdown. He took a leave from work and in 1903 resigned from the corporation. Gary shortly was named to a new
position, chairman of the board, where he would set company policy for the next twenty-five years.

It was Judge Gary's code of ethics that drew the most comment from colleagues and onlookers, in many ways reflecting the point of view of enlightened financial men rather than that of the steelmakers. The judge first broke with tradition by having the corporation issue quarterly financial reports—and distributing them to the public and to board members simultaneously. Such a practice restricted the ability of board members to profit personally from early access to information, and led to grumbling from the likes of board member Henry Clay Frick. But this was only the first of Gary's innovations. He also insisted that stockholders be allowed to speak at stockholder meetings, and that the opinion of the general public be considered when making policy. He even advocated applying “Sunday school principles” to business affairs—partly as the right thing to do, but also because it would enhance public relations. Appearances, after all, counted for a lot, especially in an age that distrusted all trusts.

At the same time, for years he resisted the biblical injunction—and calls from the public and his own board members—to give workers a day of rest on Sunday. He did not want to make such a change “simply because a public sentiment compelled them to do so,” he pompously announced at one point. In 1912, responding to criticism from attorney Louis Brandeis, he said the company had largely eliminated twelve-hour shifts, but the statement was untrue. At least 50 percent of U.S. Steel workers still endured such lengthy workdays, according to a 1911 stockholders report, and the twelve-hour day continued into the 1920s. Not every Sunday school principle, it seemed, made sense in the real world.
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The shadow of three earlier industrial communities lay over Gary, Indiana. First was Pullman, the company town repeatedly cited by the judge and others as a negative example. “Time and again the paternalistic mistakes of Pullman were given as justification for a ‘do-as-little-as-you-have-to' policy in shaping town conditions,” Taylor reported. Meanwhile, Judge Gary was a vociferous advocate of various corporate-welfare policies—
including expenditures on visiting nurses, libraries, and playgrounds—that might be regarded as paternalistic. Moreover, the corporation trained a watchful eye on steel towns including Gary: In 1907, when one entrepreneur proposed to open a movie house in a company-owned building, Buffington and Gary originally said no, then agreed only after it was suggested that the theater could double as a venue for church services. An executive was assigned to review all films, with the power to veto any he considered unsuitable. In short, to U.S. Steel executives, the dreaded term “paternalism” only applied to a policy of residential development. Instead of assuming from the first the task of planning and organizing the community of Gary, the corporation would be drawn into town-making grudgingly and haphazardly.
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The second community experience that shaped Gary was that of Homestead, Pennsylvania, America's quintessential steel town. Located in the Monongahela River valley fourteen miles south of Pittsburgh, Homestead began as a small village in the 1870s, housing a glassmaking works and 1,000 inhabitants by the end of that decade. In 1881, a group of Pittsburgh iron and steel men established one of the country's most up-to-date steelmaking facilities there, the Homestead Works. Shortly thereafter, a plague of labor problems prompted the owners to sell out to Andrew Carnegie, who transformed the works into an awesome production facility.

Carnegie, too, eschewed landlord duties, leaving further development of the town to private developers and speculators. Soon, rows of cheap frame housing spread across the hills above Carnegie's works. Carnegie's most significant contribution in this regard came in the nearby area of Munhall, where he offered homes for sale to his workers with low-interest mortgages. Other aspects of town planning went begging: The largest green space in Homestead would be the lawn of the superintendent's mansion. In 1910, a study of the area backed by the Russell Sage Foundation and known as the Pittsburgh Survey decried Homestead's open sewers and chaotic organization.
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Braddock, across the Monongahela River from Homestead, experienced a similarly congested sprawl. In the words of novelist Tom Bell, whose
Out of This Furnace
(1941) looked at three generations of immigrant life in Braddock, the housing thrown up by speculators there was “characteristic of the steel towns, long, ugly rows like cell blocks, two rooms high and two deep, without water, gas or conveniences
of any kind, nothing but the walls and the roofs. . . . They were filled as soon as they were finished and made no apparent impression on the housing shortage or the rent level.”
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In 1906, Homestead was perhaps best known for its pivotal steelworker strike in 1892. Henry Clay Frick, master of the Carnegie mill, had determined that year to destroy the established union, the Amalgamated Association of Iron and Steel Workers, which he saw as standing in the way of plant modernization. Although the company had negotiated an agreement with the union following a strike in 1889, this go-round management demanded cuts in skilled workers' pay and the elimination of numerous jobs. Frick made his late-June offer in the form of an ultimatum: Take it or we'll run the plant nonunion. Then he fortified the works, erecting an eleven-foot-high wooden fence topped with barbed wire, backed by towers with searchlights. On July 6, he attempted to reopen operations: Three hundred armed Pinkerton guards boarded two barges and attempted to slip up to the plant via the Monongahela River under the cover of darkness. Meanwhile, the strikers had also organized themselves along military lines, going so far as to acquire artillery and to patrol all river and land entrances to the town. The barge was greeted by a barrage of rifle and cannon fire from the riverbank. Before the Pinkertons surrendered, nine strikers and seven detectives had been killed during a twelve-hour battle.

The state militia entered the fray, management imported strikebreakers, and by the end of the year the Homestead mill was operating without a union, just as Frick had wanted. Within another year, thirty more of the area's sixty-odd iron and still mills had likewise broken their unions.
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But U.S. Steel was not eager to repeat the Monongahela Valley experience in the town of Gary if it could help it.

The planning of Gary, such as it was, reflected this sentiment. The various Gary plants stretched all along the lakefront, allowing town residents virtually no access to the water. In the event of trouble, supplies, guards, and willing workers could be brought directly into the plants by boat. On the other side of the factories was the Grand Calumet River, which separated all the plants but one from the residential areas of town. In effect, the river might act as a defensive moat should events like those in Homestead be repeated in Gary.

Finally, a third community provided inspiration for Gary—this time in a more positive fashion. Lying thirty-odd miles northeast of Homestead, the Kiskiminetas Valley town of Vandergrift, Pennsylvania, was built from scratch in the 1890s by the Apollo Iron and Steel Co., which in time, like so many other independent companies, became part of U.S. Steel.

Apollo Iron and Steel's first home was in Apollo, Pennsylvania, one mile from where Vandergrift would be built. Keeping up with technological developments and growing demand, the iron mill at Apollo was transformed into a steel mill in the 1880s. But residences, mostly owned by the workers, got crammed into the existing town boundaries, encroaching ever closer upon the mill, and the company had difficulty getting room to expand the works. Thus in 1892, Apollo's chief executive, George Gibson McMurtry, began contemplating expansion elsewhere, and for that purpose purchased 640 acres of land upriver in Westmoreland County.

The major depression of 1893 led steel prices to collapse. Apollo announced a wage cut, which precipitated a strike at that mill by the Amalgamated, which of course had only recently experienced the bloody defeat at Homestead. After two months, Apollo reopened after announcing that it would employ only those who renounced the union. It hired skilled workers from other, nonunion mills and promoted laborers to fill the ranks of the semiskilled. There was no violent explosion at Apollo—the Amalgamated's spirit, it seemed, was for the moment broken.