Chambers of Commerce: First Wave Magicians of Main Street
Chris Mead, the Magicians of Main Street (Oakton, VA, John Cruger Press, 2014)
The Magicians of Main Street
Can you believe up to now no one has written a modern history of American chambers of commerce? Chambers are everywhere. They are America’s oldest and most prevalent form of economic development organization. As of 2013 over 7000 chambers currently hold court in the cities, towns and villages of the United States There are another 600 or so in Canada. Conservatively around 10,000 individuals work for chambers. And yet, until Chris Mead recently published his one-of-a-kind Magicians of Main Street, no one had sat down and chronicled the history and achievements of chambers. To be fair, Chris and the Magicians take the chamber history to 1945, but going that far took almost 400 pages.
Truth in the telling, I have known Chris Mead, the author of Magicians and present day Senior Vice-President of the Association of Chamber of Commerce Executives, for a long time. But given the topic, and the lack of any history of chambers, I would have reviewed the book at some point. Right now it makes lots of sense. The reader by now is aware that I am devoting a series of issues on local economic development. In the first article I listed a number of observations or themes that I would develop in future issues. One of these was “structures matter”. Easily dismissed as unimportant, the reality is the reverse. Each type of economic development structure holds its own heritage and mixture of powers, resources, and expertise. Chambers, government agencies, quasi-government agencies, not-for-profits for example, do different things, and participate in different ways within the local economic development policy system. So Chris Mead’s chamber history fits into this theme very nicely. In the context of our local policy issue series, this issue separates out one EDO-type, chambers of commerce, and through its history to 1945, uncovers its past, revealing how chambers have affected local economic development.
But there is one more task that is attempted in this issue. It didn’t hit me at first, but there is a wonderful advantage gleaned from Magicians of Main Street’s halt in 1945. The end (at least decline)of the proverbial, but poorly defined, FIRST WAVE of economic development can be placed with some confidence at about that time. There is value in understanding what that First Wave really was. Spoiler Alert! You may be very surprised!
It seems fair to summarize the current “consensus” definition of the First Wave as stressing business recruitment, incentives, and marketing/promotion as its cornerstone economic development strategies and tools. Ted K. Bradshaw and Edward J. Blakely assert (in their seminal August 1999 EDQ article “What are ‘Third-Wave’ State Economic Development Efforts?)
”The first wave was dominated by programs designed specifically to attract footloose firms from old industrial areas to growing regions such as the South or West. The typical tools of the first wave were subsidized loans or direct payments to firms for relocation expenses, tax reductions, subsidies applied to the cost of plant facilities or utilities, and competitive and expensive industrial recruitment programs“(p. 230). Frankly, it was always my sense that the 1930’s/1940’s infamous Mississippi “Balance Agriculture with Industry” (BAWI) was the epitome of the First Wave. But in Bradshaw and Blakely there is a hint that First Wave is associated with the “rise of the Sunbelt”?
The Second Wave is alleged to involve a broadening of strategies to include more business retention and inward-focused, place-based economic development. This wave, as I have reviewed the pathetic literature concerning waves, is absolutely loosey-goosey. It is quickly passed over. Bradshaw and Blakely suggested that the Second Wave started in the early 1980s; it involved programs such as incubators, small business and workforce training. Incubators arrived on the economic development scene in the 1950’s; workforce training in the sixties, but spread with CETA in the seventies, and small business, at least the SBA part, has been around since the 1950’s.
Again, if the reaction of Northern and Midwestern Big Cities is the reference point for “the Wave approach”, then it follows that these Big Cities became more defensive as they repelled First Wave Sunbelt assaults. A secondary problem arises, in that it seem to suggest that several waves can co-exist, i.e. one Wave does not follow a previous Wave.
No matter, the Third Wave arrived sometime in the eighties, or shortly after, talking about clusters, regionalism, economic development planning, entrepreneurship, innovation, smart/sustainable growth, and knowledge-based economic development. If I missed something vital to the Third Wave, forgive me. Again, after all I do not pretend to be anything other than a lumbering, often forgetful, dinosaur.
In that I am far-advanced in writing a history of American economic development, I feel I can say with some authority, that pre-1945 economic development First Wave economic development, was mostly chamber-based economic development. Chambers were the primary EDO thru World War II. So Magicians of Main Street ought to provide insight into the First Wave and help us to determine if First Wave’s defining characteristic are attraction programs and incentives.
Chambers and the First Wave of Economic Development
American economic development, up to the 1950’s, was almost exclusively done by chambers of commerce. Government-based departments, at both municipal and state levels gradually developed through the fifties, and mostly the sixties and seventies. The entrance of state and local government into state/sub-state economic development appears to be a Second Wave phenomenon. It is reasonable then to believe that First Wave was dominated by Chambers. Indeed, chamber “boosterism”, the stereotypical characteristic associated with chamber economic development activity, seems to personify the First Wave. So a good place to start would be to see if chambers engaged in First Wave strategies.
There is no lack of examples for attracting firms and business recruitment in Magicians of Main Street. For example, the role of Dallas and neighboring Fort Worth chambers in their 1890’s developing clusters is well covered. In Fort Worth’s case the cluster was meat-packing and cattle. The Fort Worth chamber’s ever-famous 1896 “Southwestern Exposition and Fat Stock Show” started the cluster off. In 1901 the chamber offered cash subsidies ($100,000), and brought in two major plants (Armour & Co and Swift & Co). The jobs created launched a 230% increase in residential construction over the next half-decade. The cash bonus, however, did not inhibit the Texas Association of Chamber Secretaries, meeting, in all places Fort Worth in 1909, from condemning “the practice of paying cash bonuses to industrial promoters, and wishing that ‘means could be found to run them out of the state” (p. 163).
Texas was hardly alone in recruiting firms. Mead cites the business recruitment theme adopted by the Clarksville Tennessee chamber: “More Smokestacks & Whistles“–although I’m unsure as to what industry “Whistles” was meant to capture. And, if you wanted to read about the infamous 1930’s “Balance Agriculture with Industry”–the trigger, some say, for the Second War of the States–Mead discusses it on page 315.ff.
Mead also observes that Cincinnati in 1901 created an industrial bureau. Eventually there were hundreds of them, maybe a thousand. Nearly every chamber of any size, no matter what the region, north or south, alike, created industrial bureaus over the first three decades of the twentieth century. What is an industrial bureau, you ask?
Industrial bureaus were a chamber department/subsidiary. Industrial bureaus ran the marketing program and linked up with the jurisdiction’s incentive programs. These bureaus did not invent the techniques of business recruitment (branding, media placements, collateral material), but they assembled and conducted an amazingly sophisticated, even by today’s standards, advertising and promotion campaign. By the 1920’s they were working with Fantus and other “site selectors” which came into prominence during those Roaring Twenties and Lean Depression years. If First Wave advocates wanted to find justification for their linkage of that wave with business recruitment and incentives–well, industrial bureaus were the place they ought to go.
Mead also describes one miniscule (population less than 2,000) Western city that in 1905 launched a train tour of the East to promote the town and put it on the map. One of the participants wrote about that tour saying that at first it was taken as a joke in the cities they visited. After all “a hundred men getting off a train, marching with a band, boosting a place nobody had ever heard of. But business men in the places we paraded commenced to realize there must be something in our town or we couldn’t do all this. [The writer continued] Now if you are anxious to know whatever became of this tank town, it’s Tulsa, Oklahoma which would have been a real town even if its people weren’t greasy with oil, for it is founded on the spirit of its people“. The writer was Will Rogers who was a rope-twirling act on the train tour. (p. 165)
But Mead’s best example of business and people attraction was the secretary of the Los Angeles Chamber, Frank Wiggin’s “the Greatest Booster of them All” (p.168). You’ve got to read this for yourself, but over three pages Mead makes his case. If branding is your game, Wiggins is your guy–he linked California and Los Angeles to the orange and his people attraction campaigns lured literally hundreds of thousands to his city over the next decade. Diversifying beyond oranges, Wiggins made an elephant out of walnuts, a giant corn ear out of real corn ears, and a statute of a wine bottle (made of wine bottles)–and brought them to the 1893 Chicago World’s Fair. Wiggins in 1907 sent a location brochure specifically to an early movie entrepreneur, William Selig, advising him to take advantage of 350 days of sun. To Selig it made some sense and he came to LA to try it out. By 1915, it seems that 80% of the nation’s movies were made in LA–and in 1923 the “Hollywoodland” sign went up on a hill.
The issue of incentives is complicated. Chambers may promise market incentives, but only government can provide them. Whether or not incentives work, business incentives were commonly used by local and state governments before chambers ever existed. The first set of incentives were for manufacturing firms during the last decade of the 1700’s and first two decades of the 1800’s. Alexander Hamilton was deeply involved in setting up an industrial park in New Jersey, with local incentives. He was shot and killed in 1804 so that vividly demonstrates how far back these things go.
Nearly all states, north and south had manufacturing firms’ abatements, credits, and other incentives long before the post-Civil War growth of chambers. Abraham Lincoln’s administration provided tax breaks and subsidies, not only to transcontinental railroads, but to farmers and homesteaders as well. They were the largest to that point in American history. Chambers did not invent incentives, but have no fear, they learned how to use them to bring in and retain firms. But, as a counterpoint, chambers played the first major leadership role in making the use of incentives more responsible.
Thus, there is one more story to tell. Sadly, it’s not in Magicians. But if you want to link chambers with the First Wave fixation on incentives, than you need to know the story behind the formation of the American Economic (Industrial) Council (AEDC)–American economic development’s first national professional association. By way of background, the AEDC in May 2001 merged with the Council of Urban Economic Development (CUED) to form the present day International Economic Development Council (www.iedconline.org).
After World War I, for a short time, we enjoyed boom years today remembered as the Roaring Twenties. Business recruitment/incentives explode in Boom years, and communities compete the hardest when firms are more mobile. In these years they generate controversy and capture lots of headlines. This happened during the Roaring Twenties. Taking on the issue of too many chambers pushing irresponsible marketing and recruitment campaigns with unrestrained incentive wars, the national Chamber of Commerce convened a meeting of the major local players in economic development in Baltimore to discuss the issue and take steps to resolve it. Professionalization of chamber economic development was one solution that came from this meeting of over forty major chambers, railroads, and utilities.
The meeting concluded that if chambers and economic developers were to be held responsible for their business recruitment programs, then they had to be professionally trained. So, the American Industrial Development Council was formed in 1926, as a subsidiary of the national chamber. The AIDC remained a U.S. Chamber subsidiary until the mid-1950’s, after which it was spun off and renamed the AEDC. For nearly thirty years, the AEDC, insulated by the U.S. Chamber, developed a professional body of knowledge and imparted it to chambers across the nation. If Chambers used business recruitment and incentives, they also showed the way to conducting responsible business recruitment.
Anyway, if you’re looking for examples of business recruitment before 1945, you’ll find them in Magicians–the problem is that recruitment programs and incentives are only a small part of the Chamber story told by Mead.
There is a heck of a lot more to chambers and economic development than mere business attraction and incentives. Mead’s Magicians provides near conclusive evidence that recruitment and incentives were not (1) the only economic development strategy pursued by chambers in the First Wave; nor (2) were recruitment and incentives the primary chamber economic development strategy. Chambers were engaged in more important initiatives than business recruitment/incentives.
We Don’t Give Chambers Credit for Important Economic Development Initiatives: There is much more to a chamber than its industrial bureau/booseterism
When you read the Magicians of Main Street something becomes obvious. Chambers have taken on the “big jobs” as well as business recruitment. Frankly, they spent much more time on Big Jobs than they did with industrial bureaus. In this review, I focus on two particular “big jobs”: political advocacy and advancing innovative transportation modes and technology.
Chris starts out at the very beginning, 1768, with the formation of America’s first chamber of commerce. Guess where? New York City. Despite the fact, NY’s chamber was pretty loyal to the King, its initial major initiative was to fight the famous Stamp Act which later, on December 16th, 1773, prompted the equally famous Boston Tea Party. Magicians on Main Street tells the tale of Chamber involvement and leadership is the major issues of the day. From the Stamp Act, to Tariffs (yesterday’s Free Trade), Jackson’s fight against our first Federal Reserve (the National Bank), to Slavery and Abolition (some even formed regiments to fight). In the Twentieth Century, chambers help keep the home fires burning during the two World Wars–organizing bond drives and supporting war production. The events they promoted lifted spirits a bit, and helped all Americans to forget for a moment the horrors in the outside world–and we persisted to eventual victory.
Lost in fog of history was Booker T. Washington’s keynote address and opening day moderator for the Atlanta Chamber’s 1895 Cotton States Exposition–the largest event held in the South in the post-Civil War period. And earlier there was Henry Grady, editor of Atlanta’s Constitution, and his famous 1886 New South Speech that became the basis for the South’s reconciliation with the North–and amazingly, the inspiration for the South to start integration and take steps to develop a modern, non-cotton, manufacturing economy. Chambers did (and still do) get involved in issues of fundamental importance to local and community development—issues which government agencies and non-profits must steer clear. Chambers possess powers and resources unavailable to other EDO types–and they have used these powers and resources well and often.
So tackling the tough issues and playing a critical role in our community-level economic development is what chambers do–and they are still going strong today. Chambers today, however, suffer from their perceived dastardly association with private business and the Republican Party. In the early twentieth century First Wave, however, Republicans were the good guys. They were the principal force behind the Progressive reform Movement.
Chambers were the center of the Progressive Movement. They organized support for municipal home rule which allowed our big and small cities to free themselves from both machines and the corruption of state governments. Chambers fought the railroads and the obscene rates they charged. Chambers demanded well-run city governments and they pressed for, and got, honest, efficient city government.
Chambers took on the machines– the big one, Boss Tweed, for example. A Committee of Seventy from the NYC Chamber, and the New York Times (with its cartoonist Thomas Nast) led the Tweed opposition, supported the opposition candidate (a chamber member) in the 1872 election, got him elected, and then saw it through by bringing Tweed to trial, conviction and then to jail where he died. To be fair, Tammany survived, but only because the Irish took over, and installed an Irish boss who knew how to run a “sustainable” political machine (rumor has it the Curmudgeon is Irish).
Chambers led the struggle to install city managers, and start budgeting, planning, and civil service in local government. Working with Presidents Taft and Wilson, the U.S. Chamber and its members pressed for and got legislation establishing the Federal Reserve System. Who led and paid for the Chicago Exhibition and City Beautiful? Chambers! Planners didn’t pay Daniel Burnham’s consultant contracts. Chambers did! The downtown of downtown’s golden years was a chamber-led production.
(If you have never heard of the “City Beautiful Movement”, it was the movement that first built public core areas of today’s downtown. Chambers very early on led efforts to enhance the central business district and foster its commercial viability as the hub of a strong central city. Concern with the CBD has been a persistent and consistent chamber activity for well over a hundred years.)
But in the same vein, chambers worked equally hard to oppose and stop unions dead in their tracks. Chambers bitterly opposed the New Deal—that was a turning point. Most chambers remained loyal to Hoover during the Great Depression. But chambers committed to their cities fought negative forces that others were afraid to fight. They fought organized crime, for example.
A memoir of Eliot Ness (The Untouchables written by Oscar Fraley) describes the anti-crime efforts of the “Secret Six” or the Citizen’s Committee for the Prevention and Punishment of Crime, a special committee of the Chicago Association of Commerce headed by the Chamber President, Robert Isham Randolph. Over six pages Mead describes how the Chicago Chamber Secret Six on their own, and with Ness, going after Al Capone. In so doing the Secret Six coined the expression “Public Enemies”. Also, the Secret Six secretly bankrolled the federal forensics department.
At one point Randolph met privately with Capone in Capone’s office–read the transcript on Magicians pp. 302-303—it’s wild! Six months after this meeting (on July 30, 1932) Capone gave an interview saying “The Secret Six has licked the rackets. They’ve licked me. They made it so there’s no money in the game anymore“. (p. 303-304). Continuing its efforts, the Secret Six was instrumental in overthrowing corrupt mayor “Big Bill” Thompson and electing Anton Cermak, FDR’s ally, in 1932.
But all good things come to an end, however. The Secret Six, shades of CBS’s Good Wife (Sunday night), illegally wiretapped the State Attorney General, and when that sorry episode was over, the Secret Six closed up shop. Randolph went on to become the Director of Operations for the 1933-34 Chicago World’s Fair.
The Depression, however, crushed nearly everybody–not the least chambers. Chambers fought FDR and the New Deal, bitterly. They resisted mightily the rise of the federal government, indeed government in general. Chambers in the post New Deal world had moved “to the right”. Redistributive politics was something many, probably most chambers, had a hard time supporting and it is evident as Mead describes the intensity with which chambers worked to support anti-FDR candidates and put brakes on most specific initiatives associated with the New Deal.
The role of southern chambers fighting Roosevelt’s national manufacturing minimum wage and unionization was especially intense, long-standing and bitter. It directly led to right to work laws in the postwar years. The role played by chambers in capturing jobs and prosperity flowing from World War II’s war production, however, was huge–and worked to the benefit of the community and workers in these lean years.
Mead stops at the end of World War II, because so much chamber history has yet to be presented. He is presently thinking hard about writing a second book, however, that will finish the story–or at least carry it further.
Transportation as Innovation: the “entrepreneuring chamber”
One important aspect that I think gets lost in the Three Waves of economic development is that we really are speaking of very different eras. The periods of time are not especially comparable. The difference between the pre-1945 First Wave and the post-1990 Third Wave has to be a bit like comparing apples to rubber tires. To me this is most vividly demonstrated by different conceptions regarding infrastructure and innovation. Today, for example the innovation is associated with technology, the Internet, life sciences–none of which literally existed in 1920 or 1900. That wasn’t the case pre-1950.
Back in the old First Wave days, growth meant population increase, economic prosperity and infrastructure meant capturing the latest wave of innovation in transportation, energy, and communication. Those were the gazelles of the day. Capturing the disruptors of transportation/telephone/electricity and harnessing their innovation as the backbone of a city consumed far more chamber effort and commitment than the episodic business recruitment campaigns. Let’s focus on transportation and see how chambers were involved.
We no longer think about the omnibus as being disrupted by horse-powered streetcar, which in turn was disrupted by electric streetcar, and then disrupted by the elevated, and then by subways. Each technology (oops, excuse me, mode of transportation) played out within a thirty or so year span (1870 and 1900). And then in 1910 the innovative onslaught was renewed with the automobile and truck, and then in the 1920’s by the airplane. Let’s not even mention the maritime disruption of clipper ships, steam, diesel and the consequent disruption to our ports/logistics.
Reading Magicians, you can’t escape the role played by entrepreneurial chambers in making sure their communities didn’t miss a beat, captured all the innovation, and made American cities the most modern in the developed world. Chambers were the prime leader behind installation of these infrastructures. Would you even believe chambers actually constructed some of the first subways? A chamber, first of all advocating, then convincing city legislatures and mayors, then going to state capital for authorization and funding, then doing much construction management, finally cutting the ribbon opening up, in this case, New York City’s first subway line in 1897. That was the New York City Chamber of Commerce. Mead relates that story–and it is only one of many that involve transportation innovation.
Chambers were highly involved in streetcars, trolleys, and bus systems as well. They pressed for electrification and water/sewer systems–and were the principal force supporting our early parks systems, such as Central Park and Boston’s Emerald Necklace. Again, lost in the fog of ancient history is the chamber role in development of the first airports in the 1920’s. Chambers competed for postal routes to support local pilots, and airplane developers. The business community provided the venture capital. While many may bemoan their existence (streets and cars, for example), chambers pressed for highways, freeways, and our federal highway system.
Sadly, in today’s world, many chamber success stories are thought of as mere infrastructure, unrelated to economic development. Infrastructure in the First Wave era was the critical need of urban areas; it remains so today–but has largely dropped off the economic development agenda in favor of knowledge-based, entrepreneur and innovation/disruption.
One final example of chambers supporting innovation and using it to recruit business and enhance the city’s image is what Mead called “Exposition Fever” (p. 146). Built into the DNA of First Wave chambers was the world’s fair, the exposition advertising to business/industry across the globe, the trade shows, the centennials, the Rose Bowls. Large and medium sized cities held these expositions constantly. Almost all were products of Chambers and Boards of Trade. The World’s Fair was the Olympics of the day, but instead of sports these Fairs built impressive collection of buildings, cutting-edge architecture, and the most incredible technologies of the day. And as tourist events, and generators of income, the forty million who attended the New York City 1939 World’s Fair certainly elevated these events to top notch economic development initiatives.
Merciful God, This is finally ending!
We set out two tasks (First Wave and Chambers as an EDO-Type) for ourselves in this review and so we are locked into two conclusions. A final set of comments is reserved for Magicians of Main Street.
The reader no doubt noticed our skepticism about this Wave stuff. The Policy World has mentioned it for years, decades even. Up to this point few have even thought of looking under the hood. Well, we can’t say we looked intensely in this review, but a reasonable observation is that a lot more going on during the First Wave years than just business attraction and incentives. The EDO which personified the First Wave, at least to me, was the Chamber. Can the reader suggest another type? The only other candidate is the redevelopment agency and that involves us with urban renewal. Whatever else urban renewal was, it wasn’t business attraction and incentives. Business attraction/incentives reflects the ideological drift into political partisanship that the Policy World took in the 1990’s. For the moment, I might suggest it has more to do with the Republican Sunbelt and Democratic deindustrialization in the North and Midwest Big Cities. Almost certainly the review will circle around and come back to the topic in the future.
As for the second task, the chamber as an EDO-type, there are several, no doubt profound observations that arise from Mead’s Magicians. Chambers, at least through 1945, were full-fledged comprehensive economic development players—easily an EDO type with a range of economic development tools and aggressive pursuer of several strategies. Certainly, as strategies go, infrastructure, political reform, tourism, and business attraction/recruitment have been pursued by chambers for sustained periods of time. Also, the ability to advocate, to act as an interest group and a political force, is somewhat unique to chambers. Government agencies and non-profits are mostly followers in that regard. Only labor unions and think tanks can match the chamber power in the political arena.
While not specifically dealt with in Magicians, I suggest that almost all these strengths flow from a chamber’s most powerful and important asset: its membership. Visiting a chamber meeting then, and today, is seeing a snapshot of one’s economic base. And that sadly, is the chamber’s greatest present day weakness. Today if an economic developer wants to see her jurisdiction’s economic base, she looks at a computer printout prepared by the regional planning agency, consultant or university. A goodly number of current economic developers would, after talking with a businessperson, rush to take a shower to rid themselves of impurities. That’s a shame, of course, but sadly, the current distance of mainstream economic development from the private sector (leaving aside tech, life sciences, university mentoring and accelerators, and gazelles) is that we fail to see a very powerful and useful tool for economic development, networking. It is no accident that some of the best work regarding clusters and small business development, are currently accomplished by chambers.
And now for Chris Mead’s Magicians of Main Street. Reviewing the book was not a task, it is a pleasure. Yea. I know Chris personally, but the book reads very well. It is “blast into the economic development past”. Its message can be quite profound, yet its style almost makes it a book to take with you on your next vacation, like a good historical novel—except that it is fact, not fiction. The lightness in its texture is because Chris Mead focuses on people. People who are good and bad, nutsy and boring. You get to see their mistakes, and successes. You get to see they gave it their very best. You have no idea of some of the characters who have served as past economic developers; you owe it to yourself to see on whose shoulders you stand upon (or would rather forget).
Drudges like the Curmudgeon take things too seriously. That can be a strength, but it also is a turnoff—especially in the current culture. Chris Mead offers a look into the past which doesn’t lecture, tell you what’s right and wrong, but rather let’s people be themselves, doing what they thought best at the time. In the end, isn’t that one of the better things the Practitioner World offers—the opportunity to be yourself, and try to do the best you can to make things better. Mead has proven that chambers of commerce as an EDO have a demonstrated ability to do just that.