Economic restructuring can be the downfall of any
industrial city. As corporations are continuously granted legal rights to seek
profits, the towns serving them are left in the wake. In Rust Belt Resistance(Kent State University Press, 2012), author Perry Bush explores the ongoing saga between British Petroleum and Lima, Ohio. The following excerpt from chapter one, “Local Communities Are No Match For Industrial Corporations,” explains how an industrial
city and its workers can stand up against the oil industry.
Lima, the county seat of Allen
County, is a weathered industrial city
of about forty thousand people, set against the flat and prosperous farmlands
of northwest Ohio.
It still possesses a certain charm. Local people can boast of a set of nearly new
schools, a few grand old boulevards where the city’s early industrialists once
lived, and wide, tree-lined streets with some of the cheapest housing of any
similar place in America.
Nonetheless, the city seems haunted by the question of whether, when its
financial magnates left, they might have taken its best days with them. Even as
fierce a defender as its longtime mayor remembers that when he first drove into
Lima as a young
man, his first impressions were of a beaten-down old city that “hadn’t taken
very good care of itself.” Three decades later Lima’s face still seems worn and gray,
especially when compared with the tracts of comfortable housing developments on
its edges. Lima’s
urban thoroughfares are pockmarked with vacant lots and its most memorable
physical characteristics are the number of railroad crossings that nearly
barricade off its downtown. In fact, one cannot enter Lima without being reminded of the constant
physical presence of trains. The city’s heart consists of two massive hospitals,
some public buildings and a varied collection of small restaurants and businesses
spread over about eight blocks, and a business district tenaciously holding on
against the attractions of the malls in the suburbs west of town. It is the
kind of town perennially described by outside journalists with words like “blue-collar”
and “gritty.”
Lima is also an island in every sense
except the strictly geographic. In the spring and summer, it is an urban island
amidst limitless green fields of corn and soybeans. Economically and
demographically, it remains an island of working-class sensibilities surrounded
on all sides by middle-class suburbia. These are the “townships” that remain
politically separate from the city while fully dependent on its services. The
city is a political island as well, though one has to dig a bit deeper to fully
see this. As the national left-leaning journal the Nation informed readers
in 1996, Lima
was “a rock-ribbed Republican bastion, a town that still brags of going for
Goldwater in 1964.” In fact, that claim isn’t true; Lima went for Johnson that year by a small
margin. Even so, conservative political instincts still run deep across Allen County
and have been reinforced for decades by the city’s newspaper, the Lima News,
which for a generation now has served as a faithful, steady fount of
libertarian free-market ideology. On the other hand, amidst the vast sea of Republican
governments that dominate northwest Ohio, Lima’s residents have,
for more than two decades, retained enough blue-collar roots to regularly elect
a feisty and progressive Democrat as their mayor. Not surprisingly, the city’s
newspaper and its mayor have generally locked horns, except for one short
period, the greatest crisis in the city’s modern history, when they joined in
an unlikely but effective partnership.
Lima is an
island in another way, too, one that can be fully appreciated only by traveling
south on Main Street from the business district, over the Ottawa River, past
increasingly ramshackle homes to stand on a railway overpass. There to the west,
just south of the city limits, unfolds a truly alien world. It is a scene that could
be lifted from a futuristic movie: huge sculpted scaffolds of pipes emerging from
fields of asphalt, dozens of valves emitting steam, blue flames flaring into
the sky, all tended by a uniformed army in hard hats. The functionaries of this
world speak in a whole different vocabulary, conversing knowledgeably of matters
like the cat cracker, alkylation, throughput, and BPDs. At night the
place burns with the glitter of a thousand orange lights while the machinery
throbs on relentlessly. Local people tell the story of a visitor to the city
who was once staying in a motel west of town. He woke up in the middle of the
night, saw an immense orange glow on the southern horizon, and immediately
concluded that half the city was on fire. Only after he had jumped into his car
and driven to the south edge of town did he realize that Lima was not on fire. It was only another normal
working night at the city’s oil refinery.
Perhaps it
is the immensity of the place, along with its bizarre panorama, that has
secured for the refinery such a prominent place in both the local economy and
the city’s very identity. It is the largest single taxpayer in the county, the biggest
single consumer of local water and electricity, and, with a payroll of upwards
of $31 million, one of the largest local employers. But there is more to it
than that. The plant has operated continually since the days of John D.
Rockefeller, more than a century ago. Succeeding generations of local people
have worked there, often generations of the same families, and most of them
have lived and spent their salaries in the Lima community. Through such ties, the plant
has so deeply cemented itself into the unspoken consciousness of the city as to
become something close to iconic. “It’s one of foundations of the city,” a refinery
staffer observed. “It’s like it’s in peoples’ blood or something… you’re always
aware of its presence.” A drawing of an oil derrick and the “eternal flame” of
the refinery dominates the city’s flag.
Finally,
the very presence of the city’s refinery means that Lima
stands out as an island of possibility in the larger landscape of
deindustrializing America.
For many similar communities around the world, this has become a relatively bleak
and barren terrain. By all standard logic of the era–and especially by the intentions
of British Petroleum (BP), the longtime owner of Lima’s refinery–the sprawling facility on the
south edge of town should no longer exist. In the mid-1990s, over the anguished
but seemingly futile protests of local people, BP decided that the plant no
longer fit into its current corporate profile and moved to shut it down. At
that time, BP was one of the most powerful and wealthy corporations in the
world, and Lima
had already been so staggered by successive waves of plant closings that it had
come to symbolize the national economic dislocation of the “rust belt.” The
refinery–and, to some degree, the larger Lima region–stood poised to join a
hundred other such locales already carelessly discarded onto the industrial
scrap heap. Yet Lima’s
refinery did not close. It continues to pump out oil and generate wealth, to
the benefit of both its corporate owner and the regional economy. It does so
because of the strenuous efforts of a range of dedicated people, both inside
and outside the plant gates, who were determined to secure for themselves a
different future than the one dictated by BP. The story of how they succeeded
reveals previously hidden possibilities in an era of deindustrialization. What
if corporate decisions are not immutable and absolute? What if communities can
still imagine themselves, at least to some degree, as masters of their own
fates?
Economic Restructuring
Part of
what makes the encounter between BP and Lima
such a compelling story is that both entities were struggling against forces
and economic calculations larger than themselves. Throughout the United States,
large corporations, responding to an intensely competitive economic
environment, sought to close down outdated industrial plants. The reasons
behind such closures came as small consolation to the stricken communities
these corporations left behind, however. As historian Stanley Buder has
recently observed, corporate America
underwent a signal period of restructuring through the 1980s. Marked by a
series of leveraged buyouts and hostile takeovers, this economic restructuring may have
ultimately strengthened the business sector, but in the interim it meant profound
uncertainty for corporate heads. The “clear message had been sent out” to
business CEOs: either “act boldly or lose your job.” A revolution in corporate governance,
beginning about the same time, fed the new ruthless search for profits. Faced
with the prospect of hostile takeovers by a newly emerging class of corporate
raiders, CEOs faced a stark choice. As summarized by corporate theorist
Marjorie Kelly, they had to either “start wringing every dime from operations
(sending jobs overseas, selling off weak divisions, laying off thousands), or
be taken over by someone who would.” One study of corporate heads of Fortune
500 firms from 1996 to 2000 explored what happened when stock analysts
downgraded their recommendations about purchasing company stock by just one
grade, from “buy” to “hold”: within six months, almost half of the top
executives of such companies had lost their jobs.
Oil
companies in particular faced an intensely competitive economic environment, where
their ability–or inability–to function at the point of greatest efficiencies
could spell the difference between a successful year or a disastrous one. The
oil industry has always suffered from extremely high overhead; as business
scholar Geoffrey Jones noted, “the investments required to develop an oil field
or build a refinery were extremely large” and “entailed high fixed costs. As a
result, small variations in price or in output had a relatively powerful effect
on profits.” This was a particularly worrisome trend for big oil executives in
the 1980s, when they faced a sudden and unexpected drop in oil prices because
of the global “oil glut.” It was in this context that BP began to consider
reducing its refining capacity and ultimately set events in motion that would
lead to its decision to close its Lima
facility. Reporting on the plant closings by international oil companies in the
1990s, journalists noted that it was no longer enough for big oil executives to
merely report sumptuous profits; they had to worry about the extent of their
profit margins, whether their efficiencies were at peak, and whether investment
in a specific plant would produce an even higher rate of return if applied
elsewhere.
Civic
leaders faced with plant closings had to sort through their own set of grim calculations.
At first glance, it was not clear why the Lima
region’s future should be any different from that of hundreds of similar
communities, whose municipal leaders had discovered their relative powerlessness
when the reigning corporate partner had decided to close up local operations
and move elsewhere. Between 1962 and 1982 alone, the country witnessed the
closure of more than one hundred thousand manufacturing firms, each employing
more than nineteen workers, a full fifth of them in the five states of the old
industrial Midwest. From 1979 to 1986, this
region had suffered a 19.3 percent decline in manufacturing employment, losing
nearly 950,000 full-time manufacturing jobs. These job losses originated in a
variety of complex underlying economic factors. By the 1970s, many U.S.
corporations faced increased overseas competition and rapidly declining
profits. Plant closings therefore seemed, on their face, a natural and
inevitable end to the industrial life cycle. Corporate managers quickly moved
to pin the blame on an overpaid, unproductive workforce and aging, obsolete equipment.
“Yet the closing of an obsolete mill,” one analyst has summarized recently,
“was often the direct result of management’s failure to modernize or their
active decision to invest somewhere else.” Technological innovations, such as
the computer and communications revolution and containerized shipping,
facilitated the decisions of corporate managers to shift their production elsewhere,
to low union areas in the American South or, even better, overseas, wherever
the prevailing wages were lowest and the hand of governmental regulation the
lightest.
Corporate Law
Cities like
Lima also face a marked disadvantage in
corporate economic decisions because of the privileged place of capital in U.S. corporate
law and history. By the later twentieth century, U.S. corporations had been working the
legal system for at least a century, successfully attaining a whole range of new
powers. In fact, they have become something akin to a new kind of legal entity
altogether. In the first one hundred years following ratification of the U.S.
Constitution, American courts wrestled with two different readings of the essential
nature of corporations. One view held that the corporation was an artificial
being, a creation only of laws for specific purposes, and thus could be readily
restricted–or even dissolved–by the popular will. The other view held that
corporations were “natural entities,” real beings with a separate existence deserving
of basic rights. Understandably enough, corporate leaders strongly favored the
latter view, and thus, as legal scholar James Willard Hurst has noted, through
much of the nineteenth century, corporations approached federal court under the
“odd fictions” that they were citizens.
This latter
interpretation of the nature of corporations was given great weight by two key
legal decisions, which together facilitated the rise to dominance of great
corporations in the late nineteenth and early twentieth centuries. The first of
these was the Santa Clara decision of 1886, in which the U.S. Supreme Court issued the bizarre but
foundational legal opinion establishing in law the fiction that corporations
were real persons, deserving of every protection as natural beings under the
Fourteenth Amendment. This amendment had been ratified in 1868, primarily to
clarify the status of recently freed slaves, thus establishing the normative
definition of U.S.
citizenship. Corporate lawyers quickly used the Santa Clara ruling to induce
courts to strike down hundreds of laws regulating corporations and in other
ways restricting their autonomy as real persons. In the first
half-century following the Santa Clararuling, noted Supreme Court Justice
Hugo Black in 1938, more than 50 percent of the cases invoking it did so in
order to extend the rights of corporations; less than a half of 1 percent of
the cases involved the issue of racial justice. In recent decades, corporations
have used the decision to appropriate many of the other constitutional
protections commonly awarded living human citizens under the Bill of Rights. In
the Bellotticase of 1978, for example, the Massachusetts Supreme Court
struck down a law restricting corporate political advertising because of the
basic American right to free speech.
The second
watershed legal decision solidifying corporate power came in 1919. In Dodge
v. Ford, the Michigan Supreme Court ruled in 1919 that a corporation existed
primarily to enrich its shareholders, that this was its essential purpose. Hence
a corporate action aimed at any other end–to, say, soften the effect of plant
closings on its partner communities–became essentially untenable. Technically,
these or any other expressions of corporate social responsibility were illegal.
In the emerging political and economic climate of the Reagan-Bush decades, when
paeans to the virtues of the unrestricted free market reverberated with
near-religious conviction, new devotees of this view did not shrink from such
expressions of corporate social irresponsibility. Instead, they celebrated them.
“The one and only . . . social responsibility of business,” the Nobel
Prize-winning economist and free-market apostle Milton Friedman proclaimed, is
to “increase its profits.”
In the
sphere of corporate law, corporations have thus come to possess capacities that
are nearly cosmic. They are persons entitled to every right that real U.S. citizens
enjoy, yet at the same time they are something like superpersons. They are
immortal; they cannot be killed. They may legally be persons but they can
officially feel no human emotions like guilt or shame. While on the one hand,
they can devour one another, on the other, if its suits their interest, they can
break apart like amoebas into constituent parts, which all have the same
privileges as the mother body. They can disband themselves in one location and
then suddenly rematerialize states or oceans away. By the 1930s, the legal powers
accumulated by large business enterprises seemed so all-encompassing that New
Deal theorist Adolf Berle could only conclude that “the rise of the modern
corporation has brought about [such] a concentration of economic power that it
can compete on equal terms with the modern state.”
The Industrial City
Against
this awesome array of corporate powers, individual communities labor to
safeguard their own interests under a variety of marked disadvantages. Their
powers are weak compared to those of state or national governments. Faced with
a harmful decision from a large corporation, therefore, the immediate municipal
response of many local governments is to enlist the help of a governor or
senator. Yet if such officials are disengaged, or if the corporation in
question has better means of influencing them, what then? Corporate decisions
to come and go are especially fraught with danger for individual communities.
In their desperation to woo new businesses, officials from competing cities
often vie with each other in offering inducements to corporations, such as reduced
property taxes. Given the dependence of local governments on property taxes,
civic leaders must tread carefully around their corporate partners in whatever
they do, especially in light of the increased mobility of the multinational
corporation. If a corporation, aggravated by local actions, decides to pack up
and move away, its decision levies a body blow to the community, weakening its
ability to finance its schools and other basic services. Corporate mobility
places city officials at a profound practical disadvantage as well. Their need
for corporations, and for the jobs and taxes they bring, is so palpable, and
the impact of losing them so harsh, that civic leaders of all stripes usually
find themselves predisposed to corporate needs and generally willing to do
almost anything to avoid the aura of a “negative business climate.”
For the
repercussions of plant closings are severe. Numerous studies have documented
the social, economic, and psychological effects of unemployment, especially on
people who have long held steady jobs. Common among these are high blood
pressure and other stress-related health problems, difficulties often
exacerbated by the fact that, at least until full implementation of the new health
care reform law, when Americans lose their jobs they often lose their accompanying
health benefits. Other signs of social trauma–increased rates of alcohol and
drug abuse, domestic violence, mental health problems, and even suicides–likewise
follow lost jobs and reduced incomes. Industrial communities experience their
own set of interrelated crises connected to a loss of tax income, ranging from
a decline in the quality of local schools to increased demands for public
assistance. In other words, as the stricken city’s income declines, the demands
on it increase. Moreover, the loss of one type of job, especially high-paying manufacturing
sector jobs, tends to accelerate the loss of others. The U.S. Chamber of
Commerce estimates that for every three manufacturing jobs lost, a community
loses two service-sector jobs. In this manner, the job losses from plant
closings can have a kind of multiplier effect. As one political scientist has summarized
it, “Private corporations have acquired the power to issue birth certificates
and death sentences to entire communities.”
The loss of
a major local employer can evoke a range of responses from urban officials,
responses that have been classified by scholars. Some officials seem unable to
respond effectively, instead taking a “bystander” role, in which they mostly
just wring their hands and emit sympathetic sounds to the press while passively
waiting for the market to make the necessary adjustments. Given the possible
repercussions from plant closures described above, however, many stir themselves
into frenzied action despite the many handicaps they face. Some adopt a
moderate but still fundamentally reactive posture, allowing the corporation to
retain control of major decisions but doing what they can–through job retraining
programs, for instance–to “offset” some of the destructive impacts of those
decisions. Other municipal leaders take a more proactive stance, strongly contesting
such corporate decisions even at the risk of upsetting the ostensibly harmonious
business climate. Often these activist officials are those with close ties to
unions and other community groups, as opposed to area businesses. They use the
local legal structure to forestall plant closings, file eminent domain or other
lawsuits, and try to pass laws restricting corporate autonomy, as well as
working with community groups in local management buyout schemes. Yet activist
leaders are often handicapped because they generally lack the requisite staff,
technical and financial expertise, and other resources–not to mention the
political and economic power–to compete in the high-stakes terrain of large
corporations. Not surprisingly, therefore, the record of success for such
activist responses has been a poor one. In sum, there seems little ground to
question the consensus recently reached in a noted new study of the North
American rust belt: “Local communities,” Steven High concluded, “are no match
for industrial corporations.”
In early
autumn 1996, however, an informal and ideological diverse coalition of local
people in Lima, Ohio, set out to test this conventional
academic wisdom. They had no choice, for the decision was thrust upon them.
After eight months of dutifully trying to sell the local refinery–indeed, after
repeatedly assuring local people that the plant remained an excellent facility
and a buyer would certainly appear–BP suddenly announced that the sale had
failed and that the company intended to demolish the plant. Given the
refinery’s central role in the regional economy, area leaders, from Lima’s mayor on down,
quickly concluded that they would not accept BP’s decision without a fight. The
odds against their success could not have been higher. British Petroleum was,
at that time, the world’s second-largest oil company and one of the richest and
most powerful such business enterprises in the world. It employed close to
100,000 people in more than one hundred different countries and
reaped in gross profits of upwards of $170 billion annually. Lima, on the other hand, stood so battered and
bruised by two decades of successive waves of plant closings that, to many people,
this last threat seemed something like the end.
Yet city officials sensed an opening, for BP–on the surface,
at least–seemed ready to rebut the critics asserting that a corporation in its
essence could have no sense of social conscience. In some ways this was not a
new development. As early as the 1920s, in reaction to an increasing public
perception of business leaders as senseless, predatory monopolists, corporate
executives had already sought to cultivate a benevolent public image of their
companies. The corporate campaign for social responsibility had ebbed and
flowed over the decades but had noticeably accelerated in the 1990s in reaction
to worldwide anti-globalization protests. Moreover, in this corporate movement
to present themselves as sensitive and responsible public citizens, BP
especially seemed to be leading the way. The task seemed especially close to
the heart of BP’s chief executive, a diminutive, hard-driving Brit named John
Browne. Like other oil company executives, Browne was an ambitious and
sometimes ruthless workaholic. Unlike many of them, however, he exhibited a
polish and sophistication that perfectly suited the global leadership he
desired for his company. He was a graduate of Cambridge and Stanford who collected art and
frequented the ballet and opera. Browne spoke eloquently, expressing big and
expansive thoughts. He insisted that his company’s sense of responsibility was
rooted in “hard-headed business logic,” but in his speeches he increasingly
stressed the kinds of social responsibilities that BP owed the world. Late in
the decade he even began to position his company, rhetorically at least, at the
forefront of the struggle against global warming. “If we’re going to win back
public acceptance and trust,” he instructed his fellow corporate executives,
“we have to be progressive.”
In
the Lima
metropolitan region in the mid-1990s, local people presented Browne with a
perfect opportunity to put such fine words into practice. The ensuing confrontation
between an aging and economically battered industrial city on the one hand and
a powerful global corporation on the other would reveal a lot: about the real
extent of the corporate social conscience, about the core issue of corporate
personhood, and even about the extent of real agency left to industrial communities.
Yet–to
borrow an old and appropriate Lima metaphor—to
fully follow the story, one has to travel way up the tracks: before BP entered Lima, and before Lima’s
emergence as a national poster child of the rust belt. One has to travel back
in time to the city’s great golden age, when Lima made a fine living from bedrock
industrial enterprises like steel and steam, and then extend the reach of historical
memory back even further. For Lima
is a city whose modern history both begins and ends with oil.
This excerpt has been reprinted with permission
from Rust Belt Resistance: How a Small Community Took On Big Oil and Won,
published by Kent
State University
Press, 2012.
