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The Controversial History of America's Company Towns

Are they really as utopian as their proponents claim?

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  • Brookside, Kentucky, a coal mining company town.Photo Credit: Wikipedia

Online shopping behemoth Amazon has recently announced another hefty hiring push. Coupled with the growth of its distribution centers, the company has drawn comparisons to "company towns," or places in which the residents' main employer also owns all nearby housing and stores. Bloomberg has claimed that this model will lift up the working class. 

With high national unemployment rates and discussions around wage inequality dominating the news cycle, it's no surprise that this claim has been fueling some heated discussions—especially considering the company's founder, billionaire Jeff Bezos, ranks as the wealthiest person in the world. Will these so-called factory or company towns actually increase pay and job opportunities, or is just a farce?

The practice of company towns dates back to the late 1800s. So for a glimpse at how this "revolutionary" idea might pan out, let's take a look back at history.

Why were company towns founded?

The need for these institutions first arose in the 1890s among railroad construction and extractive industries, such as coal mining and lumber. These industries were naturally set apart from established towns, making company towns a logical solution to the geographical distance from civilization. In some unofficial company towns, it just so happened that most residents worked for one particular company. In other more alarming cases, a company would strategically own all businesses within a town and the housing inhabited by its workers and their families.

The motivations behind these monopolies varies. For some, companies idealistically erected towns in hopes that they would become a workers' utopia. The town was provided with schools, libraries, churches, and the like to encourage a healthy lifestyle within the community, which in turn would promote more productive workers. Meanwhile, things perceived to be negative influences, such as saloons, would be strictly forbidden within the town.

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On the flip side, some company towns were founded with more overtly nefarious purposes. Because company towns were inherently isolated from other cities and locales, that meant that workers couldn't easily seek other job opportunities—opportunities which might pay better or offer safer conditions. Residents couldn't spend their money at other businesses either, and instead poured the income they had just earned right back into the pockets of the company that owned the town.

Why were these company towns problematic?

Even in cases where companies may have the workers' best interests at heart, company towns ultimately lead to a lack of personal freedom. If churches are selected for residents at the company's whim, that means that other denominations and entire religions are left out in the cold. Choices—whether bad or good—are taken out of the residents' hands. Recreation is dictated by companies, and anything that may be perceived as uncouth or immoral is no longer an option. Personal exploration is thinned to none, and a utopia quickly becomes a force of oppression.

In the case of less well-intentioned towns, matters get only worse. In some locations, companies would compensate workers with a scrip—a monetary substitute that was valid only at stores owned by that same company. As there were no competitors for these monopolistic stores, buildings, and services, the price was fully at the discretion of the owner. Housing costs, groceries, and other necessities then became exorbitantly priced.

Related: 10 Railroad History Books That Shed Light on the Industry

Since the company that owned the town knew that all the residents had steady, reliable jobs, some of them allowed shoppers who were financially strapped to simply charge goods and services to a tab as needed. Of course, this meant that workers quickly racked up large debts—debts they were obligated to settle before they ever even thought about leaving the town.

As for the actual living conditions in such towns, they were far from the idyllic neighborhoods many might have aspired to. Houses were built as close together as physically possible, so as to allow the greatest number of workers to reside there. Besides lacking privacy and being shabbily built, one could only hope a home in the neighborhood didn't fall victim to a fire, or else the whole lot would go up in flames. Beyond that, company towns were also typically surrounded by fences or guards. This was allegedly for the workers' protection. But in areas throughout the South, the truth was rather transparent: as free laborers and convict laborers were housed in the same areas, both groups fell victim to equally abhorrent treatment.

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  • A guard watches over a company town in Alabama, 1937.

    Photo Credit: Library of Congress

Workers go on strike

In the best-case scenario for company towns, the growth of an area would result in the town naturally evolving as transportation and infrastructure improved. However, having a town entirely dependent on the success of one company could spell trouble if the finances weren't in order. If the company in control of a town went under, that meant the entire economy of the town would collapse. With a sudden localized spike in unemployment, debt, and isolation, residents would have to scramble to pull their lives together elsewhere.

But what if the economy of a town was thriving? Monetarily successful company towns might still see failure due to political fumbling. These town tended to lack elected officials, and a dearth of municipal services only spelt further trouble. Resentment was rampant among workers, who didn't have representation and agency over their own lives. Unsurprisingly, this sometimes led to workers' strikes.

Related: The Triangle Shirtwaist Factory Fire: New York City’s Deadliest Industrial Disaster

One particularly notable strike occurred in Pullman, just outside of Chicago. This was a company town funded by George M. Pullman, a manufacturer of luxury and sleeper rail cars. In 1893, the high cost of rent and goods in Pullman remained the same even as workers experienced a 25% pay cut. The resulting strike began the next spring in Pullman but soon spread nationwide, consisting of more than 150,000 participants across 27 states and territories. The federal government intervened, with troops sent in by President Grover Cleveland to crush the strike efforts. Still, the town of Pullman was never the same after the unrest of May 1894. A national commission was formed to investigate the causes of the strike, and the state ordered the Pullman company to sell off its residential holdings.

Surprisingly, this echoing backlash didn't result in the widespread disavowing of company towns. Pullman was viewed as an exception to the rule, a failed example of an otherwise sound idea. As such, company towns in the ensuing years changed in some ways, but didn't go anywhere. For the next three decades, paternalism was scrapped from the model of company towns for a more professional look, in which outside experts were consulted and the corporation wasn't as heavy-handed with its moralizing.

pullman, chicago
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  • Workers leaving the Pullman Palace Car Works, 1893. This photo first appeared in a promotional booklet praising George Pullman's paternalistic labor policies.

    Photo Credit: Wikimedia Commons

The natural decline of company towns

Following World War I, the American economy had grown large and prosperous enough that company towns no longer offered a distinct advantage. Income inequality and a poor standard of living still generally plagued factory workers. However, there had been improvements. Installment buying was now feasible for those workers who earned low wages, opening up opportunities for them to purchase goods like cars and radios. Most importantly, stronger national infrastructure and services meant that workers were no longer beholden to companies for healthcare and education.

As the popularity of automobiles spread like wildfire across the country, workers no longer faced the isolating issue of poor transportation. They could live anywhere and commute to work with relative ease. Employment opportunities all around them were suddenly viable, and they had access to mass communication via their new radios.

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The world around company towns was modernizing, and with this boom, the belief that people needed to be strictly guided in terms of morality largely fell away. Following that, the Great Depression began in 1929, and companies no longer had money to spare for heavy-handed welfare schemes.

It was Roosevelt's New Deal that was the final nail in the coffin for company towns. Minimum wages were raised across the country, and companies that once relied on underpaying their workers to stay out of the red eventually failed. Workers no longer needed to rely on companies for housing, as homeownership now had a lower-interest, lower-deposit system.

The future of company towns

Today, you'd be hard-pressed to find an official company town within the United States. But that doesn't mean that there aren't unofficial company towns operating in the country. Some companies that have heavy influence over an area choose to run the communities in an unincorporated fashion, in which company-appointed officials have more power than elected officials.

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For example, Bay Lake and Lake Buena Vista in Florida are controlled by the Walt Disney Company. Elon Musk has announced plans to incorporate Texas's Boca Chica and essentially turn it into a company town for the manufacturing and launch of his SpaceX rocket program. And now the possibility of Amazon factory towns looms overhead.

With so many downsides to company towns, who could benefit from them in today's economic, social, and political climate? Possibly the homeless. With anti-homeless infrastructure and policies enacted across the United States, the vulnerability of those living on the streets—especially during the pandemic—is only increasing. 

However, Disney itself has recently been criticized for rampant homelessness and food insecurity among its workers due to low wages. Combined with the knowledge of how company towns have played out in the past, we have a healthy dose of skepticism about the future of company towns run by large corporations.