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Kellogg's Liberation Capitalism
In 1930 Kellogg's was the largest manufacturer of ready-to-eat cereals in the world, employing nearly 1,500 workers. On 24 November the company president, Lewis J. Brown, announced that the Battle Creek plant would institute a six-hour day on 1 December. According to Brown, the company would be able to hire an entirely new shift of workers, a fourth shift in the twenty-four-hour working day, thereby helping to relieve unemployment in Battle Creek. With this bold step, Kellogg's would take the lead among socially conscious businessmen and industrialists. The company would show Henry Ford and the other "welfare capitalists" how to combat the depression crisis and, at the same time, offer a new vision of progress to a nation sunk in despair--so Brown hoped.
William Keith (W. K.) Kellogg, the company owner, told Battle Creek Mayor William Penty that "if we put in four six-hour shifts ... instead of three eight-hour shifts, this will give work and paychecks to the heads of three hundred more families in Battle Creek." Lewis Brown told audiences in Canada and in the Midwest that the "market crash," "unsound credit," and "depression" had but one "remedy ... shorter work periods."
This remedy was much more than just a cure for unemployment, for it offered a new, capitalist version of liberation to the modern world, where machines were steadily replacing men and women at work and where individual liberties were threatened by the rise of authoritarian governments. Observers around the world agreed with Brown that Kellogg's was revealing the true miracle of welfare capitalism, the rebirth of freedom in the form of "mass leisure." Under the direction of scientific managers and enlightened industrialists like Brown and Kellogg, the free exchange of goods, services, and labor in the free market would not have to mean mindless consumerism or eternal exploitation of people and natural resources. Rather, capitalism's destiny was revealed as a new freedom from work for more and more people, achieved through the marketplace. Workers would be liberated by increasingly higher wages and shorter hours for the final freedom promised by the Declaration of Independence--the pursuit of happiness.
Unlike the authoritarian schemes of the Socialists, this liberation would be founded on freedom--on the free choice of the capitalist to reduce work time (a sound management decision) and the free choice of workers to accept shorter hours as a benefit, what economists called a "normal good," on a par with higher wages. Together, the worker, manager, and owner were making sound, free choices for their own benefit. The result would be a shift of the center of American life from necessity/work to freedom/leisure.
"Welfare capitalism" was emerging from its chrysalis, revealing its true splendor as "Liberation Capitalism."
Brown argued that his vision was based on realistic considerations of the needs of both labor and management. First he explained that in order to "maintain the workers" purchasing power," the minimum daily wage for a male employee would be raised to $4.00. In other cases the loss of two hours of work per day would be partially offset by raising the basic hourly wage by 12.5 percent. He maintained that this would "give Kellogg employees ... a purchasing power, in view of price declines, exceeding that enjoyed a year ago for eight hours of work.. As a result, Kellogg's would be "paying the highest rate per hour of any of the larger firms in our city--and much greater than the average throughout the country."
From the start, Kellogg management faced the issue of total weekly pay head-on, challenging those in organized labor who claimed that work-sharers were putting the entire burden of unemployment relief on the workers. Kellogg's plan called for business and labor to share the costs of shorter hours equally: workers accepting a modest weekly pay cut and job-rules concessions, Kellogg's increasing hourly wages and expanding the total payroll and the number of employees. In late 1932, an influential group of New England businessmen gained national attention for offering exactly this "share the work, share the cost of shorter hours" scheme, calling it the New Hampshire Plan, much to the annoyance of Kellogg's management.
There is no doubt that Kellogg workers were paid less weekly, at least until 1935, when Kellogg's raised wages a third time. But there is also no doubt that Kellogg hired more people and paid out more total wages, and that the issue of hourly wages, as distinct from total weekly pay, was still important for workers. Moreover, according to Brown the six-hour day was in keeping with Kellogg's tradition as a leader of industry and welfare capitalism. Brown reminded reporters in 1930 and 1931 that Kellogg's had been one of the first companies to institute the eight-hour day and try out the five-day week. As Brown saw it, Kellogg's was continuing to blaze the trail of industrial reform. The six-hour day represented the company's latest effort to "share the benefits of mechanization and increased productivity" with workers and fulfill its social obligation to the community.
Brown and "W. K." cited Henry Ford's leadership, noting that over the years Ford developed a strong case for shorter hours as a sound principle of industrial management. Ford had already "proven" that workers gave their best service over the long term if hours were shorter. He had shown that absenteeism, turnover, and accident rates improved and a "more stable workforce" resulted. He had also "demonstrated" that workers were happier, more cooperative, and less given to militancy and unrest. Brown and W. K. Kellogg agreed with Ford's claim that a shorter day was "one of the finest cost-cutting moves ever made" and was the way to higher productivity and therefore profits. This was quintessentially good capitalism, for it gave workers, managers, and owners what they wanted.
As part of the deal, management presented the still-unorganized Kellogg workers with a package of benefits and concessions built on the six-hour initiative. In exchange for reducing hours and, in its view, maintaining weekly wages while expanding the total payroll, management insisted that workers accept the elimination of the night-shift bonus and the half-hour lunch break. Brown argued that each of the four shifts, even the 6 p.m.-12 a.m. and 12 a.m.-6 a.m. shifts, would appeal to enough workers that a free bidding procedure would make the shift bonus unnecessary--some people liked to work nights so they could have the "day-light hours free," He also maintained that most workers would prefer to work straight through lunch and leave the plant as soon as possible. Since the lunch break was expensive in terms of plant facilities and workers' time (according to the scientific managers, the least productive parts of the day were just before and just after lunch), the move would help pay for the larger payroll and higher hourly wages.
Moreover, the overtime bonus would be phased out, replaced by a "production bonus" based on how much workers produced, not on how long they worked. Brown was particularly proud of this initiative, considering it a practical application of a basic but widely ignored principle of scientific management. Before the six-hour day, workers had a "psychological" incentive to stretch out their work to win premium pay. Now overtime was outmoded, for as the editor of Forbes, Chapin Hoskins, observed, the four-shift plan created "an incentive for getting all necessary work done within six-hours"--after six hours workers were paid at the lower pre-December 1930 hourly rate.
Before six-hours, workers objected to such a scheme, calling it a management trick to speed up the line, and suffering the clear effects of fatigue. According to Brown, however, short-shift workers supported the "production bonus"; most said that they preferred to work faster and harder for the extra pay rather than put in tedious "overtime" hours. Moreover, the problem of fatigue had been reduced substantially--Brown used the analogy of a "relay-race" in which runners passed the baton well before they were out of breath.
In contrast to Ford and other leaders of welfare capitalism, Brown further argued that shorter hours would provide "greater opportunity for recreation and enjoyment--outside of business hours" and that a shorter work day would "mean better living and working conditions generally." Unlike the eight-hour system with two undesirable shifts (those beginning at 3 p.m. and 11 p.m.) and one highly preferred shift (beginning at 7 a.m.), the six-hour day would offer "opportunity for an equal amount of outside recreation and pleasure" by providing four "equally desirable" work periods (beginning at 6 a.m., noon, 6 p.m., and midnight). Brown noted that "the six-hour shift will give them all time to rest up, to do the things they always wanted to do, if they hadn't been so pressed for time."
Through the 1920s, Henry Ford had stressed the economic importance of the additional leisure created by reducing the work week to five days. The extra free time would encourage people to buy and consume more industrial goods. As for the "humanitarian side of the shorter day and the shorter week," Ford cautioned that "dwelling on that subject is likely to get one in trouble, for then leisure may be put before work rather than after work--where it belongs." For Ford, leisure was not an alternative to work but rather, within limits, the source of new "needs and necessities" and therefore the wellspring for new reasons to keep working "full-time."
Although Brown and W. K. followed Ford in most areas, they embraced the troublesome "humanitarian side" of shorter hours. In a "Personal Letter" to company employees, Brown wrote of "another income of which we do not often think, and yet it is the one by which much of our lives is governed.... Happiness has a bigger 'mental value' ... than the gain in 'money income' ... of the job. The mental income is satisfaction--the enjoyment of the surroundings of your home, the place you work, your neighbors, the other pleasures you have-[which are] harder to translate into dollars and cents" He claimed that the six-hour day would "revolutionize continuous industry operations" and laissez-faire capitalism because the balance of the workers' lives would shift from concerns about work and economic matters to the various kinds of "mental income" life offered. With six-hours, what Ford feared would come to pass--the "humanitarian side" of life would ascend.
Such a watershed had been a long time coming, even though signaled by the eight-hour day and Ford's five-day week. With the advent of six-hours the focus of life would henceforth be on leisure--on freedom from necessity. Workers' attention would shift from economics and job issues to concerns about what to do with their lives, and a new day of liberty would dawn for the industrial worker, bringing "about higher standards in school and civic ... life." But the company and industry would also benefit: "There is nothing more valuable to the industries of Battle Creek than to be able to draw its workers from a community where good homes predominate."
Brown believed that the shorter day was industrial management's best hope for the future, and that it would save capitalism. When he announced the four-shift plan, Brown played openly to a larger, national audience, asserting: "We are going to start something that has been talked about for years, but nobody has had courage enough to do."
Brown was right; the business world was watching. Factory and Industrial Management proclaimed on the front cover of its December 1930 issue that this was the "biggest piece of industrial news since Ford announced his five-dollar-a-day policy."
The editors reiterated Brown's claim that Kellogg's was on the cutting edge of industrial management:
Here lies our dilemma: On one side, millions of people wanting goods and unable to buy them ...; on the other side, industry ... working at two-thirds capacity.... [Kellogg's] sends an arrow to the heart of the problem ... to deny the ability of American industry to shorten hours for the present and for the future is to deny all the achievement of past generations.... We predict that this new policy of the Kellogg Company will do more to stimulate leaders to action and will make a far greater contribution to the solution of the unemployment problem than all the feverish temporary expedients being tried. American industry needs to apply ... the best-known management methods. It is significant that [Kellogg's has] ... the courage and the vision to undertake the experiment. Industry cannot turn back; it must go on developing new machinery and the new social values that arise from it. Therein lies profit; therein lies mass leisure, the next step.
The magazine contacted leading political, industrial, and labor leaders throughout the country to elicit their views. Without exception, the comments were enthusiastic.
Arthur Woods, chairman of Hoover's Emergency Committee for Employment, telegraphed that "the Kellogg plan is a very significant move" and that such developments were evidence of "industrial ingenuity and determination in dealing with the unemployment emergency," a model of Hoover's voluntarist policies. T. R. Darrow of the Harvard Graduate School of Business Administration visited Battle Creek and used Kellogg's as a "case study" in his classes back in Massachusetts.
Morris Leeds of Leeds and Northrop called the six-hour day an example of "constructive thinking and action which will help decrease unemployment now and may have permanent ... value," serving as a "stimulating example" for other employers. Paul Litchfield, president of Goodyear Tire and Rubber Company, reminded readers that Goodyear had been on six-hour shifts for two months, an adjustment that "is justifiable in times of ... unemployment." Edward A. Filene sent his "sincere congratulations," and the management of General Motors, including Alfred P. Sloan, Jr., indicated that they were "interested" in the experiment. Most impressive of all, John Edgerton, president of the American Association of Manufacturers, called Kellogg's six-hour scheme "highly commendable."
William Green, president of the American Federation of Labor, used Edgerton's very words: "It is obviously impossible ... to increase the number of employed workers unless working hours are decreased.... Kellogg's [six-hour day] is in line with this requirement ... and is highly commendable. The increase in hourly [wages] ... will enable workers to maintain a relatively high purchasing power." John B. Andrews, secretary of the American Association of Labor Legislation, thought Kellogg's move was "a wise step" and a model for industrial managers dealing with the problems of "this machine age." Don D. Lescohier, executive secretary of the Wisconsin Citizens Committee on Employment, thought the institution of a six-hour day would be necessary for "American industrialists generally as the basis for sound prosperity."
National interest in Kellogg's experiment, and the broad political consensus favoring it, continued throughout 1931. Herbert Hoover asked W. K. Kellogg to come to Washington. (In 1955 Hoover recalled that he had been "very interested in the experiment" and had told Kellogg that it was "very worthwhile.") Senator David I. Walsh of Massachusetts, like Henry Ford an occasional "guest" at the Battle Creek Sanitarium, visited the plant and told company officials and the press that he "heartily approved" the plan and believed that it should be adopted by as many industries as possible. Hugo Black later used Kellogg's success to argue for passage of his thirty-hour work-sharing bill in the U.S. Congress. There are even some believable reports that FDR called W. K. during the first months of 1933 to congratulate him for what he was doing, at a time when Roosevelt supported legislated work sharing, and the Black-Connery Bill was known briefly as the Black-Perkins Bill.
The New York Times followed the Kellogg story through the 1930s, reporting in 1931 that the six-hour day was "a complete success." Business Week reported that employees were "completely sold on the plan," continuing: "Needless to say, Battle Creek has been a Mecca for farsighted business executives, for students of management and all others sincerely interested in permanent stabilization of business.... Many [businessmen] are now seeing [the Kellogg experiment] in a more favorable light because not only does it please employees and appeal to the public hut, on the basis of five months experience, it is profitable."
Forbes's managing editor, Chapin Hoskins, visited Battle Creek the same year. Commenting that the experiment was "the topic of discussion" in the business world, Hoskins told how W. K. had begun two years earlier to build an executive force of "younger men" to carry the company through the next stage of its "existence and growth," hiring Lewis J. Brown as the new president. And it was Brown who had initiated this "striking formula of business administration." The fruit of the new "energetic and progressive business administration" was simply "good management," the best example of which was the six-hour day; and "good management ... will probably, in time, bring the six-hour day elsewhere." Obliquely referring to then-current attempts to legislate shorter hours, Hoskins concluded that "nothing else" but enlightened management, working closely with employees, could make work sharing work.
In the tradition of what David Roediger calls "Fordized Taylorism," Hoskins drew intricate "performance records" graphs and analyzed the situation at Kellogg in terms of "mid-morning swings," "luncheon let-down," and "mid-afternoon peaks," concluding that average worker efficiency per hour had improved substantially with the introduction of four shifts per day. "The conquest of fatigue [might be] cumulative," he suggested, given that "83 cases of shredded whole wheat biscuit used to be packed in an hour (under the eight-hour day). At the time of my visit, the number was 96." Meanwhile, the "pest of so many manufacturing plants, unnecessary overtime that somehow takes on the appearance of necessity," had been eliminated at Kellogg's. Under the "long hour regime," when their lives were dominated by work, workers tended to resist a production bonus. But under the six-hour system, most workers were showing that they preferred to work harder for premium pay rather than longer, for overtime.
Like Brown and the editors of Factory and Industrial Management, Hoskins observed that the depression had raised the "familiar specter of technological unemployment"--as Karl Marx and the Socialists asserted, capital and machines were steadily replacing labor. There were but "two ways out" of the mass unemployment and economic chaos that loomed: "New industries, the large-scale fulfillment of new wants, ... must absorb the men and women released from older employment. Or hours of work must be shortened, so that more workers will share in the jobs that do exist. This, of course, not merely in 1931 but for the years to come."
Industry's future rested on the early realization that both paths were necessary. What "thinking men in industry [were] saying is shorter hours for men and longer hours for machines." The six-hour shift was destined to become "one of the important shock absorbers of American industrial advance."
Like Forbes, most publications that ran stories about Kellogg's experiment in the early 1930s simply assumed that shorter working hours were a benefit of industrial progress, on a par with higher wages, and that workers shared this view. Unlike present-day historians, however, few journalists felt compelled to explain why Kellogg workers apparently supported shorter hours. Many had been covering labor's fight for "progressively shorter hours" for years and found it natural that workers would want to work less and would consider shorter hours with the same pay a good deal.
During the spring of 1931, Factory and Industrial Management updated its earlier story, finding that Kellogg's six-hour day had "won its spurs." Envisioning a new future for industrial capitalism, the editors wrote that the six-hour day opened up
a new way of life, and ... [showed] that production is a means and not an end, that our national increase of productivity makes it practical to devote a greater share of life to living. [The six-hour day] recognized the changed balance between leisure to live and productivity to supply the means of living ... and recognize[d] increased leisure with security as the most logical increase in the standard of living. [It was] the forerunner of a general movement aimed not only at meeting the widespread unemployment ... but at providing a saner utilization of our resources of man power and machinery. (Emphasis added)
Most business and financial publications agreed that Kellogg's scheme offered a permanent solution to technological unemployment based on "elimination of the work, not the worker." Journalists responded to Factory and Industrial Management's criticism that "we have not sufficiently realized in the past the value to the employee and to society of leisure, freedom, and opportunity to enjoy life in one's own way" and begin to sketch out the broad outline of "Liberation Capitalism."
THE THEORETICAL ORIGINS OF "LIBERATION CAPITALISM"
"Liberation Capitalism" did not spring fully grown out of the imaginations of managers like Lewis Brown or journalists like Chapin Hoskins. It had a long history. The theorizing and research that went on before the depression deserve some historical articulation beyond the exuberant rhetoric of journalists and the practical concerns of industrial managers. Intellectuals and theorists do occasionally make a real difference. When they do, it is only fair to let them have their say.
Economists such as John Stuart Mill and Simon Patten had long speculated that human needs for things the marketplace provided were finite, reasoning that as industry advanced, it was possible for humans to get "enough." Such theorists tended to divide economic goods (or utility) between "necessities" and "luxuries," and to divide the world between "free" and "utilitarian" realms. Needs for basic economic goods and services, being finite, tended to decline as industry advanced. As the most pressing material needs were met in a condition of "abundance," other "nonpecuniary" human needs, desires, and activities outside the market would become relatively more appealing, and might be given more time and attention. Mill wrote that after "necessities" had been provided for the masses, the nations of the world should accept that condition as constant and embrace what many feared--the economic "Stationary State." In such a condition, human progress would take place in realms outside economics, in "mental culture, moral and social progress ... and the Arts of Living." In a situation in which "no one is poor, no one desires to be richer," people would have "sufficient leisure, both physical and mental ... to cultivate freely the graces of life." Such free activities would flourish and expand because industry, increasingly productive, would provide more and more leisure instead of more and more unneeded (or less needed) goods and services.
But the picture was not entirely rosy. Economists had been drawing "backward-bending" supply curves for labor since the days of the Mercantilists, predicting that leisure would automatically grow as wages and wealth increased. Mill and Patten, however, later joined by Thorstein Veblen, warned that economic abundance could just as easily produce another, less promising result. The danger lay in a nation's trying to expand wealth and maintain economic growth after the "basics" had been taken care of. Mill predicted that if the western world tried to continue economic growth forever, beyond the point where people had enough, the natural world would be destroyed: "the earth must lose that great portion of its pleasantness which it owes to things that the unlimited increase in wealth ... would extirpate from it" and humans would be left "consuming [more and more] things which give little or no pleasure except as representatives of wealth."
In the 1920s Rabbi Abba Silver, Monsignor John Ryan, Stephen Leacock, Stuart Chase, and other writers added to the catalogue of horrors uncovered during the nation's scramble for more and more in an age of abundance. Responding to the birth of consumerism, the rapid increase in advertising, and what Edward Cowdrick called the "New Economic Gospel of Consumption," they expanded Mill's list to include waste on an unprecedented scale, exploitation of humans, increasing disparities in wealth and power, and the commodification and degradation of free human exchange and activities (a favorite metaphor has always been prostitution, the ultimate form of commercialization and thus destruction of the human potential for free action).
Arthur Olaus Dahlberg emerged as the most widely read and influential theorist of Liberation Capitalism during the 1930s. He tried to lay out the full significance of the nationwide experiment in work sharing, its history, and its place in economic and social theory. Responding to charges that work sharing was a harebrained fad, he was at pains to show that the theory behind the project had been extensively discussed by economists for years. Dahlberg updated the traditional themes of writers of the 1920s such as Stephen Leacock and David Friday, applying them to the national politics of work sharing and industrial experiments like Kellogg's six-hour day. For Dahlberg, the most important economic and social question facing the western world was "whether we take ... leisure in the form of shorter hours ... or in the form of unemployment and lose it." Unless that question was answered correctly, "capitalism would fail" and be replaced by authoritarian government. AFL President William Green turned Dahlberg's argument into a slogan: "Free-time will come, the only choice is unemployment or leisure."
Dahlberg suggested that an "Age of Leisure" under capitalism would mean unprecedented freedom from work and material concerns, unlimited opportunities for the masses to live outside the marketplace. More time spent with family, friends, the community; in nature, learning, teaching, worship, appreciation, and play would invigorate working-class culture and lead to a different kind of progress and a new understanding of human and national achievement.
With Mill, Dahlberg thought that the key failure of capitalism was its resistance to the natural decline of the importance of the marketplace, a resistance based on inflated egos, flawed values, and short-sighted beliefs, not on objective, rational economic analysis. For ideological or psychological reasons, most businessmen and economists rejected long-term work reduction as industry's best, last achievement, for such a consummation would set the economy and business in second place, as a servant to other kinds of human needs and purposes. They feared the loss of their status as providers of the primary and most pressing needs of human beings. For them the business of America was and should always be business. Or as Ford put it, "What else is there to do?" but work and create more wealth.
Accordingly, most economists and businessmen and a growing number of politicians embraced that fantastic project that Mill, Patten, and others had warned about: eternal economic growth. Moreover, they were beginning to enshrine this insane idea as an absolute, unquestioned economic principle and to establish it as the ideological foundation of the modern state. According to the Gospel of Consumption, the social expectation that people could reduce their working and curtail their buying to do something "better," this old yearning for an age of "abundance," had to be rooted out. Language that consigned work and wealth to a subordinate role in life had to be replaced by appeals to a "higher standard of living" and a proper regard for "new products" and for work as life's permanent center. This was "serious business." It was the responsibility of what Rexford Tugwell called "workers on work" to find new, "important," "useful," and "necessary" work for the nation to do, for the alternative was aimless drift toward chaos.
The fundamental value attached to everlasting economic expansion entailed several corollaries: government support for (and thus control of) economic growth, the eternal creation of new work to replace work "lost" to machines, a new definition of "full-time" work to counter the century-long social acceptance of work reduction, and the rejection of the notions of "basic necessity" and "enough."
Dahlberg used the metaphor of a "new religion" to attack these ideas. (Stuart Chase used that of industry's "squirrel cage.") The "Calvinistic worship of toil" had become a new, secular religion in which economic growth was "an end and a world of itself," where "we automatically anoint our business men as the high priest of our religion ... [and] the manufacturer ... becomes the modern shepherd ... [seeking] some human frailty which he can cultivate into a new demand."
Salesmen were continually trying to "convert" the buyer to the true faith:
Consuming more physical goods is spiritual expression. Advertising campaigns are his sermons. "Consume More" is his text.... Our long day, then, forces our producers to lead us into a commercial religion and materialistic philosophy. Energetic salesmen, impelled by selfishness, determine the course of our spiritual expression and become the priests of our religion. They impel us to worship wants.... When selfishness can turn nowhere else, it wraps our soap in pretty boxes and tries to convince us that is solace to our souls. (224)
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