The 1950s Business and the Economy: Topics in the News
The 1950s Business and the Economy: Topics in the NewsADVERTISING
THE AFL-CIO AND THE TURBULENT TEAMSTERS
ALCOA, ALUMINUM, AND THE END OF A MONOPOLY
BANK OF AMERICA AND FINANCIAL EXPANSION
CREDIT, INFLATION, AND PRICE CONTROLS
THE "MILITARY-INDUSTRIAL COMPLEX"
THE NATIONAL HIGHWAY ACT AND THE AUTO INDUSTRY
SMALL VERSUS BIG BUSINESS
The rise in popularity of television during the 1950s afforded manufacturers a new and powerful outlet through which to advertise their products. This was the precable television era, when all one had to do to view all available TV programs was purchase a set. Even though noncable (or network) television has come to be known as "free TV," its viewers have always paid a hidden price. That price: being bombarded by the television advertising that interrupts the TV series, movies, or sporting events they are watching.
During the decade, products often were incorporated into television series names. Typical examples included Schlitz Playhouse of Stars (1951–59); Philco TV Playhouse (1948–55); General Electric Theater (1953–62); Lux Video Theatre (1950–57); and Chevrolet on Broadway (1956). The first official name of the comedy-variety show presided over by television pioneer Milton Berle (1908–2002) was The Texaco Star Theater (1948–53); after a switch in sponsors, it became the Buick-Berle Show (1953). Television stars regularly hyped their show's advertisers on the air. For example, Lucille Ball (1911–1989) and Desi Arnaz (1917–1986), stars of the hit comedy I Love Lucy (1951–57), extolled the virtues of Philip Morris cigarettes. (Cigarette advertising was allowed on television until early in 1971.) Years before becoming governor of California and president of the United States, Ronald Reagan (1911–) pitched products on General Electric Theater.
To hawk their wares, advertisers reportedly were spending approximately $53 per year for each man, woman, and child in America by 1955; annual spending on marketing doubled during the decade, from $5.7 billion in 1950 to almost $12 billion in 1960. All this nonstop huckstering resulted in a backlash. In mid-decade, Christianity and Crisis, a religious-oriented magazine, complained about the pressure being exerted on Americans to "consume, consume, and consume, whether we need or even desire the products almost forced upon us." In his controversial, best-selling book The Hidden Persuaders (1957), sociologist and consumer culture critic Vance Packard (1914–1996) offered insight into the manner in which advertisers target markets and convince consumers to purchase their products. Packard observed that different brands of a specific product essentially are the same and that consumers have little reason to prefer one brand of detergent or peanut butter over another. However, advertisers were consulting motivational researchers, sociologists, psychologists, and other experts in human behavior to detect hidden sources of attraction that might be exploited. If a product could be psychologically linked to winning popularity or attaining love and happiness, sales of that item would skyrocket. On the recommendation of these researchers, companies redesigned packaging to consider the impact of color and artwork on the potential purchaser. In The Hidden Persuaders, Packard quoted one advertising executive who remarked, "The cosmetic manufacturers are not selling lanolin, they are selling hope.… We no longer buy oranges, we buy vitality. We do not just buy an auto, we buy prestige."
Sponsors also wielded influence over programming content. On Man Against Crime (1949–54; 1956), a detective drama, the sponsor, Camel Tobacco Company, dictated that no villain could be depicted smoking a cigarette. The tobacco firm also made the crime of arson taboo, because lit cigarettes occasionally caused deadly fires. In 1953, writer Reginald Rose (1921–) suggested to the management of Studio One (1948–58), a popular CBS dramatic anthology series, produced a teleplay involving racial prejudice in an upscale Illinois suburb. "Thunder on Sycamore Street" as written by Rose depicted a black family who moves into a community, only to have its residents attempt to drive them away. The network and program sponsors, however, asked Rose to rewrite the show to avoid antagonizing Southern audiences. Rose had no choice but to comply, replacing the black family with a character who is an ex-convict.
Prior to the television age, magazine advertising often featured movie stars or athletes as pitch-people. In more recent times, companies pay to have their products placed in movies. The idea is that if characters played by Tom Cruise (1962–) or Julia Roberts (1967–) are shown using a particular product, sales of that specific brand will increase.
THE AFL-CIO AND THE TURBULENT TEAMSTERS
The AFL-CIO became one of the largest, most influential labor unions during the 1950s. The American Federation of Labor (AFL), one of the most historically important American labor unions, came into existence in 1886, emerging from the restructured Federation of Organized Trade and Labor Unions. Originally, the AFL represented only craft (skilled) workers. However, during the early twentieth century, mass production resulted in an increase in the workforce of unskilled and semiskilled workers. An AFL splinter group, whose members disagreed with the exclusion of such workers, bolted in 1935 and formed the Committee (later Congress) of Industrial Organizations (CIO).
During the 1950s, AFL and CIO leadership acknowledged that they had a great deal in common simply because they represented workers—and that there was strength in numbers. Six days after assuming the AFL presidency in 1952, George Meany (1894–1980) observed, "There's too much effort wasted in competition between unions." In 1955, the AFL and CIO merged, becoming the AFL-CIO. This umbrella organization included more than 120 separate unions and represented approximately fifteen million American workers.
The AFL-CIO Executive Council is made up of a national president, a secretary-treasurer, and various vice presidents. The council follows through on policy decisions that come out of biennial conventions, attended by thousands of member-delegates. The primary purpose of the AFL-CIO is to negotiate with employers for pay raises, shorter working hours, and improved working conditions; each member union conducts its own negotiations with management. The AFL-CIO backs political candidates who are proworker; usually, those candidates are Democrats. Additionally, it coordinates labor support for the issues of the day, from education to social welfare to American foreign policy.
In the 1950s, AFL-CIO president George Meany was a powerful political voice. He was a vocal critic of any threat to liberty, whether from the far left or the far right. He deplored communism, believing that Soviet Russia posed a serious danger to the United States. Yet he equally abhorred the tactics of Republican Senator Joseph McCarthy (1909–1957), who played on public fear regarding communist aggression by claiming that subversives were running the U.S. State Department. Meany also condemned the U.S. government's support of right-wing dictatorships that were anticommunist but that stripped their citizens of human rights.
The leadership of the AFL-CIO was not free of discord, however. For example, Meany and Walter Reuther (1907–1970), CIO head and AFLCIO vice president, disagreed over U.S. foreign policy in Vietnam. The AFL-CIO also was tainted by the presence of criminal elements. The leadership of several member unions, such as the large and powerful International Brotherhood of Teamsters, the trucking union, thrived on stolen funds and cultivated highly publicized relationships with organized crime. With the AFL-CIO merger came the adoption of a set of guidelines for union officials, stipulating that all corrupt leaders would be banished from the organization. The AFL-CIO cooperated fully with the U.S. Senate Select Committee on Labor-Management Relations, also known as the McClellan committee (named for its chair, Arkansas Democrat John McClellan [1896–1977]), which in 1957 began investigating labor racketeering (the illegal gain of money through threats to a person or organization). Teamsters
president Dave Beck (1894–1993) was called before the committee, where he was asked about an interest-free loan of between $300,000 and $400,000, which McClellan believed was a misappropriation of union funds. During the proceedings, Beck took the Fifth Amendment sixty-five times. Afterwards, he came before the AFL-CIO Ethical Practices Committee. His refusal to respond to questioning resulted in his expulsion from the Executive Council, and his union's banishment from the AFL-CIO.
Despite AFL-CIO efforts to police itself, a coalition of congressional Republicans and conservative southern Democrats passed the Labor-Management Reporting and Disclosure Act of 1959, more commonly known as the Landrum-Griffin Act. While the legislation was devised to eliminate corruption in organized labor, it also placed new restrictions on labor organizing and picketing by striking workers. Predictably, the AFLCIO strongly opposed the Landrum-Griffin Act.
Before the 1950s, the long-distance vacation was a luxury, even for those who could afford an expensive leisure trip. A typical New York City dweller, for example, who wished a change of scenery might head off by car or bus to a Catskill Mountains resort, located a couple of hours outside the city, or perhaps travel by train to Florida.
However, during the decade, the commercial aviation industry underwent massive expansion. Passenger airlines adopted technological innovations that had been employed by the military during World War II. In order to compete with the railroad industry, they offered inexpensive "air coach class" tickets. These round-trip fares, often as low as $100, allowed middle-class travelers to fly practically anywhere in the United States. In 1953, TWA initiated nonstop air service between New York and California. That airline also advertised the "fastest trips to Europe," even though its planes still needed to refuel during the journey. In 1957, Pan American Airways added to its fleet the first true transatlantic airliner, capable of flying across the ocean without refueling.
All this growth resulted in an expansion of the nation's airports. Airfields that recently had been handling hundreds of passengers now were overwhelmed by tens of thousands of travelers. Paralleling this passenger crush came longer waiting times and increased air traffic. On September 14, 1954, 300 planes were stacked in holding patterns over New York City. A heavy fog had prevented them from landing on schedule, and all of the aircraft had to wait their turn for runway space. This in-flight traffic jam hampered the travel of 45,000 passengers.
New industry safety regulations were implemented in the 1950s. Many more planes traversed the skies than ever before; the number of commercial aircraft rose from 960 in 1950 to 1,647 in 1959. There was a corresponding increase in airplane crashes. On June 30, 1956, the deadliest air disaster to date occurred when a TWA liner smashed into a United DC-7 over the Grand Canyon, killing 128 people. This tragedy resulted in the federal government ordering all airplanes to be equipped with radar. In 1958, Congress passed the Federal Aviation Act creating the Federal Aviation Administration, an agency which dealt with all issues relating to air safety.
Despite increased waiting times at airports and sensational media coverage of air disasters, air travelers would not be deterred. By 1955, more Americans were flying cross-country than journeying by train. Instead of being bound by car or bus to local resorts, vacationers now could fly to destinations that were far from home. A New Yorker wishing to play slot machines could board an airplane and wind up in Las Vegas, thousands of miles away; at the time, Atlantic City had not yet been established as a gambling mecca, and gambling was against the law in all other states. Meanwhile, Florida-bound vacationers could fly south rather than travel there by train, and be just a few hours (rather than days) away from frolicking on the beach.
The increase in long-distance travel during the 1950s spurred a market for clean, inexpensive lodging, which included such necessities as restaurants and amenities like swimming pools. Tennessee-based architect-builder Kemmons Wilson (1913–) acknowledged this need by creating the Holiday Inn motel chain. Wilson's goal was to offer travelers spacious, family-style accommodations at affordable prices. Not only did his inns feature swimming pools, but he also allowed children to stay at no cost and provided free ice, parking, and cribs for infants. Each room came equipped with air-conditioning and television sets.
The first Holiday Inn opened in 1954, outside Memphis. The hundredth, located in Florida, registered its first guest just five years later. Over the decades, the number of Holiday Inns rose to just under two thousand locations worldwide.
ALCOA, ALUMINUM, AND THE END OF A MONOPOLY
For the first four decades of the twentieth century, Alcoa (Aluminum Company of America) monopolized the production of commercial aluminum, a lightweight metal that was an inexpensive alternative to steel. During World War II, however, the company was unable to meet the heightened demand for its product, so the U.S. government encouraged such Alcoa competitors as Kaiser Aluminum and Reynolds Metals to increase production. After the war, the government's War Surplus Properties Board sold its plants to Alcoa's rivals, further leading to the demise of the company's monopoly.
Despite this new competition, Alcoa not only survived but thrived. Its revenues tripled between 1946 and 1958, topping out at $869 million in gross sales and $89.6 million in net income (profit). In 1958, Alcoa had four times the production capacity it had two decades earlier, and even expanded its production into other lightweight metals and construction materials.
By decade's end, Alcoa was producing 853 million short tons of aluminum per year, compared to 701 million tons by Reynolds and 609 million tons by Kaiser. All this output by Alcoa's rivals was made possible not only by government intervention, but by what Fortune magazine described as Alcoa's "splendid retreat" from monopoly status. The end of the monopoly had benefited Alcoa and the entire industry.
BANK OF AMERICA AND FINANCIAL EXPANSION
During the 1950s the concept of branch banking, banks with remote offices, or "branches," allowed the appropriately named California-based Bank of America to become the nation's largest banking institution. By 1954, "B of A" (as it was nicknamed) oversaw 534 branch offices, achieving this status via a merger with four of its top eastern rivals (National City Bank, Chase National Bank, First National Bank, and Bank of the Manhattan Company).
At the time, states maintained the authority to allow banks to open branches. Except for California, most states still restricted the practice, and no banks could branch across state lines. One fear some people had about the branch-bank concept was that it might lead to a monopoly, with one company, such as Bank of America, controlling a majority of the nation's money flow. However, one advantage of the concept was that if, for example, one Bank of America branch suffered because of a regional financial crisis, it could be supported with funds from branches situated in communities that were flourishing.
While Bank of America's success resulted in the expansion of branch banking into the South and Southwest, at the close of the decade single-location banks still exceeded the number of branch banks, 13,472 to 10,472. Yet the total number of branch banks was steadily rising, and they eventually overtook their single-site competitors.
Additionally, the 1950s saw an increase in such "non-bank banks" as insurance companies, trust companies (concerns that manage trusts and carry out all banking activities except the issuance of bank notes), and holding companies (corporations that hold the stocks or bonds of other companies). Some of these enterprises purchased banks in a variety of communities, sidestepping laws designed to limit branch banking. All were exempt from the strict federal and state regulation under which banks operated, and the manner in which they conducted business threatened the commercial banking establishment. This new competition led the American Banking Association to pressure the federal government into passing the Bank Holding Company Act of 1956. This legislation restrained "non-bank banks" from engaging in certain types of activities, and it prevented them from operating in more than one state, unless permitted by the states involved. Despite the increased competition, banks in general flourished during the 1950s, with assets rising to $282 billion by decade's end.
CREDIT, INFLATION, AND PRICE CONTROLS
Before the 1950s, most consumer purchases were transacted in cash and paid for at the time of purchase. A common practice in the 1950s was "buying on time." A person could pay off large purchases in installments rather than all at once. Americans used time payments mainly for such major acquisitions as cars, refrigerators, ovens, ranges, dishwashers and dryers, and record players. Purchases were paid off in monthly installments with interest.
The first credit card appeared in America in 1950, when Diners' Club of New York issued charge cards for use in restaurants. Eight years later, the American Express Company marketed a card for buying goods and services. In both cases, purchases were to be completely paid off upon receipt of a monthly bill.
In 1959, the Bank of America pioneered the initial national "revolving" credit card when it issued the BankAmericard. Purchases made on "revolving" credit could be paid off over time, with a minimum monthly payment required and the balance appearing on the following month's bill. In 1977, the BankAmericard name was changed to VISA in order to appeal to international consumers.
Buying on credit, coupled with more available jobs, higher wages, and increased consumer spending, resulted in inflation (an increase in currency circulating in the economy, leading to a sharp decrease in its value and a rise in prices). In 1952, the federal government reported that, since the mid-1930s, retail food prices had risen by 235.1 percent; between 1950 and 1952 alone, they had increased 15 percent. In order to control inflation, the government established price ceilings (maximum prices) for a range of goods. The Federal Reserve Board hiked requirements on bank reserves in an attempt to dampen the banking industry's eagerness to allow consumers to "buy on time." The resulting business expense increase was passed on to borrowers via higher interest rates.
Government-imposed price controls were completely lifted in 1953. A recession (a temporary decrease in business activity) between 1953 and 1954 helped slow the rate of rising prices. For the rest of the decade, prosperity and small price increases ruled the American economy.
The Rise of the Middle Class
Post-World War II abundance led to an increase in the American middle class. A generation of Americans who had suffered through the Great Depression of the 1930s and World War II during the first half of the 1940s now savored the fruits of prosperity. More families could afford to own their own homes, choose the communities in which they lived, purchase cars, and own the latest modern household appliances.
During earlier, leaner times, blue-collar workers labored all their lives without ever moving up the economic ladder. Now, many such wage-earners were unionized. This translated into higher pay, better working conditions, and entry into the middle class. Furthermore, more Americans than ever before were earning college degrees, which gave them fatter paychecks and more career options.
THE "MILITARY-INDUSTRIAL COMPLEX"
With the exception of the Korean conflict, the United States was not involved in a shooting war during the 1950s. Nevertheless, tensions with the communist-bloc nations, particularly with the Soviet Union, dictated that the United States maintain a standing, fully equipped military force. Despite this need, defense contractors could not turn profits during peacetime because military purchases generally were too small. In order for them to remain in business, the government supported defense contractors with cash-payment subsidies.
Before leaving office in 1960, President Dwight Eisenhower (1890–1969) cautioned the nation about the growth of this interdependence between business and the military, which he labeled the "Military-Industrial Complex." At its worst, this alliance resulted in allegations that the armed forces and defense contractors were conspiring to pad the Defense Department's budget at the expense of taxpayers. In 1953, a House of Representatives subcommittee ordered the military to discipline those accountable for spending $3 million on "useless" navy forklifts, $45 million for "unsuitable" army overcoats, and $1 million for inessential air force chainlink fences.
Whether or not its purchases were wasteful, the government continued to increase its spending on defense. The decade ended with defense spending at $46.6 billion, a 38-percent increase over 1949.
THE NATIONAL HIGHWAY ACT AND THE AUTO INDUSTRY
During the 1950s, as more Americans purchased automobiles, highways and car culture became an essential element of American society. Cars were a necessity, particularly to the new inhabitants of suburbia, where public mass transportation was haphazard and sometimes nonexistent. For Detroit's automakers, the decade proved to be highly profitable. In 1950, manufacturers produced 6.7 million cars, an increase of 1.4 million over the previous decade. By mid-decade, 70 percent of all American families owned cars; in one year, 7.92 million cars were sold. By 1960, Chevrolet offered forty-six different models, thirty-two types of engines, twenty transmissions, twenty-one colors, and more than four hundred accessories.
The increase in car ownership parallels the development of the American highway system. Despite the increased usage of cars, American roadways remained woefully deficient. Expressways had been constructed only in major cities. Outside the eastern part of the country, four-lane highways were nonexistent. America was a nation of mostly smaller roads, which were unable to support the increasing needs of drivers.
Highway construction was in order and, in 1958, Congress passed the National Highway Act, resulting in the building of a 43,000-mile-long interstate highway system. The new roadways were wider, faster, and safer; cross-country travelers could shave days off their trips, driving from coast to coast in less than a week.
One of the downsides of the interstate system was that such legendary roadways as the 2,400-mile-long Route 66, also known as "America's Highway" and the "Mother Road," which extended from Chicago to Los Angeles, were virtually abandoned in favor of the newer superhighways.
SMALL VERSUS BIG BUSINESS
Today, a shopper who wants to purchase a toy likely will head for the nearest Toys R Us. Hungry Americans looking for a quick bite might choose to dine at McDonald's, Burger King, or Kentucky Fried Chicken. Those who wish to sip coffee and savor a pastry might head to the closest Starbucks.
This was not always the case. Before the 1950s, specialized, individually owned "mom-and-pop" shops dotted America's Main Streets and downtown shopping districts. A woman would purchase a dress in a dress shop. A man would buy a suit in a store called a haberdashery. Casual restaurant meals were consumed in single-owner diners, hamburger joints, or spaghetti houses. Everything from draperies to books to appliances came from specialty shops. Departments stores were found in many downtown shopping districts, especially in larger cities, but even these tended to be one-of-a-kind, family-owned-and-operated enterprises.
All this began to change during the 1950s. Small concerns like McDonald's and Baskin-Robbins Ice Cream franchised themselves, and eventually become high-profile restaurant or ice cream parlor chains. Brand names such as Bic (pens), Gerber (baby food), and Culligan (water
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filters and softeners) became synonymous with the products or services they marketed nationwide.
The Sun Belt
The 1950s marked the beginning of the migration of American business from the Northeast to the "Sun Belt," a term referring to the southern third of the nation.
At the dawn of the decade, the Northeast, despite being composed of just 8 percent of the nation's land mass, had 43 percent of the U.S. population and 68 percent of manufacturing-related jobs. "Sun Belt" states were blessed with milder climates, wider and more open spaces, and less-expensive land; plus, many were hostile toward labor unions. This was attractive to large corporations looking for financial relief from the compensation benefits that labor unions had managed to negotiate for their members. The widespread availability of air conditioning also made everyday living more comfortable, allowing for a respite from the South's often sweltering heat.
The defense and technology industries spearheaded the southward migration of American industry. White-collar professionals also abandoned the traditional northern industrial centers to take part in the decade's technology boom in the South. Many types of manufacturing companies that did not depend on existing resources in the North also relocated. Not all Northeastern industry and manufacturing interests headed South, but those that did benefited from lower tax rates and living costs, and Southern antiunion sentiments.
The growth of American suburbia directly led to a decline in traditional downtown shopping districts and the growth of the shopping mall. At the mall, a range of stores could be housed under one roof, simplifying the shopping experience. Free parking lots allowed shoppers to browse without worrying that they had outstayed the time left on their parking meters. And even early malls that were not fully enclosed offered shoppers overhead protection from inclement weather as they strolled from store to store, in full view of that convenient free parking. In 1956, sixteen hundred shopping malls dotted the country. Six hundred of them opened that very year.
Corporations became bigger and more powerful during the 1950s as well. In 1951, American Telephone & Telegraph (AT&T) became the first American corporation to have one million stockholders, and its stock prices steadily rose throughout the decade. General Motors was the world's largest company, while Du Pont employed one-third more chemists than could be found in all of America's universities. Corporations also merged with increasing frequency during the 1950s. Among the decade's most prominent corporate unions: Chase National Bank and the Bank of Manhattan Company became Chase-Manhattan; Remington-Rand and the Sperry Corporation became Sperry Rand; the Kroger Company purchased Childs Food; the Brown Shoe Company merged with the G. R. Kinney Company; and the Nash and Hudson automobile companies first merged, and then were absorbed, by Chrysler.
The vast resources of these larger corporations allowed them to spend money on research that led to some major technological breakthroughs. In 1950, a total of twenty computers could be found in the entire United States; most were part of university or government installations. Their combined value was approximately $1 million. The following year saw the debut of the UNIVAC 1 computer, produced by Remington-Rand. Then IBM began producing and marketing computers, heralding the dawn of the information age. Among entertainment-based corporations, CBS and NBC initiated color television broadcasts, while in the travel sector, various airlines began transporting passengers on jet aircraft.
Blockbuster business deals made headlines. In 1957, the share of the 77-story Chrysler Building owned by real estate developer and planner William Zeckendorf (1905–1976) was sold for $66 million. It was the largest real-estate deal in U.S. history. In some sectors of the economy, the decade of growth and success in the corporate world had a negative effect on small entrepreneurs, many of whom were forced to close up shop.