Economic Irony

 

In 1904, Birmingham was in the midst of a population explosion. The number of people was about to quadruple to more than 130,000 by the end of the first decade of the twentieth century. Birmingham had become one of the fastest-growing and largest urban areas in the country according to the U.S. Census Bureau. And it was only 30 years old.But it was hard to tell where all the people were; a lot of them went underground. Literally.Merline Johnson | “I got a man in a Bama mine”

Those “Bama Mines” Merline Johnson sang about were full of stories – hard, dirty work – along with dreams and aspirations to make money in this new city. The entire region had been decimated from the Civil War; reconstruction was slow.
But Birmingham was ground zero for the Southern industrial revolution. An abundance of iron ore, limestone and coal were ingredients for making pig iron. Iron turned into pipe and valves or into rolled steel and hard metals. People had come from all over the nation and world for this rush.

And one man – well, not man, god with a little g — was born of this revolution.

The statue Vulcan was cast like everything else in Birmingham: in a foundry, out of pig iron. And that’s what made him such an appropriate addition at the time.

“It symbolized the success of the southern industry headquartered in Birmingham.”

Marjorie White is executive director of the Birmingham Historical Society.

“By 1904, Birmingham had become the world’s largest producer of iron and Vulcan shouted that out to the world in great triumph… and also said we can produce steel, what the world wanted in the early 20th century. And we can produce it in gigantic quantities… as large as the Roman god Vulcan.”

But Vulcan was more than mere cast iron pipe. He was 55 feet of in-your-face advertising, concocted by a commercial club looking for publicity at the St. Louis World’s Fair. Vulcan represented everything that sculptor Giuseppe Moretti saw that the people of Birmingham could do – work hard and overcome enormous odds.

We used a little creative license, a thick Italian accent, and the words to an historical play by Theater UAB’s Lee Shackleford to listen in on what Moretti might say if confronted about his big, bulky and, yes, somewhat homely, mythological tribute to Birmingham’s industry.

“He makka such things of iron and steel thatta even those gods themselves starta to envy. He takka the dirt and the rocks and he heat them inna his fires and he shape them with the beauty in hissa soul and with a great genius in hissa mind, and with a steaming sweat from hissa blazing brow… he take alla this lifeless black rocks and he bring uppa some beauty anda some wonder anda some power!”

Actor Sam Chalker for a Readers’ Theatre piece, “Tale of the Iron Man,” written a few years ago.

As is so typical of the “boy-gets-cast, boy-wows-everyone-at-the-world’s-fair, boy-comes-home” story, there are many sub-plots. But one cannot be overshadowed. Vulcan didn’t witness just one economic transformation. He’s actually seen two.

For years during and after the Civil War, people had known about north central Alabama’s geographic blessings. Iron furnaces at Tannehill, in Jefferson County, and Brierfield, in Bibb County, were used to make armaments during the Civil War. Tannehill was destroyed by the Union Army. Brierfield didn’t survive reconstruction; in the years after the war, the money dried up and the economy was very weak.

But railroads helped to change all that. Lines, that had been started before the war, would soon make their way from town to town across the south. And that helped to foster growth in each of those towns.

And if there was growth because of one rail line, imagine a place where there were two.

In what was then an area known as Elyton, the ‘South and North’ line and the ‘Alabama and Chattanooga’ line intersected and founding fathers – already aware of the special ingredients that it bore underground – gave it the name of the English Industrial mecca Birming-um.

Trixie Smith | “Railroad Blues” (Copyright 1925, All Rights Reserved.)

BirmingHAM – as it would become known here in the states — became a bustling young city. With the railroads and a reputation for industry, people came looking for work. Those who were here needed only look to the ground to see what the future held.

On Red Mountain – where Vulcan stands today — there are some of the most fertile iron ore seams in the world. At least five coalfields, all-varying in size, are west and north of the city. Limestone deposits are nearby as well. Because each of the ingredients are so close to one another and so abundant, the Historical Society’s Marjorie White says Birmingham always has had an industrial advantage.

“Birmingham is here because of the presence of minerals in our soils … of coal, iron ore and limestone … and the ability of men to make them into first, raw iron. It was 30 years after the founding of the city that they figured out how to use these minerals to make steel. And that actually is the moment at which Vulcan is cast.”

Birmingham quickly became a metallurgic empire. White says the chamber of commerce even proclaimed it with a sign on the front of their 1st Avenue North building.

“It said you could find all the raw materials for making iron and steel within gunshot distance of this place. (how far is that?) Gunshot distance? Evidently they could shoot for a mile and a half.”

And so coalmines were dug and iron foundries and steel plants were built. Thousands of people worked in those plants and foundries producing more iron and, eventually, more steel than any other city in the country with the exception of Pittsburgh, or Gary, Indiana.

Some workers came from the north; others were immigrants new to the United States. But according to the Alabama Department of Archives and History, a vast majority of hard laborers were impoverished African-American men: some former slaves, others, descendents of slaves. For them, working conditions were the worst. Miners were subjected to intense heat and poor breathing conditions. Foundry workers put in twelve and fifteen hour days.

“It was very dangerous work. You could be killed by rocks falling, the mine caving in, gases and all other kind of hazards that were in the mine.”

Reverend Abraham Woods is President of the Birmingham chapter of the Southern Christian Leadership Conference (SCLC). One way he says blacks were subjected to the hard, dangerous – and cheaper – work was through the justice system. Justice, he says, was loosely defined in those days.

“Blacks were arrested and convicted for nothing, loitering. You have no visible job. There were many blacks who got caught up in the convict system who had done nothing. It was a way of keeping convicts and certainly using blacks for their dangerous work.

…all for pennies on the white man’s dollar. It foreshadowed something that would later overshadow Birmingham’s early industrial success: the civil rights movement.

Everyone suffered when the stock market crashed in 1929. When the depression hit America, Marjorie White says Birmingham took a particularly bad hit.

“The old adage is ‘hard times came to Birmingham and stayed the longest.’ (How so?) A lot of unemployment.

Orders for iron and steel dropped by half. Fewer orders meant fewer workers. But the mills, mines and factories never shut down completely.

During that time, about the middle 1930s, the symbol of Birmingham’s industry, Vulcan, was moved from the state fairgrounds, where he’d overlooked the midway and farm acts for 30 years, to Red Mountain. City leaders wanted him to stand atop those big iron ore seams.

But despite Vulcan’s proud posture atop a pedestal built by the Works Progress Administration, the American economy was slow to recover. And Birmingham was even slower. Iron and steel production was still below pre-depression numbers, and it would take an attack – ‘a day that would live in infamy’ – to get Birmingham’s industrial engine back into gear.

On December 7, 1941, the Japanese attacked Pearl Harbor. That very day, Johnny Rutledge started his job at U.S. Steel’s Fairfield Works. But because of the attack, Rutledge did what a lot of other 18-year olds did – enlisted for battle.

After several tours of duty in Europe that included the deadly Battle of the Bulge, he returned home to find a reinvigorated industrial society in Birmingham, and the haze and smoke to prove it.

“When I came home from the war, I moved over to West End on Alabama Avenue and then to Fairfield… and in both of those places, every morning, you had to sweep the cinders and soot off your porch. Every so often, you’d clean out your window sills and things.”

Birmingham’s steel production was nearing its peak by then – the mid to late 1940s — turning out 3.3 million tons a year. That’s nearly triple the amount of just a few years before.

At 81 years old, Rutledge is still working. He is a machinist, doing general repairs for Fairfield. When something breaks down in the mill, he, and many others, would make a new part for it.

“When I came in here, we had about 500 men. Three shifts. Working. And people were just – I mean people really worked. I guess the war just coming on. It’s changed a whole lot since then. Right now, we have about eight men in this shop.”

He says the work of hundreds can be done with one computer or robotic arm.

With the flip of a remote control switch, Rutledge controls a crane the length of an eighteen-wheeler at least two or three stories above the ground. A large hook picks things up and transports them across the football field-sized shop. No more men doing all the heavy lifting.

Technology’s transformed steel-making.

“Look at it this way…they had eleven open hearths up here. It took them approximately eight hours to run a heath of steel. And now, they can run one in forty-five minutes to an hour. (Is that the technology that’s improved?) Yeah. They have computers now. They charged these furnaces…they know exactly how much for a different grade of steel, whatever steel they want to run. Well, back then, they used a wheelbarrow and shovel. Now they’re more precise, they can with a push of the button, can charge it up. That did a whole lot to the steel industry.”

In 1951, according to the Birmingham Historical Society’s book, The Birmingham District, expansion of U.S. Steel’s Fairfield Works with new open-hearth steel furnaces allowed for a capacity of 4.2 million tons of steel to be produced. Through the next ten years, production would exceed 3 million tons. More than 70 percent of capacity.

Today, despite competition from foreign steel imports, production totals about 2.2 million tons, out of a capacity of 2.4 million tons. More than 90 percent capacity. While overall total capacity is down, the percentage of production is up. Steel-making’s become more efficient.

“Birmingham remains the south’s largest industrial workplace. (even today) Even today. Yes, industry – heavy industry – forms a substantial core of our economy, even today.”

But because of technology, fewer hands have control of it today. 28,000 people worked for U.S. Steel in Birmingham in the 1940s and 50s. Just 18-hundred have jobs there today. Machines are doing most of the work now.

At the Fairfield Works, molten is rapidly cooled and stretched and rolled…and tightly wound into 10-inch thick sheets, which form huge cylinders to be shipped to customers all over the world.

Tons of it make its way out of Birmingham every year.

And, for that matter, cast iron pipe – not pig iron, but ductile iron made from scrap – is still hot. More than 50 percent of the cast iron pipe produced in the United States comes from the Magic City. Yet, according to the latest Census data, the number of employees working in primary metals manufacturing has dropped from 18 percent of the Birmingham metropolitan population in 1950 to about one percent today.

So where did all those workers go?

Marvel Quartet | “Union Boys Are We”

Gradually, through the 1960s, it was a combination of technology and increased steel competition that ensured most of the people who had worked in primary metals – many of whom were union members – needed to find other things to do. Reverend Abraham Woods says the black community – which made up 40 percent of the population — was especially hard hit.

“We were left to do the dirty work and the dangerous work, and we did it and so when they declined, that certainly caused a greater depression so for as economics was concerned for black folk. And it was a very distressing time to see that happening.”

In the 1950s and 60s, demonstrators — including the Reverend Fred Shuttlesworth — took to the streets to protest segregation and march for jobs and equal opportunity.

“…whatever the economy was, the Negro was on the bottom. That said something.”

The Reverend Shuttlesworth and hundreds of other protestors were regularly met by Birmingham’s police force, and the orders by Public Safety Commissioner Eugene “Bull” Connor to turn the fire hoses and dogs on them.

Charles “Cow Cow” Davenport | “Jim Crow Blues”

Segregation and racial strife were slow to end in Birmingham. Violence continued in the streets. Dr. Martin Luther King, Jr. was jailed in the city. Homes of civil rights leaders – including the Rev. Shuttlesworth and attorney Arthur Shores – were bombed… as was the basement of the 16th Street Baptist Church on the morning of Sunday, September 15, 1963. Four young girls were killed in that attack.

It wasn’t the magical growth, or the iron and steel industry that garnered attention. This time, the world’s eyes were on ‘Bombingham,’ as it became known.
But other positive changes were taking place on the city’s Southside. A budding medical school was taking shape in this city that once prided itself on sweat and toil. And that’s no coincidence, says the Birmingham Historical Society’s Marjorie White.

“When you have an industrial economy, you have lots of accidents and needs for lots of doctors.”

She says Birmingham’s health care economy traces back to the days of the mills, foundries and factories. The University of Alabama in Tuscaloosa saw the need to relocate its medical school to Birmingham because of city’s growth and because it’s where the doctors were most needed.

One early graduate of the medical school was Dr. Charles “Scotty” McCallum, who had transferred to Birmingham in 1951. Now mayor of Vestavia Hills, McCallum says attracting highly regarded faculty for the fledgling school was tough given the city’s notorious civil rights reputation.

“To recruit somebody to come to Birmingham was very difficult. (Why was it difficult?) Because Birmingham did not have a sterling reputation. Going to Birmingham…what are you going to Birmingham for? How come you’re not staying here in Boston?”

But despite all the negative reviews of Birmingham, Dr. McCallum says early school leaders prevailed and growth picked up significantly. Dr. Tinsley Harrison, the former chair of the Department of Medicine, Drs. Joseph Volker and S. Richardson Hill, both Vice Presidents for Health Affairs and Dr. John Kirklin, the heart researcher and surgeon all put the best possible face on the situation and managed to recruit some of the country’s best faculty and doctors.

“It was exciting and I think a lot of people that came here stayed … and they didn’t leave and there was a continuity of leadership and vision with Dick Hill and people like that, John Kirklin, that felt that you could take something and start anew.”

It was the beginning of another economic transformation the likes of which Giuseppe Moretti and his famous statue Vulcan would’ve seen in their day. In 1969, by act of the Alabama Legislature, the University of Alabama at Birmingham, or UAB, was born.

Dr. McCallum would later serve as UAB president from 1986 to 1993. In more than 50 years in Birmingham, he says he witnessed a small three-building medical school turn into a world-renowned research and health care facility through an unusual series of events.

“Usually you have a university and they establish a medical school or health science centers. But in this case it was reversed in that the emphasis relative to health and the establishment of the medical school originally and the university hospital gave birth to a university. And the growth that has taken place here in this community of the university I doubt will be replicated in the United States. It has been phenomenal. And in my estimation, has served the city and state very well.”

Today, UAB is the largest employer in Alabama with more than 16,000 workers. Ironically, U.S. Steel used to top that list. Healthcare and social assistance jobs in Jefferson County account for more than 14 percent of the workforce. Medical schools within UAB consistently rank in the top 20 in National Institutes of Health grants. The size of the campus went from a few square blocks in 1950 to more than 80 square blocks today. And it seems like there’s construction going on everywhere at UAB.

There are some who call UAB, with its expanding territory, ‘the university that ate Birmingham.’

But not-too-far from campus, there is a different kind of feeding frenzy going on.

On any given weekday, millions of pieces of paper — credits and debits — are fed through proof, or encoding, machines at the Compass Bank Harry Brock Operations Center on 32nd Street and 7th Avenue South.

Checks and deposit slips and vouchers are encoded and moved along to processing, where checking and savings accounts are deducted from or added to, or loan and credit card payments are credited.

Birmingham can credit a growing banking industry to a couple of things that happened over the last twenty-five years. In the early 1980s, Alabama legislation allowed for a bank’s separate branches to merge into one bank chartered in the state: intrastate banking. A few years later in the mid 1980s, federal laws were loosened to allow one bank to buy another out-of-state bank, interstate banking.

“It became open.”

Jerry Powell is General Counsel for Birmingham-based Compass Bancshares.

“The market became open. And the only limitations there were was that you had to buy an existing bank. You couldn’t start a bank from scratch. So that opened the markets up.”

For example, after the gradual deregulation in the 1980s, Powell’s company Compass, what was then Central Bank, bought existing branches in Texas. First Houston, then Dallas. Other banks moved into the Florida panhandle and Georgia. A few years ago, AmSouth bought Tennessee’s largest bank, First American in Nashville. More recently, Regions is acquiring Memphis-based First Union and will become one of the nation’s15 largest banks after the merger. The combined company will continue to be called Regions and continue to be headquartered in Birmingham.

But consolidation giveth… and consolidation taketh away. Earlier this summer, Charlotte, North Carolina-based Wachovia Bank announced it would acquire Birmingham-based SouthTrust for $14.3 (B) billion, shaking up Birmingham’s financial services community. When the merger is complete by late next year, the SouthTrust name will go away and so will a longtime corporate citizen in Birmingham. University of Alabama professor of Finance and Chair of Banking, Dr. Benton Gup, says that will have far-reaching economic implications.

“Because corporate headquarters tend to be more generous than branches, they participate more in charitable giving and things of that nature. And we’re going to be losing some positions here as well, so it’s going to have a negative impact on Birmingham…”

But Gup says the SouthTrust deal doesn’t mean Alabama’s other big banks have bullseyes on their backs.

“Well, they’ve always been a target of other large mega-banks and conversely, our banks have always grown by buying other banks. So it’s a continuing process of consolidation. The fact that SouthTrust was by another bank does not indicate that one of our other banks is immediately going on the block.”

Compass Bank’s Jerry Powell says, historically, it’s because Alabama has a strong track record.

“Alabama’s an excellent environment for… the banking laws are good, the ability to grow the bank on an interstate basis is sound…and reasonable. One of the real significant reasons why we’re here is a quality workforce at a competitive price.”

Even after the Wachovia-SouthTrust merger, Birmingham-based banks are still expected to hold more than 150 billion dollars in assets. Before the SouthTrust-Wachovia merger, the city ranked eighth in the nation in total assets and has more, large top 50 banks headquartered in it than Atlanta, Chicago and San Francisco. Locally, more than 8 percent of Jefferson County’s workforce is in financial services. According to the Alabama Center for Business and Economic Research, commercial banking payrolls in 2001 topped one billion (B) dollars in Alabama.

“Because of all the banking that’s in Birmingham, Birmingham is an attractive place to be.”

Dr. Jennings Marshall is professor of Business at Samford University in Birmingham. He says the banking boom has been hard to stop given the rapid rise in Birmingham’s financial sector.

“In other words, you have the body of knowledge. IN other words, banks need people who understand banking to work for them. And these great big banks that are located here and running their facilities here have created a large labor pool that has expertise in banking.”

The same can be said about the health care industry as well. And that would mean the future of Birmingham’s two biggest service industries is bright – right? A future that would make even Vulcan proud?

Well, there are a few variables — and challenges — in Birmingham’s new, transformed economy.

David & David | “Welcome to the Boomtown”

Birmingham grew from a young iron and steel town to a more advanced health care and financial services town. But now that a second economic transformation has taken place, how has Birmingham survived the competition with other cities?

It’s done a good job so far.

Take for example Buffalo, New York, a city similar in size and blue-collar background, with an unemployment rate today of seven-and-a-half percent. Buffalo had the highest jump in the nation in the past year. But Birmingham’s unemployment rate was four-point-two percent in April, down one-tenth of a percent from a year ago.

And smaller industrial cities such as Gary, Indiana and Akron, Ohio have higher unemployment rates and have yet to find ways out of their dependence on manufacturing: in their cases steel and tires.

Compared to those places, Birmingham is in the midst of an economic renaissance.

“…and now, we really have a knowledge economy here. A knowledge economy is connected principally to biomedical. And it is the wave of the future for us.”

UAB President Dr. Carol Garrison says the biomedical – or biotech — industry is big business to the university.

“…we’re primed right now – we’re in a very positive position to look forward to another decade or two of remarkable growth.”

Dr. Richard Marchase is Senior Associate Dean for Biomedical Research at UAB.

“There are very few medical schools in the future that are going to be able to carry out all three missions: education, research and service. And we’re going to do it very well. I think we’re one of the few places that is going to keep this tripartite mission. Our research engine is as strong as it’s ever been. We have made a lot of terrific hires in the last few years. We’re counting on the space in the Shelby Building to allow us to continue to expand.”

Research inside the 12-story Shelby Interdisciplinary Biomedical Research Building, which is under construction, is expected to examine the causes of diseases ranging from Multiple Sclerosis and Rheumatoid Arthritis to brain disorders and osteoporosis.

“When we write these NIH grants, we very often get them funded. They bring jobs are well paying. There aren’t issues having to do with pollution associated with these jobs. We are a real economic developer for the city.”

…And there’s lots of money to be made. Just like at the turn of the 20th century when venture capitalists helped fund new coalmines, mills and foundries in young Birmingham, today’s biotech industry is also soliciting for future expansion.

Investors got an up-close look at Birmingham’s more modern economic engines several weeks ago. That’s when fifteen Alabama biotech companies – many of them that work with UAB – went looking for additional funding and presented their ideas to prospective financiers at the Investors’ Choice conference at the Birmingham Marriott.

“I think why I’m here is an example of how you can succeed in Birmingham with a high tech company. I mean there’s a lot of good technology around.”

Dr. Matthew Gonda is board chair of the Biotechnology Association of Alabama and President and CEO of Transmolecular, Inc. His Birmingham biotech company recently closed on more than $33 million in financing for more of its research into cancer drugs.

“Our investors have invested in Birmingham from all over the world…investors from Europe, Canada, Korea, Taiwan as well as the United States. So we’ve really pulled in a good group of investment people.”

Those investors are seeing advances in research at a number of Birmingham-based biotech firms.

Southern Research Institute which is affiliated with UAB, Vaxin and the publicly traded BioCryst Pharmaceuticals have been conducting clinical trials on a host of drugs, some of which – the Southern Research cancer drug discoveries — have already been approved by the Food and Drug Administration and marketed.

But here’s the challenge: Birmingham is either slow in gaining a reputation for biotech funding, or omitted altogether. In the latest Business Facilities magazine survey identifying the 40 top biotech areas in the United States, Birmingham didn’t even make the list. However, Raleigh-Durham ranked 7th and Atlanta, Nashville, Memphis and New Orleans all were ranked in the top 40.

As for Birmingham’s banking and financial services industry, it’s not finding the money – it’s keeping the money here… the billions in assets that the big Birmingham banks hold. It’s not a matter of venture capitalism, but venturing to stay independent – in light of recent mergers — or to maintain their headquarters in Birmingham.

Again, Samford University’s Dr. Jennings Marshall.

“…some of them could be targets for acquisition. But they are very good at acquiring banks…so they’re in the process of growing. So in my perspective, I think the future’s bright and I think the banks we have here are going to continue to grow and acquire other banks and Birmingham will continue to be a major financial center.”

But what if one of those banks moves on it’s own? What if another city or state tries to persuade one of Birmingham’s banks to move away?

“We are like a Honda or a Mercedes-Benz. We are an attractive corporate citizen that they would love to have.”

Compass Bancshares General Counsel Jerry Powell says it is the nature of business… city and state leaders wooing corporations such as Compass.

“Oh they do. Everyday we have somebody from Texas or Florida or Georgia someone who wants to entice us to come to their states. (They do, they say bring the corporate headquarters to Texas) Oh yes. And if we were wanting to go to Texas, we could sit down and they would be willing to talk to us about incentives to come to Texas. But that’s true of every state.”

Powell says that scenario’s not likely given the low cost of living and operating in Birmingham.

Sounds like the way people thought one hundred years ago.

At the turn of the 20th century, the symbol of Birmingham’s economic prowess was a cast iron statue erected to advertise the will and might of the Birmingham district. Who knows what sculptor Giuseppe Moretti would think of his big, bulky iron god and the new industries it oversees today.

Again, a little creative license and the acting skills of Sam Chalker bring us the ‘Tale of the Iron Man,’ by Theatre UAB’s Lee Shackleford.

“You stand up there tall anda strong, so people can look up to you anda remember… that whenna these people from around here, they getta together on something anda they putta their minds anda their hearts anda their backs into whatever they do – there issa nothing that issa impossible for them. You arra the greatest proof of that. You, my beautiful ugly man – you arra the greatest proof!”

Today’s proof is more metropolitan and less cut and dry – or, in Vulcan’s case, cast and cooled. Maybe it’s all the construction cranes, or “storks” as they’re known, that dot the campus of UAB. Maybe it’s the skyline downtown – with some of the tallest buildings in Alabama that read like an address book of some of the nation’s largest banks.

But those are all tangible objects. And, yes, Vulcan too is tangible. But he also has a personality; a face. And on the one-hundredth anniversary of his completion, the Historical Society’s Marjorie White says Vulcan could very well be the symbol that leads Birmingham through the 21st Century.

“…he’s up there to remind us that industry created the engine that gave birth to this city and this place and the reason we’re here.”

John Henry Mealing, John Cole, Arthur James, Abraham Parker, Cornelius Wright, Jr., Willie Henderon and Henry Caffey | “Two Gandy Dancer Work Songs”

The hard work and enormous odds overcome are just as meaningful today as they were in 1904.