Red White and Sears - an American Tragedy Pt. 1
Roland is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Rise of a Giant
There's a lot of talk in the news about about Sears (NASDAQ: SHLD) having the unmitigated gall to squeeze the Illinois General Assembly for special favors without coughing up the fact they planned on closing stores unless holiday sales were off the charts. It certainly didn't surprise me. I didn't think they should have been cut a deal in the first place. Physically relocating a corporate headquarters is a massively expensive and time consuming process. Besides, the dirty little secret about corporate headquarter locations is that some CEO or board member picked it so they would have a short and easy commute from their McMansion. A more important conversation to have might be "where did it all go wrong?"
To understand why Sears defined America (yes, I actually said that) you have to understand a bit about Scrip and history. In its original form, Scrip, usually coin like metal objects but some times paper units, was required because this country simply didn't have enough of a standard currency. When U.S. President Andrew Jackson issued his Specie Circular of 1836 due to credit shortages, Virginia Scrip was accepted as payments for federal lands. From the 1930s until the 1980s there was an incredibly popular "rewards program" which used a unique form of scrip many will remember as S&H Green Stamps.
Companies adopted the use of scrip and viciously abused it. Originally, because scrip cost next to nothing, they would pay their workers in scrip. The scrip could be exchanged at the company store for every day needs and the company tavern for drinks. At the end of the fiscal year, many companies promised, and some did, distribute a large portion of the money saved by using scrip as cash to their employees. Greed settled in. Company owners decided they could charge whatever they wanted at the company store and tavern. They also began charging whatever they wanted for company housing. Not long after the Civil War was over, corporate management attempted to create a new class of slaves in the U.S. This one was not based on race, but where you were born and more importantly TO WHOM.
These abuses lead to the Pullman Strike/riots south of Chicago in 1894 and the Ludlow Massacre on April 20, 1914 when the Colorado National Guard was ordered to attack a tent colony of 12,000 striking coal miners and their families. In response to the Ludlow massacre, the leaders of organized labor in Colorado issued a call to arms, urging union members to acquire "all the arms and ammunition legally available," and a large-scale guerrilla war ensued, lasting ten days. Eleanor Roosevelt, during one of her humanitarian crusades in the mid-thirties, attacked the use of scrip by coal companies as an evil thing.
While President Franklin Roosevelt was in Bedford, Mass., campaigning for reelection, a young girl tried to pass him an envelope. But a policeman threw her back into the crowd. Roosevelt told an aide, "Get the note from the girl." Her note read,
I wish you could do something to help us girls....We have been working in a sewing factory,... and up to a few months ago we were getting our minimum pay of $11 a week... Today the 200 of us girls have been cut down to $4 and $5 and $6 a week.
To a reporter's question, the President replied, "Something has to be done about the elimination of child labor and long hours and starvation wages."
-FRANKLIN D. ROOSEVELT
Public Papers and Addresses, Vol. V
New York, Random House, 1936), pp. 624-25.
During one of is "fireside chats" President Roosevelt issued a warning that still rings true today. "Do not let any calamity-howling executive with an income of $1,000 a day, ...tell you...that a wage of $11 a week is going to have a disastrous effect on all American industry."
On Saturday, June 25, 1938 the Fair Labor Standards Act of 1938 was signed into law. With it came a ban on oppressive child labor, a maximum work week of 44 hours, and a national minimum wage of 25 cents per hour to be paid in U.S. currency.
While many lawmakers felt they had done something grand, in reality they had not. The people still lived in a company town. The only tavern was the company tavern and the only store was the company store, both of which still insisted on being paid in scrip. It took two other things to rescue these people: the U.S. Postal Service and the Sears catalog.
At least once per year a huge book showed up in their mailbox. From it you could order anything from farm implements to a house (yes, an actual house), some assembly required. You could take your money to the Post Office and obtain a money order (only the rich had checking accounts) to send off with your "page of dreams." Some six to twelve weeks later your freight would arrive. Once they convinced local farmers to partner with someone in town for a grocery store, they put an end to the abusive "company store" and the entrapment of a "company town."
It is sad that so many have forgotten so soon. The battle to end this form of slavery lasted far longer than the Civil War. There have been no studies to determine the number of lives lost during this fight. Indeed, there is argument over whether the number should only include those who died in actual riots or those who died sleeping in the mines or streets because they could no longer afford the company rent and the company food on the company wage.
People of a certain age who were forced to listen to country music growing up will remember a Loretta Lynn song which lead to a 1980 movie of the same name describing both the plight and the role the Sears catalog played in these people's lives.
In the summertime we didn't have shoes to wear,
But in the wintertime, we'd all get a brand new pair,
From a mail-order catalog, money made from sellin' a hog,
Daddy always managed to get the money somewhere.