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I... .4. ........ . V C .0 . .I r | l ’1. II. n ‘ II I | « H um"trigxwygiuzlwwullzW 3 ABSTRACT RESOURCE DEVELOPMENT POLICY CONSIDERATIONS OF SELECTED UPPER PENINSULA FIRMS By &( ) John Raymond Suffron (M 0 Private development of the resources of Michigan's Upper Penin- sula has a long and fascinating history. It is the purpose of this thesis to trace this development, primarily from.the middle of the nine- teenth century to the present, and to look into the future, projecting what may be forthcoming. / / \ The method which has been followed includes historical analy- sis of Upper Michigan resources, searching out and defining general corporate policies of several of the larger Upper Peninsula landowners, identifying individual and collective corporate land development stra- tegies, and projecting corporate and resource trends, suggesting ways of improving relations between government and business. This has been accomplished principally through many personal interviews with policy- makers of the firms considered and through the several published refer- ences bearing on the subject enumerated in the List of References. The findings of this study included the following: 1. The extractionfof Upper Michigan.resources has been a long-standing response to demands generated by industrialization and industrializing centers of the American scene. ( A t Arm ‘9’ 5" .k .‘I \.,,. 1 3 L \ . ‘ § (r f *‘r .."‘ ( [A l-‘n ‘ . t‘ - ‘7 ‘, u.“ John Raymond Suffron 2. Corporate policy is at once profit-oriented, pragmatic, and tinged with varying degrees of conservatism. 3. Individually and collectively Upper Michigan extractive in- dustries are diversifying products, merging into conglomerates, depart- ing somewhat from traditional conservatism, and developing corporate images. 4. Corporate future rests upon cosmopolitanism and realistic pragmatism. 5. Michigan resources will play a continuing role in tomorrow's industry. 6. There must emerge a "middle-of-the-road" reciprocal philo- sophy between government and business. RESOURCE DEVELOPMENT POLICY CONSIDERATIONS OF SELECTED UPPER PENINSULA FIRMS BY John Raymond Suffron A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Resource Development 1966 ACKNOWIEDGMENTS In the preparation of this thesis, the writer wishes to acknow- ledge the assistance of several faculty members of the Departments of Agricultural Economics, Anthropology, Communications, Forest Products, Forestry, Geography, Marketing and Transportation Administration, Philo- sophy, Resource Development, and Sociology. Special appreciation is ex- tended to Dr. Mason E. Miller of Extension Personnel Development, Drs. Lee M. James and Victor J. Rudolph of the Department of Forestry, Drs. Clifford R. Humphrys and William.J. Kimball of the Department of Re- source Development, Professor Ivan F. Schneider of the Department of Soil Science, and Dr. John L. Hazard of Marketing and Transportation Administration. In the final revision of the manuscript, the contributions of the following people are gratefully acknowledged: Professor Edmond W. Alchin of the Institute for Community Development; Dr. Dale E. Hathaway of the Department of Agricultural Economics, for his knowledge of govern- ment policy; Dr. Daniel E. Chappelle, Department of Resource Development, for his assistance with methods; Dr. Georg A. Borgstrom, Department of Geography, for his in-depth knowledge of global resource management; Dr. A. Allan Schmid, Department of Agricultural Economics, who offers a testing theory of "public goods" and acquaints the student with the ideas of the world's acknowledged economists; and Dr. James D. Shaffer, Depart- ment of Agricultural Economics, who opens up an understanding of consumer ii behavior. Two individuals from.Michigan State University's Department of Resource Development must be singled out here for the writer's deepest gratitude. Without the guidance of Dr. Raleigh Barlowe, Chairman, and Dr. Milton Steinmueller and their faith in the author's ability to carry through this study, it would not have been possible. The writer is es- pecially honored to have been originally acquainted with conservation, micro-economics, area/regional development, and international dimensions of resources through Dr. Steinmueller and to have him guide his educa- tional program.through these several years. The writer also wishes to thank Mr. Frank D. Stempihar and Mr. Albert T. Hainault of the White Pine Copper Company, who offered considerable advice in correcting the final copy's references to the history and techniques of iron and copper extraction in Michigan. Mr. Howard Beach of Marquette, Michigan, was also very helpful in pro- viding information on the people of that part of the state. Finally, sincere appreciation is extended to my mother, Mrs. Elsie A. Suffron; my aunt, Mrs. Edith LaFreniere; and my future wife, Kay, whose support and encouragement were needed throughout the project. 111 TABLE OF CONTENTS Page LIST OF TABLES .,. . . . . . . ... . . . . . . . . . . . . . . . vi INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Purpose Chapter I. II. III. IV. Justification for Private Land Use Policy Appraisal Procedure PHYSICAL CONDITIONING FACTORS IN THE UPPER PENINSULA . . 5 Resources Defined Evolution of Resources Michigan's Evolution Observations on Physical Patterns-~ Immediate Consequences of Humanization HISTORICAL AcchTS O O O O O O O O O O O O O O O O O O 11 Perspectives Copper Mining Iron.Mining Timber Production TIE CURRENT ERA O O O O O O O O O O O O O O O O O O O O 34 The Setting Changing Industrial Policy Impact of the New Policy Primary Participants in the Changing Land Development Schemes Firm Policies COMPANY DIRECTIVES AND EXTERNAL FORCES CURRENTLY INFLUENCING MINING POLICIES . . . . . . . . . . . . . 44 Copper Companies External Forces Affecting the Copper Companies Iron Companies External Forces Affecting the Iron Companies iv Chapter Page V. COMPANY DIRECTIVES AND EXTERNAL FORCES AFFECTING TIMBER POLICIES . . . . . . . . . . . . . . . . . . . 62 Timber Companies External Forces Affecting the Timber Companies VI. COMPANY DIRECTIVES AND EXTERNAL FORCES AFFECTING HOLDING CMANIES O C O O C O O O O O O I O C O C O C 75 Holding Companies Externalities Affecting the Holding Companies VII. BACKWARD AND FORWARD GLANCES . . . . . . . . . . . . . . 81 Reminiscences Future Policy Trends Catalysts for Development LIST OF EFEENES O O O C O O C C O O O O O O O O C O O C O C O 112 LIST OF TABIES Table Page 1. Estimated Holdings of Selected Companies . . . . . . . . . . . 37 vi INTRODUCTION Purpose The major purpose of this investigation is to render more fully and readily available certain knowledge concerning the nature of pri- vate land development policy in the Upper Peninsula of Michigan. To a lesser degree, an intent has been to suggest appropriate policy revi- sions which are believed essential to cope with changing territorial perspectives in that region. Justification for Private Land Use Policy.Appraisal As a function of derived consumer demand, and as limited by the availability of demand satisfiers (supplies), by government regulation, and by technical know-how, corporation policy becomes the "rules of the game" for the occupation of private resources. In like fashion, the collectivity of industry-wide policies is what we come to recognize as the rules of the marketplace. Captive land, furthermore, transacted in these collective actions presents a variety of economic connotations. Indeed, how the United States Steel Corporation utilizes land, for ex- ample, has profound repercussions on us as individuals, as consumers, as producers, and as public representatives. It follows that in some practical way, socio-economic man always has vested interests in the manner in which private enterprise is conducted. Yet, beyond pure economic considerations there are several 2 other stimulating reasons for analyzing private land use. One of these is that investigation can lead to establishing an historical understand- ing of resource evolution, including the policies governing extraction. Philip Olson put it this way: In self reflection is hope for man's reawakening and a renewal for the search for the meaning of his existence. . . . One way of gain- ing a perspective on this renewed search is by trying to grasp the meaning of our society in its historical depth - to form a Gestalt of our existence in both time and space. For the natural resource historian, Perloff2 and Isard3 have prepared provoking manuscripts carefully depicting the association be- tween natural endowments and regional development, but the true cham- pion of the historical school is Erich Zimmermann,4 who approaches the study of economic life from the viewpoint of understanding physical forces in chronological perspective. According to him, an evolutionary process spirals from the most simple physical basis to a complex cul- tural superstructure in technologically advanced societies. The crux of the historical approach is delineated in Zimmermann's belief that economics, as well as all social life, has a physical basis. A further reason for this present examination is that from the study of land use it is possible to crystallize many of the problems and changing ideas regarding development of natural resources. Here the 1Philip Olson (ed.), America as a Mass Society (London: Collier-Macmillan Limited, 1963), p. ii. 2Harvey S. Perloff et a1., Regions, Resources, and Economic Growth (Baltimore: Johns Hopkins Press, 1960). 3Walter Isard, Location and Space-Economy (New York: John Wiley & Sons, 1956). 4Erich W. Zimmermann, World Resources and Industries (2d ed. rev.; New York:_ Harper & Brothers, 1951). 3 claim is that since little in life, either abstract or concrete, remains static, there must be periodic redefinition of status, positions, roles, functions, duties, and likewise physical, social, and economic worlds. Cognizance of, and preparedness for, changing natural resource patterns thus aid this adjustment and tend to smooth out the agony of conflict. Another, perhaps often overlooked, justification for this his- torical analysis is that such a study may help to rate or quantify pri- vate and public land development cooperation. Quite often prudent appraisal of the parallel development of private and public policy regarding land use divulges disparities and antagonism.built up between business and government. Rating, then, clarifies these fissures. Beyond, but closely allied to the above-mentioned justification, this study may suggest ways for better private and public land-resource cooperation. Accomplishment of this goal rests upon the application of all of the aforementioned--the understanding that both individual and societal rights must be properly balanced, by recognizing and adapting to changing resource functions, and finally through taking appropriate action to ameliorate those injustices, either public or private, which impair the pathway to Pareto Optimal trades. Procedure A mass of information has been collected on corporations, re- sources, and people, but rarely have these data been coordinated for a single locality. This thesis attempts such coordination for the Upper Peninsula of Michigan, and to that end representatives of the fifteen largest landowners were interviewed concerning business matters. These interviews provided a means to sufficiently ascertain the individual and collective corporate images of the moment. 4 An historical review of the literature attempting to resurrect the flavor and heritage of today's attitudes precedes the interviews. Several predictions, along with a number of subjective observations, follow the analysis. Since little use is made of statistics, models, control groups and other such measurements, the observations are perhaps somewhat arbi- trary. The omission of many analytical tools, however, is purposeful. Instead, a literary approach has been chosen, particularly in view of the emotional nature of the subject matter. Complete impartiality in disciplines such as land economics is truly unapproachable. By nature, economists are argumentative, always hastening to point to a vague con- cept of "rational man." This study, too, welcomes controversy, with the thought that the latter will inspire further investigation and lay the groundwork for better understanding. CHAPTER I PHYSICAL CONDITIONING FACTORS IN THE UPPER PENINSULA Resources Defined A dominating factor in the development of the Upper Peninsula, the concept of Uresources" must relay a commonly understood meaning. Throughout most of recorded history, resources, if recognized at all, were associated with the market process and considered only as tools of the entrepreneur--1and, labor, and capital--or recognized through their impact on cost and price, and supply and demand.1 The danger in thus limiting the definition of "resources" is that it leads to identi- fication with substances or tangible things and creates the false imp pression that resources are static. In actuality, resources represent a highly dynamic concept, and according to Zimmermann, are living phe- nomena, expanding and contracting in response to human effort and behavior, and pertaining not to a thing or a substance, but rather to a function which a thing or substance may perform or to an operation in which a thing may take part, namely, the function or operation of at- taining a given end, such as satisfying a want.2 It is with this latter concept of the term "resources" that this study is concerned. 1Ibid., p. 6. 2Ibid., p. 7. Evolution of Resources An understanding of resource eVolution is fundamental to a comprehension of the history of the Upper Peninsula. Basically, re- sources are composites of potentialities and inaccessibilities, of scarcity and abundance. In unmechanized cultures, resources play the dominant role in both strengthening and limiting survival, often creating hazards rather than relief from them. In complex, atomic-age communities, resources are manipulated, refined, dissolved, exploited, redefined, and extended. Through the increased application of human intelligence, or the mere necessity for survival, or both, primitive people one day experi- ment with new forms and ideas and eventually accrue resource surpluses. With this reserve, less time is required in performing elementary func- tions, and life turns more toward satisfying an increasing number of derived social wants. This rise of cultural involvement adds a third element to what had formerly been a simple relationship between man and nature. In this three-way interaction of man, nature, and culture, char- acteristic of the most advanced society, man's psyche, or his individual and cultural aspirations, is forced into the realm of nature or "neutral stuff." This penetration both creates new resource options and destroys old ones. Copper, iron ore, white pine, and lake trout, the "neutral stuff" of prehistoric Upper Michigan, took root in the physical de- velopment of the Mid-Continent landscape, far removed from anything man had to say. 7 Michigan's Evolution A volcanic upheaval of the Laurentian Shield and the Ozarkian and Appalachian Highlands delivered Michigan out of the sea. Subse- quent weathering, eroding, and reshaping of the highlands produced the debris which was transported and deposited into what is now the Michigan basin. Further volcanic activity exposed molten rock to chemical and water action, forming veins of copper, iron, gold, and silver. The completion of Michigan's geology entailed yet many more transitional vicissitudes, including long periods of climatic reversals. As the climate changed, so did the ecology, and consequently the deposi- tion, culminating in the swamp environment of the Pennsylvanian Epoch, which marked the end of the deposition period. The Pleistocene Epoch of the Quaternary Period followed, begin- ning about 100,000 years ago. It was characterized by several advances and retreats of massive ice sheets, the last one retreating an estimated 10,000 years ago. Michigan's natural topographic features are a direct product of these receding glaciers and their gouging, scraping, and de- positing activities.1 The glacial recession was followed by an era of continuing soil development. The soils took their characteristic profiles from the scattered glacial drift, as influenced by climate, topography, and pre- vailing vegetation, climatic conditions dominating the process in the Upper Peninsula. Over time, heavy precipitation removed from the surface strata all of the salts of potassium and sodium and the carbonates of calcium 1The entire geologic process from volcanoes through glaciation is dealt with in Bert Hudgins' Michigan - Geographic Backgrounds in the Development of the Commonwealth (Detroit: Edwards Brothers, 1961). 8 and manganese to classify Michigan soils as pedalfers. But unlike southern.Michigan, soil formation in the north has continued under the influence of much colder year-round temperatures and far more frequent and deeper snows, in the end forming podzolic soils, i.e. profiles of maximum leaching of all elements.1 Concurrently, plant and animal succession were paralleling this soil build-up. The aging podzols eventually prepared ground for tree growth, climaxing in a forest of white pine on the xeric sites; sugar maple, yellow birch, and hemlock on the mesic sites; and spruce on the hydric sites. Woodland caribou, moose, black bear, beaver, otter, mink, fisher, lynx, and wolves roamed the primeval forests. Observations on Physical Patterns Inclusive of its contiguous inland water surface, the Upper Peninsula comprises 10,858,240 acres--less than one percent, area- wise, of the United States. Yet from.such a small surface has come the iron ore which converted the Pennsylvania hills, the Ohio oak for- eats, the Detroit swamps, and the Chicago prairies into a veritable LA. H. Eichmeier states in the Michigan Weather Service publica- tion Climate of‘Michigan by Stations (February, 1963), that most of the post-glacial Upper Peninsula has over 100 inches annual snowfall, and in some micro-areas this figure is trebled. Snow covers the ground nor- mally from late October to late April, reaching peak depths of five to six feet on the level in the Copper Country. Temperatures during the winter are severe-~below zero as many as 60 days a winter in the inter- ior. Michigan State University Professor, I. F. Schneider, says that the combination of these severe climatic immutables renders much of the Upper Peninsula incapable of becoming a major crop-supporting area--at least as long as there are more favorable tillable grounds closer to consumer markets. Podzols are nature-, not man-, made; they are a re- source, but poor. Zimmermann would undoubtedly call podzols "resistances," and would rather spend energy on more functional aspects of the area: timber, minerals, fish. industrial megalopolis; the timber which built Iowa barns and rebuilt Chicago; the copper which forged a ballooning electrical industry; and the lakes which yielded the prized trout. With all these contributions, however, the landscape remains detached, relatively undaunted by man's prolific civilization. The terrain itself is not dissimilar to that when Raphael Pumpelly stood on Newport Hill gazing at the wilderness and wondering about prospects for iron ore. To the lake Superior shores has come no automobile industry, no meat packing center, no tire and rubber industry. That is not to say that change has eluded the "Old North." Indeed, the bulk of high grade ores, virgin forests, and trout have dwindled or disappeared, but in their place have come the develop- ment of low-grade ores, managed forestry, and controlled fishing. The Upper Peninsula is a land of contrasts--of severe weather, infertile soils, short growing seasons, of variable and often difficult topography, but also of vast hardwood and conifer forests, of mineral deposits, of fur and game animals, of fish, of multitudinous lakes and streams, and of abundant shorelines. An anomaly, the Upper Peninsula is not bountiful without being harsh, and never harsh without being bountiful. It is a land where Lake Superior, enraged, can claim the life of a lone helmsman, or can be captured on canvas in all of its moods for the wondering admiration of generations of viewers. Immediate Consequences of Humanization Settlement of the Upper Peninsula originally rested on the ex- tension of resource demand originating to the south and east and, in part, on the legends of her supposed wealth. Serious encroachment came, however, because settled regions lacked sufficient resource supplies at low cost, even as the uneven spread of resources has been the cause for 10 opening every American frontier. Indeed, no inhabitation can long main- tain self-sufficiency, and consequently, civilization has gathered a collection of interlocking and interdependent regions. Alaskans, for example, import automobiles and export salmon; a Florida housewife buys locally grown oranges and Minnesota wheat; and an Upper Michigan mining company ships iron ore to Cleveland and buys western red cedar shingles from Oregon dealers to build a ski lodge to lure vacationers from.Minnea- polis. Such interdependence has been facilitated through national ex- perimentation in transportation. Railroads, highways, pipelines, tele- phone and power transmission lines, ports, cargo freighters, and air- planes have evolved to overcome the handicap of space and disbalances of nature. Had the world organized into separate, autonomous regions, in lieu of this exchange economy, much of the countryside (certainly the Upper Peninsula) would have suffered economically. Instead, the adop- tion of a cooperative regionalism has enabled the Upper Peninsula to provide the raw materials which helped build Midwestern empires. Over a century has passed since the dawn of the machine age. In these decades lie the hallmarks of today's industry, of man's crea- tion, of his culture, of resource evolution. The early days on the iron ranges, the copper towns of the Keweenaw, the logging camps, the con- solidation years, the beginnings of timber management, and the discov- ery of new mining technologies-~together these offer a source of en- lightenment and add a necessary page to present and future understanding of the Upper Lakes region. CHAPTER II HISTORICAL ACCOUNTS Colonization of the Upper Peninsula resulted in the rapid de- pletion of its readily exploitable resources--minerals, timber, and fish-~all to supply demands created elsewhere. These were times of extravaganzas, of fast fortunes, and of real disappointment. Business shifted from small family interests to concentrated, complicated, vertically integrated corporations. Management broadened its viewpoints; its horizons went beyond the mine, the forest stand, and the town to state levels, but there they ended. Perspectives Regions are spacial and temporal entities--the creation of human imagination and existing for human purposes. Any region has a unique identity, and the Upper Peninsula undoubtedly exhibits a pan- orama of events peculiar unto itself. What follows is probably the best documented chronology of the area. An explorer enters; a fur trapper lays his lines; economic life bezgins. Regional products swell, and out-shipments are made. Mineral disscoveries are documented, and the wealth of the land is recognized. AS leapital investment accrues and extractive industries burgeon, concen- trations of men and equipment form industrial empires. Furtherance of out-shipments interlocks regions. While ores, 11 12 timber, and fish go to the cities, men, machinery, foodstuffs, and literature venture to the country. Money flows in both directions. Economic activity in the hinterland generates multipliers in the heart- land, and regional and interregional contacts expand, operating through a web of linkage systems. Finally, extractive industries are exploited, and reserves dwindle. Heartland-hinterland linkages weaken, the former shifting its connections to Labrador, the Pacific Northwest, Montana, and Ari- zona, while the hinterland's people migrate elsewhere. Interdependen- cies dissolve; social and economic forces have played to other engage- ments. Reawakening, the disadvantaged hinterland resolves to counteract the disfavorable economies, and the sciences are queried for an answer. The people respond by shifting to the development of low-grade ores, capitalizing vertically integrated industries, establishing sustained timber management, controlling the lamprey eel and commercial netters, and publicizing outdoor recreation. An economic rebound is effectuated. This, briefly, is the story of the Upper Peninsula--a myriad of trade-offs and compromises closely threaded to yesterday. But from just such a past come the makings of the present. Indeed, the policies of today's Upper Peninsula have their seeds in yesterday, and in certain of these seeds lie the landmarks of tomorrow. Copper Mining Early reports.--The Indians, as well as the French explorers, knew of the existence of copper in the Upper Peninsula long before white men settled there. Dudley Eastby suggests that the old lake copper 13 cultures may have begun about 4000 B.C.1 Louis Cass and Henry R. Schoolcraft reported copper on the shores of Lake Superior during expeditions in 1800 and 1820. Again in 1840, Douglas Houghton, the state's first geologist, made a careful ex- amination and reported the first professionally encouraging appraisal of copper mining potential in the tip of the Keweenaw. Congress re- sponded by purchasing some 25,000 square miles of land then belonging to a Chippewa tribe.2 Thereafter, Houghton was charged by the federal government to make a land survey, which included the Upper Peninsula. In 1843 the first mining permit was issued. The first boom.--The hardiest of souls from the early lead mines of Wisconsin, along with many fur traders, explorers, and speculators, came by boat during 1843 and 1844 to win their fortunes. The harsh land to which they came was a remote outpost from which it took twenty-five days to haul the copper over land and water to Boston. Winter storms and ice floes slowed lake transport by five months; snow-clogged trails were the arteries for the carrying of mail and supplies by dogsled, and bears roamed the board streets. In Buffalo, New York, Boston, Cleveland, and Detroit, the Copper Country was jokingly described as a "howling wilderness." Yet mining, or something that resembled frantic exploration, began. Men stamped the wilderness equipped with little more than picks and a pocketful of gunpowder. A few copper finds were made--mostly from surface outcrops-—but only very slowly did real technology, investment, 1Dudley T. Eastby, "Early Metallurgy in the New World,” Scienti— fic American, CCXIV (April, 1966), p. 73. 2Treaty of LaPointe signed October 5, 1842. l4 and establishment begin. Methods carried over from the Old World, particularly Cornwall, were adopted in these Lake mines, which were forged out of laborious hand drilling and gunpowder blasting. Copper masses were hauled to the surface by iron kibbles attached to heavy chains and powered by men at a windlass or horses at a whim. Underground, the ore was transported by wheelbarrows rolled along boards. Miners, trammers, and maintenance men reached the surface via a series of hemlock ladders. Surface in- stallations generally consisted of a small farm, blacksmith shop, car- penter shop, log bunkhouse, storehouse, rockhouse, possibly a sawmill, and sometimes a stamp mill. As William Gates implies, professional mining was the exception rather than the rule during this period.1 Several factors contributed to discourage these early ventures, notably regional remoteness, diffi- cult topography, and the hidden nature of the major reserves. Even more disheartening were the federal leasing and mineral royalty laws then in force. These policies led to widespread buying and selling of permits, royalty abuse, and an immature approach to metallurgical sci- ence and technology. The first boom finally ended in 1846 when the President of the United States suspended further issue of permits. Later boom.--In 1847 Congress shifted mineral lands from the War Department to the Treasury Department, at the same time authorizing outright sale of the lands formerly covered by leases, and by September, 1850, the minimum price for such property was reduced to $1.25 per acre. These favorable land laws of 1847 and 1850, together with the first U.S. 1William B. Gates, Michigan Copper and Boston Dollars (Cambridge: Harvard University Press, 1951), p. 4. 5—].— Co do at 15 Geological Survey maps, which were produced in 1850, opened the door for a new surge of mining. Concurrently, the small copper deposits of the eastern coastal states were being rapidly depleted, while the re- mote North Country awaited a transportation breakthrough. By 1855, Harvey's vision had opened the locks at Sault Ste. Marie. Boston capital returned to the North Country, and a new boom exploded-~unequaled in numbers of mine starts, false claims, bonanzas, trusts, and outright frauds. Gates reports that by the early 1860's the district was pro- ducing about 14,000,000 lbs. per year--an amount equivalent to 60% of the domestic requirement. Prices fluctuated wildly, and during the Civil war years only eight of ninety-four companies paid dividends. The Cliff in Keweenaw County, the Pewabic, Quincy, and Huron along Portage lake, and the Minnesota in Ontonagon County were the leaders. The postwar period saw the emergence of a new company which was to dominate the industry for decades--Calumet & Hecla. On September 17, 1864, Edwin J. Hulbert, a local surveyor, discovered the rich Calumet Conglomerate. He informed eastern interests of his findings, and as a result, two companies, Calumet and Hecla, were incorporated. In May, 1871, these two companies merged, and Quincy A. Shaw directed the finan- cial affairs from Boston, while the management of properties was en- trusted to Alexander Agassiz. The impact of the Calumet Conglomerate discovery can be seen in the figures. In 1868 the two companies were shipping 8.4% of Michigan copper. Five years later Calumet & Hecla was producing 65.3%. Ups and downs occurred over time, but Calumet & Hecla maintained regional suprem- acy until the reopening of Copper Range's White Pine Mine in the 1950's. 16 Changing times.--Copper prices during the 1870's continued to be highly irregular. As prices rose, the added income was generally spent on improvements and exploratory work, but the uncertainty in the price patterns could not long be shouldered by the small producers, and by 1883 four mines accounted for 71% of Michigan production. In the early years, Michigan copper went primarily into ship sheathing, pots and pans. With the emergence of Calumet & Hecla, the demand shifted to rifle cartridges, locomotive fittings, trimmings, fire boxes, bronze doorknobs, and soldering irons for the canned goods trade. The majors, led by Calumet & Hecla, readily adopted new tech- nology. By the early 1880's, air drills and high explosives had become prime essentials, and the diamond drill was receiving experimental trials. Man-made engines continued to be installed in the deepest mines, but hoisting engines were becoming sizeable pieces of machinery. Skips were improved by the addition of automatic pumping devices; rail tram cars replaced horses; standardized equipment was becoming the rule. Here, then, was one of the early stages of the replacement of men by machines. Actual amounts of labor required did not decline, however, but increased instead, due mainly to a rise in the volume of mining. Technology transformed transportation also. The first bridge between Hancock and Houghton was completed in the spring of 1872, and by 1879 it was possible to travel the ninety miles between Copper Harbor and Ontonagon by comparatively good wagon roads. Even more important were the internal railroads, which brought the mineral to port. By 1876 many mines were shipping via these rails to the Portage Lake smelters. Harbor improvements were also made, and when the Portage Lake and Lake Superior Ship Canal was completed in 1873, vessels were able 17 to pass directly through the Keweenaw Peninsula--a short-cut to the iron and wheat country further west, which made Hancock and Houghton what Gates calls "ports of call" for almost all of the upper lake traf- fic.1 The culmination of the transport hookup came in 1883 when di- rect rail connections reached the East Coast, finally making it pos- sible to ship copper by boat to Chicago and thence eastward with only one transfer of cargo. These links also made winter ore shipment a reality--and with it, other year-round economies. For a time, national copper policy and that of Calumet & Hecla were almost one and the same. One of the early moves concerned an at- tempt to control the market via protective tariffs and pooling arrange- ments. The desire was to cut off foreign imports, and for a time it proved effective. Gates reports that the mines operating outside the pool received a higher average price for their copper than did Michigan producers.2 Moreover, the Lake companies carried the full burden of clearing the domestic market of surpluses by sacrifice sales abroad and restriction of output, while other companies were free to produce for domestic demands. At any rate pooling continued through the Seventies and into the early Eighties, but far from being perfectly disciplined, it eventually weakened. Blamed were the many small local producers who began acting independently and the new western developers who showed little sign of cooperating with the Lake giant. Michigan fields, as all others, were receiving greater demands, llbid., p. 61. 21bid., p. 63. Ii 18 and additional properties were worked and technologies stepped up, but the Lake firms were no longer exclusive. The struggle became one of each firm trying to out-innovate the opposition. Evidence as early as 1885 shows that Keweenaw copper had lost its preeminence. Calumet & Hecla's national power steadily declined in the face of great finds in Arizona and Montana, which came into exploitation via the extension of rails. The old district had seen its grandest hour. Nonetheless, groping Michigan producers showed determination. The last decade of the nineteenth century brought concentration, con- solidation of properties, and vertical integration. In 1891, the Quincy purchased the Pewabic property, and by 1897 the Mesnard and Pontiac were absorbed. Concurrently, Calumet & Hecla purchased land adjoining the Tamarack in 1895, and in 1899 began buying land around Calumet (mineral and otherwise). Added to this was the purchase in 1892 of the Detroit and Lake Superior Copper Company, a smelting firm. ln_1897, the Osceola absorbed the Iroquois, Kearsarge, and Tamarack Junior into the Osceola Consolidated Copper Company. Another Boston group of Paine-Webber, then laying plans to open rail links, entered the picture in 1899. The rail- road opened in 1900, and (among others) served the newly discovered Bal- tic Lode. By 1901, William Paine and John Stanton had formed the Copper Range Consolidated Company to hold virtually the entire stock of the Baltic Mining Company, the Copper Range Railroad Company, and the Tri- mountain Mining Company, as well as one-half of the stock in the Cham- pion Copper Company and a 60% share in the Michigan Smelting Company. By 1904, Calumet & Hecla and Copper Range controlled 68.6% of Michigan copper production, and with the Osceola and Quincy, the total 19 became 95.8%.1 Bigness had arrived. The two largest interests smelted their own mineral, and one had substantial investment in manufacturing. Diversification spread even further: Calumet & Hecla and Copper Range began investing in timber lands and sawmills; all companies owned short rail spurs for mine-to-mill hauls; Calumet & Hecla owned and operated a fleet of vessels which deployed copper to the eastern markets and hauled coal on the return trip. Yet the changing policy, the widening scope of activity, and the Boston capital failed to capture the intri- guing western lodes--an oversight which Gates believes came from old-age inertia of Shaw's and Agassiz's seemingly endless commitments elsewhere.2 The twentieth century.--With the dawning of the twentieth cen- tury came the electrical industry, and with it a corresponding resurging need for copper. Often miners were made slaves to their jobs, but not so in most of the Lake District. At the turn of the century, the many small Upper Michigan ore towns were enjoying their prosperity. The com- panies were perhaps even overly generous. Wages, though not as high as in the West, stretched further because living costs were lower in the Lake Superior country. The larger companies were definitely community- minded. Benedict describes Calumet & Hecla as providing low-cost qual- ity housing, free fuel, a hospital, library, community center, and a first aid fund by 1872, as well as a pension program by 1904.3 The Calu- met stage shows and theaters were packed; the dinner table was full; people were happy. Paternalism had brought wealth to the copper country. 1lbid., p. 73. 21bid., p. 91. 3C. Harry Benedict, Red Metal: The Calumet and Hecla Story (Ann Arbor: University of Michigan Press, 1952), pp. 213-216. 20 Miners immigrated from all over Europe--Austria, Italy, Ireland, Sweden, and Finland. This pleasant harmony was disrupted, however, when on July 22, 1913, a strike commenced. Coming as a surprise to all but management, the conflict became one of the fiercest in Michigan history. Apparently, the American Federation of Miners, then a militant organization, sent organizers into the conservative Upper Peninsula copper district, which until that time had been free of unions. As the account goes, a letter was sent by the outside organizers to the operators, demanding that the latter meet with the union for the purpose of discussing wages and var- ious grievances. The note was ignored, and the Federation struck. Most miners were unaware of the happenings on their way to the morning shift, but they were quickly advised. The Federation had re- cruited a few local workers who physically dissuaded intrusion by strike- breakers. Several fights broke out, and Governor Ferris responded with increments of the state militia. Management countered by posting pro— fessional guards. What followed was a long, costly battle, including charges centering around a false alarm fire disaster on Christmas Eve, which claimed the lives of seventy-one pro-unionists in a stampede. The strike revolved around the following issues: (1) acceptance of the Western Federation as bargaining agent, (2) minimum wages, (3) abandonment of the one-man drill, (4) establishment of eight-hour days, and (5) easy employee access to management. Dramatic court battles stretched into several costly months, and in the end neither side was truly victorious, though management did fare slightly better. Although shorter work days were programmed and greater access to management was guaranteed, the one-man drill was kept in use, and the union and its 21 leader were literally kicked out of the district, not to return until the New Deal era. In 1943, affiliates of the CIO became the sole bar- gaining agents for labor in the Copper Country. The heated philosophical dispute between labor and management eventually cooled, but as social life regained a certain stature, min- ing activity sagged. Shafts dropped deeper, ores dwindled, and proper- ties shut down. Outside Michigan, however, the picture was considerably brighter. In fact, investment in copper began glutting the market. The falling of prices resulted in national and international attempts at price control. Financial manipulation helped somewhat, but the hand- writing was quite clear--Michigan had ended its dominion over the copper market. Figures tell the story. In the forty years following 1900, the Copper Country lost 40,000 people, community life faltered dramatically, and scores of mines were dismantled. Consolidation and vertical integration were significant changes during the first half of the twentieth century. In 1929, Copper Range purchased the assets of the White Pine properties, acquiring Hussey Manufacturing in Pittsburgh, a guaranteed fabricating outlet, two years later. Calumet & Hecla gathered in considerable land and mining assets in 1911 and in the early 1920's, but awaited the management of A. E. Pettermann to acquire fabricating facilities, the Wolverine Tube Company, in 1943. It was Pettermann who also opened the zinc-lead mines at Shullsburg, Wisconsin; constructed the Decator, Alabama, fabricating plant; and programmed unit operating cost saving by replacing labor with mechanized equipment--including a boiler plant at Lake Linden, diesel locomotives, enlarged foundaries, and detachable drilling bits. It was Pettermann again who was responsible for starting a Secondary Copper 22 Division, devoted to finding new copper uses. This resulted in the use of copper oxides as an additive to depleted southern soils, in paints, and as a component of certain fungicides. Iron Mining Early reports.--Unlike copper, the whereabouts of iron ore was unknown until recent times. First discovery came at Teal Lake on the Marquette range in 1844, when William A. Burt, with a band of Indians, was making a federal land survey and noticed compass needle deflections which led to the ore outcroppings. A year later, P. M. Everett of the Jackson (Michigan) Iron Company found iron ore near Burt's earlier dis- covery. The Jackson company obtained the first mining permit. The beginnings of iron mining.~-Those first to arrive in the Negaunee area were similar to the rough and tumble assemblage simul- taneously flocking to the Keweenaw, and the Marquette wilderness was easily as challenging--an evaluation which was probably applicable to the entire Upper Lakes region from Sudbury to International Falls. The Marquette iron investors--the Mathers, Pickands, and Jay C. Morse-~were residents of Cleveland rather than Boston from whence the copper capital had come, and they viewed the iron ranges as daring but rewarding fron- tiers. The Jackson opened in a vast forest full of howling wolves. Picks and shovels busily poked away at surface outcrops, but little was accomplished. The Jackson lacked capital and showed signs of faltering. As with the copper mines ninety miles to the northwest, however, changing land laws and availability of geologic maps stimulated the iron llbid., pp. 235-241. 23 men. Samuel L. Mather took control in the Marquette range, first by purchasing open lands. Known as the Cleveland Iron Mining Company, Mather's firm, along with the Cliffs Iron Company (also backed by Mather finances), really opened the Michigan iron industry. Demands for elemental iron during these early days included: (1) cast iron household goods, (2) agricultural tools, (3) wrought iron construction tools, and (4) cast and wrought iron transportation equip— ment. By 1850, the demand shifted more toward wrought iron-~a product which had until that time evaded American industrialists while Britain took advantage of American markets by disposing of her "hot blast" coke furnace wrought iron. The wrought (pure) iron was preferred over pig iron for the expanding steam engine, locomotive, rail, and reaper mar— kets, and the American "hammered" wrought could scarcely compete with the mechanically "coke" forged British wrought. Suffice it to say that when coal became available to the mills west of the Alleghenies via the extension of rails, American industry quickly imitated the British method, helping to ignite the prodigious steel industry in the United States. The infant industry.--As in the copper district, the opening of the Sault Locks brought various inducements to the iron region. More ex— plorers came on the scene, and iron was reported in the Menominee by two geologists, Foster and Hill, as early as 1848. The Breer deposit at Waucedah was discovered in 1867. In 1872, the Milwaukee Iron Company undertook large-scale field work in the vicinity of the Vulcan Mine, and immediately thereafter other companies came into the picture. With the construction of a railroad into the region in 1877, shipping began. Min~ ing commenced on the Gogebic range in the vicinity of the Colby in 1880. 24 Progress was slow. Though mining was at first open-pit, shafts soon penetrated deep underground. Large amounts of local timber went into mine support, and numerous fires, some serious, broke out. Mules were used as trammers; candles burned on hard hats; wooden ladders were in common employ. As to the miners, they were a wild breed. Not afforded the lux- ury life of their Copper Country brethren, these men were rascals--carry— ing dynamite around as carelessly as match sticks, boozing, and gambling. Walter Havighurst describes 1890 Hurley, Wisconsin, on the Gogebic range, as boasting fifty-eight saloons, twenty hotels, four lobster houses, three groceries, two druggists, and a Presbyterian minister. Ironwood, built on the Norrie location, wallowed in mud. Street fights were common between miners and loggers, with the loser being doused in the mud. Truly the town was in constant disarray. In 1887, a fire started behind the Alhambra Theater and swept the business dis- trict. Rebuilt, there were fifty-five saloons, sixteen hotels, and fifteen boarding houses. The 1887 version of Wakefield was a tent town with a few frame buildings chopped out of the forest and the Coliseum Variety Theater, where miners and loggers paid a day's wages to watch dog fights on the stage. This was a zesty life from management down. Men and equipment were moving in fast, and the great country was being tamed. Exploration continued, and lands were gobbled up. One explorer of import was Raphael Pumpelly. 1Walter Havighurst, Vein of Iron: The Pickands—Mather Story (Cleveland: WOrld Publishing Co., 1958), p. 57. 25 A Harvard man, Pumpelly came to the iron country to pick out portions of 400,000 acres, all odd sections, as federal payment to the Portage Lake and Lake Superior Canal Company for the harbor work. The primary company went under, but its successor, the Keweenaw Land Asso- ciation of 1908, prospered. Pumpelly's knowledge of the local geology proved to be a bonanza on the Gogebic. The foresight of this early ex- plorer gave the Keweenaw Land Association many years of mineral royalty on the mines which were worked by Pickands-Mather, M. A. Hanna and Oliver (U.S. Steel). John M. Longyear, another legendary figure attracted to the Lake Superior region for health reasons, entered in the 1870's. A shrewd real estate evaluator, Longyear also explored for the Keweenaw Land Association and alertly secured for himself many adjoining sections. In 1884, Longyear, with Frederick Ayer of Boston, filed a claim on the Ashland location at Ironwood. By 1890, the mine had shipped a million tons. Still other financial magnates found their way to the north woods. The sly share-trading deals of Henry W. Oliver concentrated many smaller holdings into the Oliver Iron Mining Company. Inland Steel, first incorporated in 1893, also purchased lands, and by 1900, open entry mineral lands were in short supply. Through the wanderings of Pumpelly and Longyear, the early pur- chases by Samuel L. Mather, the dealings of Oliver and Inland, the Pickands, Morse, Ayer, Norrie, and other Mathers, thousands of acres were turned over to private parties. The government's land disposal policy had succeeded, but the concomitant purpose of homesteading never became a reality in the Upper Peninsula. Land was bought and sold solely 26 for its minerals. The maturing industry.--The iron industry fast became competi- tive. Market capture and integration became bywords of the free-wheel- ing, laissez-faire 1880's and 1890's. The Cleveland interests on the Marquette range were consolidated into the Cleveland Cliffs Iron Company in 1890-91. At this time, Cleveland Cliffs had its own fleet of vessels and controlled the Lake Superior and lshpeming Railroad. Pickands- Mather also had a fleet. The time to insure stability had arrived. The American‘iron indgstry rapidly developed into anwoligopoly of gladiators. Two forceful "top dogs" emerged. Andrew Carnegie con- trolled vast raw materials--iron ore, coal, and limestone--through a progressive organization. Most of his production--with the exceptions of structural steel, rails, and slates--was sold as raw steel. The other giant, J. Pierpont Morgan, owned several manufacturing combina- tions--including the Federal Steel Company, National Tube Company, and the American Bridge Company--and shared agreements with Gates's American Steel and Wire Company and certain of the Moore interests--the manufac- turing ties being former Carnegie outlets. Surrounding these giants were several significant independents-~Jones and Laughlin, Bethlehem, Inland, Republic, and a few merchant iron ore dealers (Pickands-Mather and Cleveland Cliffs Iron Company). Clamorings for more mergers arose (especially in Carnegie's precarious resource-oriented position). Although it may be argued that the intent to monopolize played the dominant role in the "Grand Merger," it cannot be denied that the shift in firm loyalties did much to stir Carnegie's imagination, and in the end survival, rather than monopolization, was the key. In any event, in early 1901 Morgan began negotiations with Carnegie, Gates, and Moore, 27 which resulted in the formation of the United States Steel Corporation. With it came the Oliver lands which earlier had been sold to Carnegie. In the years immediately following its formation, U. S. Steel innovated the Cary Dinners as a means for various firms to meet and "hold prices and prevent demoralizing competition." Not surprisingly, the federal government became suspicious of price fixing and monopoliz- ing functions of the dinners, and filed suit to dissolve the corpora- tion in 1911. However, World War I broke out before action could be taken, and in the intervening years, U. S. Steel played "good boy." The steel giant's new “friendly” attitude toward competitors (unlike the situation found in the tobacco and oil trusts) dampened the post- war trust-busting efforts.1 In spite of the considerable power acquired by U. 8. Steel in 1901, the firm steadily lost potency. Adams suggests this loss was due to a combination of things: (1) the corporation's fear of becoming too big and thus vulnerable to antitrust laws; (2) the consolidation of other majors--Bethlehem in 1922, 1923, 1930; Republic's merger of 1930; and the formation of National Steel in 1929; (3) the shift in demand from heavy steel (rails, plates, and structural shapes) to lighter prod- ucts (sheets and strips), while U. S. Steel was deeply committed to heavy industry; (4) U. S. Steel's lag in innovating; and (5) the chisel- ers, the disasters, the collapse of basing point pricing, and other 2 "evils" of the depression. While U. S. Steel's strength has declined, its power today is 1Walter Adams (ed.), The Structure of American Industgy (New York: Macmillan Company, 1961), p. 147. 2 lbid., pp. 150-152. 28 not to be underestimated. The steel industry, led by U. S., endures as the vibrant backbone of American economy, with a core of shrewd busi- nessmen. Furthermore, the mergers, especially those in the ”combina- tion of combinations" have fanned today's big business, have made long- term commitment possible, and have made American industrial progress an outstanding reality. By 1930, the Upper Peninsula iron firms were committed to the steel industry--M. A. Hanna to National Steel, Oliver to U. S. Steel, and Inland to the parent firm. The iron ore merchants (Pickands-Mather and Cleveland Cliffs) made long-term contracts with the majors. Gone were the days of the explorer and tycoon. In their place came the mana- gerial classes, corporate decentralization, soft-pedaled public rela- tions, and professionalism. Recent times.--The new companies were welcomed as expanding markets for the Upper Peninsula's raw material. With the automobile industry beginning to flourish, iron ore issues throughout the 1920's and 1930's looked like sound investments, and this early growth proved a clear indication of things to come. Steel quickly gained national power--a position which it has retained. As the steel industry grew and immigrants flocked to the mines, managers joined the technology bandwagon. Community life improved; min- ing changed from a roughhouse pursuit to a sophisticated affair. Mules disappeared from the shafts; carbide lamps were carried by 1912, with belt-hung batteries by 1935; electric shovels were first used in 1924. With mechanization, miners became specialists. Havighurst de- scribes muckers and trackmen, drillers and powdermen, pumpmen and plumb- ers, timbermen and skip-tenders--all underground--and engineers, 29 machinists, electricians, carpenters, and timbermen on the surface. Electricity brought signal systems, telephones, conveyor belts, and lighting. Safety drills became part of mining practice; injuries de- clined; production per worker rose. Mining was progressing, but alas, the ore was being depleted. The latter day story of the Keweenaw took encores on the iron ranges. By the late 1940's and all during the 1950's, production skidded. The boundless Cleveland Cliffs lands were in jeopardy; Inland, Oliver, and Pickands-Mather pits were in even more serious throes; the Longyear and Keweenaw Associations were shifting to timber royalties. Indeed, the narrow, ore-minded philosophy of the past needed broadening. Timber Production Early developments.--Timber was not exported from the Upper Peninsula during its early settlement. Rather, the major portion of cutting supplied the burgeoning mining communities around Calumet- Hancock-Houghton, Wakefield-Bessemer-Ironwood, Iron River, Iron.Mountain, and Negaunee-lshpeming-Marquette. Machined, these locally cut trees were the construction timbers of mines, boarding houses, barns, carpenter sheds, rock houses, shafts, and boardwalks. Although pioneer loggers started up the major Upper Peninsula streams--the Menominee, Ontonagon, Manistique, Paint, Michigamme--taking prize pine and hemlock in the early 1860's, the great rush for Michigan timber was yet to come. On the national scene, eastern forests were rapidly being de- pleted, and reports of surveyors and timber cruisers on Michigan's white pine wealth were reaching the ears of eastern financiers. All of the better journals carried the story of Michigan pine. By 1871, Upper Michigan was ripe for the cutters, and with the great Chicago fire of 30 that year, another of Upper Michigan's zestiest hours began. To the shores of Lake Superior now came French Canadians and Swedes, axes, peavies, compasses and saws. The timber barons.--From the land came the timber, but first (as with mining) came land exchange. Harold Titus of Field & Stream Magazine depicts Michigan timberland disposal as becoming particularly exciting after statehood.1 The lumberman and the speculator wanted the timber and minerals. The territory needed funds for schools, roads, and other services, and land sale could provide these funds. The combina- tion of needs and opportunities was ideal, so exchange and sale policies were inaugurated. Stream timbers were bought up and harvested before those of the interior. Quickly this forest resource became a bank account which gave rise to a harvesting program never equaled in volume in any other simi- lar area before or since. As a rule, towns grew up at mill sites, usually at the mouth of navigable streams-~the stream serving as an avenue for log drives, and the water providing power to run the mills. Stream cutting transpired rapidly, and by 1877 narrow-gauge rails were fingering inland to tap the upland pine riches. According to Raymond Pfeifer and Norman Smith of the Department of Conservation, the Upper Peninsula pine-hemlock harvest en- compassed the years from 1870 to 1930, hardwood logging from 1910 to the 1930's, and spruce-fir pulpwood cutting starting shortly before 1900.2 1Harold Titus, "The Land Nobody Wanted," Readings in the Geogra- phy of Michiggg, ed. Charles M. Davis (Ann Arbor: Ann Arbor Publishers, 1964), p. 271. 2Raymond Pfeifer, "The Economic Importance of Forests in the Upper Peninsula of Michigan," ibid., p. 121. 31 Logging itself was restricted to the winter months when the logs could be skidded. The remainder of the year was spent building rail spurs, outpost camps, repairing equipment, etc. Loggers, carrying heavy axes, two-man saws, and compasses, had to be skilled in many aspects of the industry. Legendary rivermen floated logs down the rivers, peavy in hand, maneuvering the rapids and often dynamiting precarious log jams. The mess halls were filled with grubbing loggers who gobbled their meals, scarcely speaking a word, and thereafter flopped down on bunkhouse cots to be awakened at 4:30 a.m. Management regarded the trees as a one-time crop, and the land as a source for later agricultural pursuits. The harvest continued, with the rails opening up more and more land. First only small plots and sections, and later whole townships of timber were cut. Sault Ste. Marie, Manistique, Seney, Menominee, Shingleton, and other hamlets blos- somed, thrived, then waned. The forests were not as infinite as ori- ginally thought. By the 1930's, the logging towns no longer had a raison d'etre. Titus perhaps describes the logging days as accurately as anyone. The whole logging era was one of life at a concert pitch. It was tremendously exciting to grow rich or even to watch neigh- bors grow rich on timber; it was exciting even to work for a pittance and risk life and limb in that roaring epic of the tim- ber harvest. It was a period of swank, of color, of absorption in the moment, the day, and small thought of the morrow.1 Small thought of the morrow.——Michigan pine rebuilt Chicago, paneled Iowa farms, and opened many new markets, but the pine barons left a thousand smoking fires and a desert of bracken fern as remnants of their contributions. 1Titus, Readings in the Geography of Michigan, p. 273. 32 The stately white pine that once towered along the trembling Michigamme now serves as a floorboard in a downtown Milwaukee hotel, but its old haunt lies idle. Indeed, the raw materials of one area molded the livelihood of another. Unfortunately, the sacrifices made were far-reaching. I Thousands of unwanted, treeless acres returned to the state as tax delinquent (under the laws of 1869 and revised as of 1893), and the state, still wishing to settle rural areas, returned them to the selling block. Pamphlets and exhibits depicting the values and virtues of pri- vate property were launched on the public. Private profiteers, swin- dlers, even the state entered the real estate business with such slogans as "a farmer for every forty." The plow was tried, but the general drift back to delinquency continued.1 In the meantime, significant ecological changes were also taking place in the shadow of the timberman's axe. In short, the changing en- vironment brought the introduction of new species and decline and dis- appearance of older ones. The opening forests provided favorable condi- tions for the invasion of the white-tailed deer and market hunting, but spelled doom to the moose and caribou and decline for the timber wolf. The new openings provided ground for the sharp-tailed grouse and prairie chicken, while simultaneously curtailing the life of the grayling. The haunts of the bald eagle, fisher, and martin were cut away. The organic soils were burned and reburned--and erosion considerably accelerated. A few farsighted firms, including Kimberly—Clark (then a partner- ship) and a Menasha, Wisconsin paper-oriented firm, acquired holdings during these desolate years. By 1920, Henry Ford, too, was roaming the 1Much of this land later became part of the state forests. 33 woods seeking timberland, but the great era had ended. The regrowth.--As with the mines, mergers played an important part in the timber industry. Kimberly-Clark acquired the assets of the William Bonifas Lumber Company in the early 1900's and gradually became a major landowner. The Menasha firm mentioned above was purchased by Marathon Paper Products. Though timber holdings were consolidated, much of the land re- mained fire-sterile and denuded until the 1930's when a new forest began taking root. This time jack pine, aspen, and many low quality hardwoods seeded in where once had stood the arching hemlocks, yellow birch, and white pine. Furthermore, this time the forest grew back into a new economy--one in want of quality interior specialty woods, veneer, furni- ture stock, plywood, and pulping material. At about this same time, large landholders also began making conscientious efforts in applying improved management, indicated by such new terms as "sustained yield" creeping into conversations. The perils of the Depression, however, and the subsequent drain of World War II relegated improvements to a later period for more serious thought. As the mid-century mark approached, the logging camps had long since disappeared. Large land groups (Kimberly-Clark, Marathon, Connor, Huss-Ontonagon, and Vulcan) were buying more properties, and chain saws and trucks were taking over in the woods. Overall, management remained conservative, however. Many adjustments to the changing forest industry had not yet been contemplated. CHAPTER III THE CURRENT ERA The Setting The "Golden Age" of the North Woods was a bygone lamentation by the middle of the twentieth century. The economic experiences of birth, growth, stability, and decline were all familiar by this time. With but a few mines "hanging on” amidst a decadent second-growth forest, the North's role as an industrial supplier was believed concluded. Pessim— ism reigned. Elsewhere, however, there were rumblings that suggested startling local consequences. World War II had fostered new demands for minerals and timber arising from (1) the growing desires of the newly formed nations to emulate the material lives of Western cultures, (2) the swelling needs created by a worldwide population boom, and (3) the unprecedented mar- ket penetrations made by America's growing middle class. Steadily, industry came to grips with these demands and opened up more of the environment which had previously been defined as part of the "neutral stuff." The result has been beneficiation of ores, ground- wood pulping, reinvestment, flotation ore milling, and ultimately the rejuvenation of the Upper Lakes. Changing Industrial Policy The narrow ideology of Adam Smith's day could not long remain valid in the atomic age. People and industry of today are too 34 35 interdependent to function in a system of isolated, independent commit— ments. Reexamination of economic parameters has recently brought us the rewards (as well as the hazards) of professional analysis. In general, resource industries have lent an attentive ear to sound advice. Though there is always some reluctance to move in new directions, an unques- tionably different managerial philosophy, along the lines of Friedman, Galbraith, and Samuelson, prevails in the modern executive suite. Specifically, organizational man has begun wearing the hat of a pragmatic cosmopolitan. His business is being adjusted for regional and interregional ties; schemes are being devised for taking the best advan- tage of automation; managerial and labor incentive "task force" tech- niques are being programmed; product image and advertising campaigns are growing; diversification and firm integration have become necessi- ties. The educated economist, aided by changing tastes and preferences, has initiated top-level card shuffling. The keenly competitive tactics in mineral and timber markets, for example, have forced micro-locales, such as the Upper Peninsula, to band with similar peripheral areas into what Dr. John L. Hazard of Michigan State University's Marketing Depart- ment calls "regional commodity trade units." The depletion of direct shipping ores has given rise to beneficiation; pyramiding recreational needs have startled firms into studying their lands for possible leisure uses; the whimsical nature of the affluent, consuming public has alerted management to remain "product loose" and "diversify wary." Without doubt, today's managers are an entirely different breed from their skillful and daring, but shortsighted and ultra-conservative forefathers-- 36 the Mathers, Morse, Longyear, Ayer, Norrie, Colby, Oliver, Paine, Shaw, and Agassiz. The new leaders represent a cosmopolitan blend, shadow- boxing with the impulsive consumer. Impact of the New Policy Modern corporate policy, partly necessitated by a changing world, and partly the result of a mixture of headstrong, often philanthropic, skillful people, has lubricated the worn-out northland. Today's Upper Peninsula is not withering as in 1949 or 1956. Instead, kindled by several of the companies shortly to be scrutinized, a new economy is brewing. Pellet plant ores are replacing natural high-grades; timber and recreation management are gaining steadily; lake trout fishing (and coho salmon more recently) is moving again. In world markets, the experts have promised "a long and rising demand" for timber and minerals, and in the corporate suites efforts are being made to buy more land, reduce taxes, promote company and product images, automate further, innovate, extend integration, and plan for expanding future markets. Primary Participants in the Changing Land Development Schemes From hundreds of independent copper, iron, and timber companies, there have emerged a select few local giants who control and use a con- siderable amount of Upper Peninsula land. Since land is such a vitally important and controlling resource, much of the Upper Peninsula's des- tiny is bound up in the policies and attitudes directing the use of these private properties. Although the exact amount and location of surface resources is held somewhat confidential, and while changes in the figures through 37 sale and trade are common, an estimate of the total holdings has been made for these companies. TABIE 1 ESTIMATED HOLDINGS OF SEIECTED COMPANIESa Company Acres Kimberly-Clark Corporation . . . . . . . . . . . . . . . . . . 450,000 Cleveland-Cliffs Iron Company . . . . . . . . . . . . . . . . 375,000 Calumet & Hecla, Incorporated . . . . . . . . . . . . . . . . 275,000 United States Steel Corporation . . . . . . . . . . . . . . . 250,000 Celotex Corporation . . . . . . . . . . . . . . . . . . . 240,000 Connor Lumber and Land Company. . . . . . . . . . . . . . . . 200,000 Copper Range Company. . . . . . . . . . . . . . . . . 180,000 American Can Company (Marathon Division) . . . . . . . . . . . 150,000 Keweenaw Land Association . . . . . . . . . . . . . . . . . . 125,000 Mead Corporation . . . . . . . . . . . . . . . . . . . . . . . 125,000 Longyear Realty Corporation . . . . . . . . . . . . . . . . . 75,000 Inland Steel Company . . . . . . . . . . . . . . . . . . . . . 50,000 Vulcan Corporation . . . . . . . . . . . . . . . . . . . . . 35,000 Hoerner Boxes (Huss- -Ontonagon Division) . . . . . . . . . . . 30,000b Ford Motor Company (Fund) . . . . . . . . . . . . . . . . . . -- aSource: Company records, plat books, and personal estimates. bAll holdings are in the process of being sold. Combined, the above companies hold a total of 2,560,000 acres, or 23.6% of the land area of the Upper Peninsula. This is an area greater than Marquette and Chippewa counties put together--greater than the combined areas of Iosco, Alcona, Oscoda, Crawford, Montmorency, and Presque Isle counties. It is in the development and management of these properties that recent pragmatism has found some of its best practition- ers, and it is to the policies and problems of these firms that this thesis is dedicated. 38 Firm Policies Kimberly—Clark Corporation.--Kimberly—Clark manufactures wood fiber products. Management of their Upper Peninsula land involves sus- tained production for cellulose wadding, white papers, and allied prod- ucts-~the wood being shipped to pulp mills in Kimberly, Niagara, and Neenah, Wisconsin and Munising, Michigan; to the Appleton, Wisconsin and Munising, Michigan industrial products mills; and to the sawmills at Marenisco and Norway, Michigan. Of the total, 57% of production repre- sents sanitary wadding (including Kleenex tissues and Delsey toilet paper), 27% is white paper products (book and wall papers), and 16% in- cludes industrial wadding and cigarette paper. The company is engaged in extracting fiber trees and subsequent- ly making paper products at the lowest possible cost. Broad-based re- search is carried on. Secondary interest is shown toward community progress, land leasing, and free access to the hunter and fisherman. Cleveland-Cliffs Iron Company.--This firm is concerned with the mining, transportation, and sale of iron ore from the Marquette Range, and with the growing, milling, and selling of timber products. Subsid- iary Upper Peninsula lands include those of the Cleveland-Cliffs Iron Steamship Company, Superior Realty Company, lshpeming Mining Company, The Lake Superior and lshpeming Railroad Company (76.05%), lshpeming Ho- tel Company (68.07%), Marquette Iron Mining Company (53.76%), Arctic Mining Company (50%), Fox Cliffs Lumber Company (50%), Humboldt Mining Company (50%), Negaunee Mining Company (50%), Michigan Mineral Land Com- pany (50%), and the Upper Peninsula Generating Company (50%). Cleveland-Cliffs mines iron ore from open pit and underground formations, and manages continuous wood crops to supply its Hartho mill 39 and the open market. Extensive research is performed to reduce costs and find new technologies and wood uses. A strong emphasis is placed upon community welfare and area progress, in addition to leasing of cottage and home sites and providing free access to hunters and fisher- men. Calumet & Hecla, Incorporated.--Calumet & Hecla embraces the whole gamut of copper and lumber production. The company's diversified operations are separated into product divisions through which the land production is directed. The Calumet (mining) and Goodwin (woodlands) divisions control the use of Upper Michigan developments. The Calumet Division embodies all mining in Keweenaw and Houghton counties, as well as the milling and refining of copper shapes, tubes, and chemicals. The Goodwin Lumber Division manages Upper Peninsula tim- ber on sustained yield for products such as building lumber, finished hardwood dimension stock, faces, centers, Spliced veneers, and wood chips for the manufacture of prepared roofing and plastics. Subsidiary lands are those of the Torch Lake Canal Company, Keweenaw Central Rail- road Company, and the Lake Chemical Company of Michigan (50%). The two divisions collaborate to maximize profits in their re- spective markets. Research to reduce costs, innovate products, and in- corporate metallurgical technology is evident. Substantial efforts are also made for those involvements in community and area planning, leasing of lands for homes and cottages, and free access for the outdoorsman. United States Steel Corporation.--United States Steel is wholly integrated for the production of almost all varieties of steel. Manage- ment of their Upper Peninsula land includes: (1) extraction of dolomite at Cedarville to supply parent steel mills, (2) processing low-grade ores, 4O (3) treatment for sustained timber harvesting (for open markets), and (4) recreation leasing. U. S. Steel, like all companies, is a profit maximizer and is dependent upon directives emanating from Pittsburgh. Extensive research covering all phases of innovation, technology, and costs is institution- alized. Community interest is a secondary part of their program. All lands are open to hunting and fishing. Celotex Corporation.--Celotex is in the building materials in- dustry. Forests are managed on a sustained yield basis to provide the L'Anse, Michigan, plant with raw supplies for the manufacture of insula- ting fiberboard and fiberacoustical products, with certain lands re- served for vacation complexes. Research studies are expanding, and community involvement is a growing concern, as is leasing and free access for the hunter and fisher- man. Copper Range Compagy.--Copper Range is a copper and timber pro- ducer, whose Upper Peninsula subsidiary properties include the Champion Copper Company (inactive), St. Mary's Canal Mineral Land Company (in- active), White Pine Copper Company, and 90.3% of the Copper Range Rail- road Company, as well as vast timber holdings. Mining, milling, refining, and fabricating Ontonagon and Hough- ton county copper and, to a much lesser degree, the growing of sustained crops of trees constitutes Copper Range's activities. Cost reduction, new product innovation, metallurgical research, environmental control, and technology studies are carried on. Community and area betterment, sale and lease of land for homes and cottages, and free access for hunt- ing and fishing round out management perspectives. 41 Connor Lumber and Land Company.--This is a lumber company pro- ducing several end products. Management on Upper Peninsula land involves selective logging for its own Wisconsin, Wakefield (Michigan), and open market mills for such products as bowling pins, kitchen cabinets, floor- ing, and lumber. The company aims toward maximum profit from these operations and carries on limited product and cost research. Lands are open to hunting and fishing. American Can Company (Marathon Division).--American Can makes a variety of packaging items. Its Marathon Division manages Upper Penin- sula timber on sustained annual increments to supply Green Bay, Menasha, Ashland, Neenah, and wausau (Wisconsin) and Menominee (Michigan) mills with pulp. Specific wood-derivative products include a diversified line of paperboard carton blanks and printed wrappers used principally for packaging bread and other bakery products, ice cream, butter, cheese, oleomargarine, frozen vegetables, fish, poultry, fresh and cured meats, and a line of household and industrial products including Northern and Gala tissues, paper towels, paper napkins and wax paper. The Marathon Division is concerned with operating at a profit in the wood packaging industry, which operation includes controlled tim- ber cutting and research for reducing costs and developing innovations. Secondary measures, closely tied to preserving profit and image, involve appeasing the public by providing open hunting and fishing and, in rare cases, cottage access. Keweenaw Land Association and Longyear Realty Corporation.--These are holding companies, gaining profits on the royalties from mining, tim- ber production, and recreation. Policy comprises continuous yield 42 cutting plans, while mining strategy is left to the leasees. The companies spend appreciable time contriving ways of maxi- mizing royalties and promoting lease demand. Cottage sites are oc- casionally sold, and land is unofficially open to the outdoor sportsman. Mead Corporation.--Mead manufactures wood fiber products. Land administration entails continued yield for white paper (65%) and liner (35%). Specific products include letterpress, printing and publishing papers, bond and writing papers, bristol boards, menus, price lists, calendars, die-cut specialties, filing system bristol, office forms, post cards, currency grades, securities, negotiable forms, onionskin, manuscript, tracing grades, and a wide range of industrial papers. Paperboard items include corrugated and liner boards, laminated board specialties used in cigar boxes, furniture, and automobile panels. Ultimately, the thought is for maximizing market access and profit through production of fiber and paper at the lowest cost and highest quality. All phases of research are ingrained. Corporate re- sponsibility in local leadership is recognized, and all land is open to hunting and fishing. Inland Steel Company.--Inland is wholly integrated for the manu- facture of steel products, and responsibilities on Upper Peninsula prop- erties, which include a 50% share in the Michigan Mineral Land Company, are limited to iron ore production. Any activities concerning Upper Peninsula land must favorably affect Inland's Chicago plants and its position in the industry. Re- search covering many facets of business is well established. Secondary interest (profit-image oriented) is maintained for local and area prog- ress. Land sales are made for recreation and timber interests, and all 43 land is open to hunting and fishing. Vulcan Corporation.--Vulcan, like Connor, is a lumber establish- ment. Continuous hardwood crops are managed for the open market and for bowling pin, shoe fitting, flooring, and lumber mills. Vulcan, concerned mainly with making a profit on its lumber, does not have the extensive research program that the larger companies have, and lands are relatively closed to hunting and fishing. Hoerner Boxes (Huss-Ontonagon Division).--Primarily a packaging firm, Hoerner Boxes' Upper Peninsula land supplies the Ontonagon factory with material for the manufacture of corrugated containerboard and fab- ricated corrugated shipping containers. Hoerner's policy is geared to making profits in the fiber box industry. Research efforts are expanding, and secondary interest in community life is exhibited, as well as free leisure use of the land- scape. Ford Motor Company (Fund).--All of the old Ford timberlands, which once served to supply auto factories with wood needs, have now (very recently) been sold. Under the Fund, the policy was to dispose of these lands on the open market to firms which indicated an interest in sustained land management, and the funds from these sales were used for charitable, educational and research purposes. This land has always been open to hunting and fishing. CHAPTER IV COMPANY DIRECTIVES AND EXTERNAL FORCES CURRENTLY INFLUENCING MINING POLICIES Copper Companies The optimism expressed nationally for a resource so unevenly distributed as copper can have far different repercussions locally. Michigan copper production has gravitated toward two firms--Ca1umet & Hecla and Copper Range. Calumet & Hecla,jIncorporated.--The promising resource picture of the 1950's did not immediately erase the pessimistic attitude in Calumet offices. No doubt other regions were sharing a new confidence, but not the Keweenaw. The once voluminous local surface reserves were exhausted, and the feeling was, particularly with management, that Michigan's copper industry was in its closing hours. Termination plans were common topics; out-migration continued; cynicism thrived. What seemed the etchings of a sad but unmistakable demise were all but final- ized when a daring experiment was divulged. Copper Range Company made the statement that because of rising and projected continued demand for copper and because the company's Michigan operations were unable to supply this need, the company was going to gamble and make ready for operation a low-grade development on its White Pine property. The announcement was a revelation in the Copper Country. Exploration and research were stepped up throughout (.4 45 the area. In the meantime, Copper Range not only initiated the project, parlayed federal assistance, and finished construction, but indications were that the idea was no "fly-by-night." The jolt was enough to shock Calumet & Hecla to action. Neglected diamond drills were dusted off and again put to work. Indeed, all eyes focused on these tiny northern Michigan communities. By 1960, Calumet & Hecla, while not finding any major discov- ery, nevertheless was harboring a better picture for the firm's and the area's future, even contemplating expansion possibilities. In the woods and mines, Calumet & Hecla was again gearing up for industrial greatness. Progressive changes were evidenced in all fields--in min- ing, forestry, fabricating, research, image building, and in community promotion. For the Calumet firm the parochial past was ending, and in its place a new approach came face to face with a myriad of world inter- connections and potentials. William Davison of Calumet & Hecla's Woodlands Division noted that basic research is, and will continue to be, the impetus to the 1 He further stated that land firm's standing in the copper industry. will continue to be viewed as a necessary element in production, and consequently, land use policies must be farsighted. Timber for furni- ture veneering stock and construction lumber markets will be needed in increasing amounts, and cottage site leasing will undoubtedly be gaining momentum, especially (almost solely) along lakes and streams. One of the problems currently facing land use decision-makers is the disproportionate taxing of certain forested properties, which 1Interview with William Davison, Woodlands Division, Calumet & Hecla, lnc., February 3, 1966. 46 presents a hindrance to profitable timber production. Davison's per- sonal solution would run along the lines of county merger and school consolidation, with emphasis on the latter. Another problem is that of the rising pressures from recrea- tion, but Davison pointed out that these demands, if handled cautiously, can go hand-in-hand with the company's paternal history. Calumet & Hecla officials feel that the recreational pressure which they are experiencing is in its infancy compared to that being felt in northern Lower Michigan, and that in any case, most of their holdings are of un- desirable recreational value because of their interior nature (away from water frontage). On those Calumet & Hecla properties which do border water, Davison envisions several of the same problems which concern Michigan State University's Dr. Clifford R. Humphrys--spacing of cottages, reduction of scenic value, lake and river pollution. In- deed, Calumet & Hecla does not yet have adequate justification to scientifically study lake/river communities or to design and develop recreation complexes. While no bitterness exists toward public land officials, Davison did express the feeling that publicly-owned timber frequently competes with private trade, especially that of small firms. He stated, however, that Calumet & Hecla will expand efforts to control, purchase, and trade forest and mineral land. Mr. Randall Weege, Geologist with Calumet & Hecla, elaborated on the copper industry, its changes, and the operations of Calumet & Hecla.1 He supported the fact that the firm lives and breathes 1Interview with Randall Weege, Geologist, Calumet & Hecla, Inc., February 3, 1966. 47 research--the mainstay of any marginal firm such as the Michigan ones in an arena of such majors as Anaconda, Kennecott, and Phelps-Dodge. Indeed, Weege contends that conditions external to the Copper Country dominate all local existence. In discussing copper's competition from plastics and aluminum, Weege stated that although the threat is present, he does not feel these substitutes will wield a final blow to the Copper Country, to Calumet & Hecla, or to the mineral copper. Rather, he feels that copper uses will broaden along with those of its competitors, particu- larly in the formula paint, chemical, and fungicide fields, in addition to increased demand in the well established electrical and associated uses. Weege stated in conclusion that if Calumet & Hecla is to survive, it must be ultra-efficient, automated, integrated, and research-con- scious. Drilling must continue; labor costs must fall (via automation); costly labor stoppages must be brought under control; new products must be developed, and used metals recycled. Copper Range Company.--It was Copper Range which fostered new hope in the Copper Country. The experiment at White Pine eluded to above is a rarely paralleled demonstration of optimism. The rediscovery and development of the copper deposits in the White Pine vicinity date back to the early decades of the twentieth cen- tury. While official discovery occurred in 1845, the property didn't begin to produce until 1879 under the direction of the Cornish Captain Thomas Hooper, who soon ran into a financial drought. The property was later sold to Calumet & Hecla, which spent $2,000,000 on exploration and development after the turn of the century. Hooper's old shaft was sunk deeper and began yielding ore which ran as 48 high as 10% native copper. In a short time, three more shafts were put down, a 1,000-ton stamp mill built, and a railroad added. Between 1915 and 1920, more than 18,000,000 lbs. of native copper and over 200,000 ounces of silver came out of White Pine operations. As the price of copper dropped to around 11¢ per pound after World War I, less efficient concerns began shutting down. White Pine was one of these. Eventually, Calumet & Hecla put the prOperty up for sale, and in May, 1929 William Schacht, Copper Range Vice President, purchased it for $119,000 based on a confident theory that copper oc- curred in this formation in sufficient quantities to be of economic value. At the time, there was no way of knowing how to mine the rock cheaply enough to make it pay nor how to separate the valuable copper from the rock. However, Mr. Schacht had long felt that the key to the White Pine story lay in solving the beneficiation problem-~how to free the chalcocite in the milling process. This remaining White Pine orebody sold to Copper Range was not at all like the native deposits that occurred and were mined in the vein- type or so-called amygdaloidal and conglomerate mines. The mineralogy, or the assemblage of minerals that contain valuable elements, in the White Pine formation is so finely divided and so difficult to separate economically from the imprisoning rock that most companies would be un- willing to press for development. In traditional vein-type mines, the copper fraction was readily separated through specific gravity principles and jigging. The problem at White Pine, of course, was separating infinitesimally small copper 49 sulfide particles from a shale association. The direction that Mr. Schacht took was to grind the copper-bearing rock to the consistency of talcum and separate the copper particles via a flotation process. Geo- logical and metallurgical studies were undertaken shortly after purchase of the property. The depression, however, forestalled most activity un- til at least 1937. With the start of diamond drilling, ore became available for testing, and Michigan Technological University began laboratory investi- tions in 1938. More tests were carried on by American Cyanamid Company and by COpper Range at its test mill at Freda, Michigan. However, World War II further delayed work until 1946 when the Battelle Memorial Insti- tute was called in for laboratory work. Examination showed that, with very fine grinding, it should be possible to get 85% recovery out of 1% ores. Costs and waste disposal were yet unsolved problems. Concurrently, a mining method which could effectively be used in a sloping underground deposit had to be perfected. The development of roof bolts for holding up the roof of bedded deposits, the refinement of room and pillar construction, and the safe use of diesel engines un- derground enabled the White Pine effort to become increasingly feasible. With the outbreak of the Korean War in 1950, the country found itself short of copper, and the government requested Copper Range to in- itiate a study of developing the White Pine orebody. The results of past research were put to use at this time. Copper Range submitted a plan to produce 72,000,000 lbs. of copper annually. Following approval, the company received a construction loan of $67,000,000 under the Defense Production Act, to which it added $13,000,000 of its own. Actual 50 construction began in March, 1952, and the first shipment of copper came three years later. Mr. William Waara of Copper Range's Lands Division elaborated on his company's expanding horizons and neofcorporate viewpoints in much the same terms as did the Calumet & Hecla officials.1 Waara traced the developments of Copper Range's recent years and suggested that in- stallations such as that at White Pine will be the minimum operating scale in years ahead, the implication being that inflation will close the small mines. As an example of this inflation, Mr. Waara mentioned that taxes on some lands have risen as much as 386% in the last decade, and he, too, suggested a need for school consolidation in this connec- tion. According to Waara, Copper Range planning is done as much as ten years in advance. Among the matters which must be considered in this planning are the tremendous unpredictability and unavoidable cost- liness involved in diamond drilling and plant expansion. Although re- cent technology has reduced much of the work load, it has done little to temper labor demands or offset expenditures for heavy equipment, computers and other technical apparatus, and consulting fees. Large land tracts are considered managerial necessities for mine expansion, and in many areas recreation is receiving considera- tion on Copper Range lands, as are Celotex-like operations.2 While recreation possibilities are a recent consideration, there are other 1Interview with William Waara, Lands Division, Copper Range Company, February 13, 1966. 2The recreational policies of Celotex Corporation will be dis- cussed in Chapters V and VII. 51 more traditional issues, and one of the more controversial of these relates to public responsibility. It is Waara's belief--one shared by many, if not most, western Upper Michiganians--that some self-styled conservationists, in particu- lar the federal government, have been at odds at times with people and industry of the Upper Peninsula. Far from being anti-government or ultra-conservative, Waara argues that industry, the locality, and government can develop better rapport through social intercourse in- volving cooperation, frequent inspection and revamping, and through more localized decision-making. At present, however, he sees public agencies as often guilty of being misinformed, misguided, and generally lacking feeling for local situations. Accordingly, Waara stated in conclusion, many local people believe that uninformed, or at best mis- informed, bureaucrats have leveled some serious socio-economic blows at the Upper Peninsula. He included: (1) poor public relations programs of the Midhigan Department of Conservation with regard to deer manage- ment, (2) undercutting timber prices on public lands, (3) supersatura- ting the region with public recreation sites and other one—use areas, (4) destructive competition between the universities in area develop- ment. (Copper Range and many other Upper Peninsula firms would gladly support an all-university development effort, but they feel they have been forced to take sides.) External Forces Affecting the Copper Companies In considering the history of Michigan copper mining, it has been suggested by Gates, Benedict, Murdoch, and Hazard that the whole- sale importance of the Michigan position at any time, past or present, 52 has been set by external developments. Economics would not suggest any- thing radically different for the future, and the success of any policy adjustment will hinge on a firm's ability to properly appraise macro- economics. Michigan copper cannot be developed independently of the rest of the world. Its prosperity is bound up in the metropolitan market- place. Although a preview of future market developments is not possible, projections can be made which can provide industry with some benchmarks whereby policies can be structured. With the normal amount of reservation, Zimmermann, Landsberg, McDivitt, Steinmueller, and Hazard agree that Calumet & Hecla and Copper Range can expect increased demands for copper. In the electrical and associated automobile and durable products fields, copper will hold its own against encroaching substitutes and find new adaptations, given con- tinued exploration and inventive research. Another projection centers around vertical integration. Regard- less of certain vendettas against them, the ”General Motors-type” organ- ization is almost an economic necessity in the complex, costly, image building, advertising, twentieth-century enterprises. Two factors alone-~tremendous advertising costs and the frequently changing whims of the consuming public--are conditions which a multitude of tiny firms could not long handle. Government intervention and viewPoints will be the hardest to predict and adjust for. A long-term trend, suggesting no reversal, is evident in which the power of government to intervene in private affairs is increasing. The copper industry, as all others, can expect closer scrutiny over long-term commitments and mergers. 53 Iron Companies Like copper, iron ore and its derivative, steel, received endur- ing consumer claims after the Second World War. Once again a unique modern saga surrounding the Michigan firms transpired. Cleveland-Cliffs Iron Compapy.--As the 1950's waned, Cleveland- Cliffs and the whole Michigan iron ore industry were riding the brink of industrial breakthrough. Deep shaft mining was being replaced by beneficiation and pelletizing of open pit low-grade magnetic ores, and the reason for the change was economic. The underground direct ship- ping ores were disappearing and had become far more costly to produce than the beneficiated ores mined by the open pit method. The steel industry overwhelmingly accepted the newly perfected processes for the beneficiating and pelletizing of low grades. The next question concerned which ores should be developed. In essence, all iron-bearing formations are now known to be amenable to beneficiation, which can be achieved through either chemi- cal flotation or magnetic separation. However, separation of magnetic ores--chiefly taconite, Fe304--is far more economical than heavy media concentration or chemical flotation treatment of non—magnetic ores--the lower-grade hematites, Fe203. Consequently, industry turned to tacon- ites. Even more important than the availability of 30% iron taconite ores close to the surface, and even more critical than the downturn in the availability of high-grade (55%-60%) hematites, was industry's preference for pellets over shipping ore. Here again, the reasons were financial. Open pit mines require about one-third of the manpower re- quired for an underground operation. In addition, equivalent 54 beneficiated pellets can be manufactured into steel alloys in about one- third of the time needed in the most efficient processing of high-grade, unpelletized ores. Consequently, both at the mine and in the steel mill, the new process could be accomplished at considerably lower cost. Special qualities of the pellets also make them preferable to iron ore. Pellets are uniform in content (68% iron), heat-treated to retain structure while stored or in transfer, and low in moisture (less than .5%). By contrast, high-grade ores vary in iron content (55%-60%), are ununiform in structure (the fines being susceptible to blowing while in transport or in inventory), and are high in moisture (8%-10%--one rail car of water per ten cars of ore). These attributes of pellets, therefore, ushered in the low- grade enterprises fortunate to have control over magnetic ores close to the surface. With the Upper Peninsula's sizable store of both mag- netic and non-magnetic reserves, the handwriting was on the wall. The Gogebic and Menominee Ranges, basically non-magnetic, gradually closed. The Marquette, bearing a sizable magnetic lode, was revitalized. Cleve- land-Cliffs stood to gain the most. Mr. Melvin Johnson, Manager of Cleveland-Cliffs Upper Peninsula mines, discussed the fact that Michigan iron mining has become a multi- firm decision-making effort.1 Due to the tremendous costs involved in beneficiating facilities, several interlocking firms have developed. The Humboldt Mining Company has become a 50-50 affair between Cleveland- Cliffs and the Ford Motor Company; the Empire involves interests of Republic Steel, International Harvester, and Cleveland-Cliffs; the 1Interview with Melvin Johnson, Woodlands Division, Cleveland- Cliffs Iron Company, January 13, 1966. 55 Michigan Mineral Land Company includes Inland Steel and Cleveland- Cliffs. I With regard to general company programs, Johnson stated that as an iron ore merchant, Cleveland-Cliffs retains a product outlet through long-term contracts with steel manufacturing or fabricating companies. As the ties to these manufacturers vary in strength, so does the degree to which Cleveland-Cliffs policies are dependent on them. While this complex relationship presents nominal problems dur- ing extended or rising booms, Cleveland-Cliffs market access is ques- tionable at best during periods of prolonged recession or when steel demand falls off independently. Although iron trade is paramount, there are other interests and problems of consequence. In 1962, Cleveland-Cliffs opened the Hartho Sawmill near Munising--the largest in the Lake States--and with it the company announced an intensive forestry policy, including con- tinuous forest inventory programs, product and marketing studies, and research cooperation with the Forest Service. Mr. David West stated that the Hartho project has given Cleveland-Cliffs further control over woods markets and has expanded the company's diversification.1 Prior to the opening of the mill, all timber from Cleveland-Cliffs land had been dumped on the open market via jobber contracting, and before the 1920's timber was either burned, removed for use in the mines, towns, and as a fuel in pig iron production, or was not cut at all. Both West and Johnson concurred that only recently has the company seriously recognized the multi-nature of land products and particularly the poten- tial of timber. 1Interview with David C. West, Chief Forester and Assistant Man- ager, Cleveland-Cliffs Iron Company, February 7, 1966. 56 With regard to problems currently facing management, both Johnson and West mentioned certain high-tax townships as posing a hindrance to wise forest planning. Their solution, as heard else- where, 1ies in school and township-county consolidation. Low stump- age rates on Forest Service cuttings also threaten the private land entrepreneur. As is the case at Copper Range, the general feeling of Cleveland-Cliffs officials is that public policy concerning industry is seriously impaired by bureaucratic red tape and misunderstanding, including the public's misconception of the ultimate motives of busi- ness. Looking into the future, Messrs. Johnson and West envision Cleveland-Cliffs cautiously expanding pelletizing as market indices delineate the best timing. A number of additional goals are expected to materialize also, such as a program for finding suitable manufac- turing processes and markets for fiber products from predominantly cull hardwood species (a problem shared by the entire Upper Peninsula which has been a source of wood resources for Wisconsin for years, while its low-grade hardwood resources have gone unutilized and un- managed). There is also an expectation of increased demand for outdoor recreation, including Celotex-type developments, and it is probable that Cleveland-Cliffs will cooperate in relinquishing certain land for the Pictured Rocks Lakeshore project. They will, however, continue expanding other buying (present acreage is mostly in Alger and Marquette counties), will delve into tax revision, and continue to expand research and product development, as well as area promotion. 57 United States Steel Corporation.--Outside of Michigan, U. S. Steel has a commanding hold on raw material supplies. Dr. Walter Adams of Michigan State University's Economics Department has even suggested in his lectures that the ebb and flow of all steel is a function of this one giant. In Michigan, however, U. S. Steel's mines are at rest. Indeed, U. S. Steel's relevance in the Michigan mining picture has not been great, due chiefly to the fact that the company's lands do not en- joy the same strategic location in the magnetic ore formations as those of Cleveland-Cliffs. For many years, U. S. Steel operated underground iron ore mines on the Gogebic, Menominee, and Marquette Ranges. The soft ore of these mines required substantial quantities of timber products (principally hardwoods) for the support of underground workings. Consequently, tim- berlands were acquired and forested to meet the needs of these opera- tions. Later, as mines were exhausted and operations reduced in number, the excess timber was marketed to the public. From solely mining operations, then, the company's Michigan ac- tivities have shifted to sustained yield forestry administered by pro- fessionals. Substantial quantities of sawtimber, pulpwood, and other products are sold each year to local wood industries and loggers, pro- viding a stable source of local employment. In addition to the forestry management, the corporation produces considerable quantities of dolomite annually from the Cedarville property. U. S. Steel generally opens its lands for normal recreation use and has leased land for cottage colonies. At corporate headquarters in Pittsburgh, there is a continuing, well-defined research division cov- ering all aspects of mining, steel making, and product development. 58 Commenting on the future, A. F. Kimmel voiced the opinion that U. S. Steel will continue in the business of timber production, will work toward developing commercially feasible techniques for processing non-magnetic low-grade bearing materials from the Michigan properties, and will study recreation pressures and their significance on private industrial lands.1 Kimmel added that the most important problem loom- ing on the horizon is probably the risk of fires and other damage that may result from the increasing recreational use of forest lands. John Lake of U. S. Steel's Woodlands Division touched on some of the local situations, remarking that all large Upper Peninsula land— owners have a difficult time acquiring and keeping both a national and local image.2 One of the ways in which his company is trying to combat this problem is through establishing friendly relations with potential and actual cottage leasees. Mr. Lake also decried the disproportional taxes and listed certain townships (one-room schools) as the primary culprits. He, too, cited the disparaging forest fires as another local problem. As with other Upper Peninsula landholders, Lake mentioned that U. S. Steel lands are constantly being bought, sold, and traded. Allusion was also made to the building of a more intensive forestry program to include a closer watch over Species control and other stand improvements. In closing, Mr. Lake emphasized that all U. S. Steel policy regarding Upper Peninsula land use is ultimately made in Pittsburgh, and these policies, together with governmental actions, economic 1Letter from A. F. Kimmel, Manager - Financial & Labor Cost & Statistics, United States Steel Corporation, December 22, 1965. 2Interview with John Lake, Woodlands Division, United States Steel Corporation, January 13, 1966. 59 cycles, and consumer peculiarities, always return to affect that land in some way. Inland Steel Coupapy.--Like U. S. Steel, Inland once operated on all three Upper Peninsula iron ranges, but today has no active mines in the state. Present commitments are those linked with the cooperative beneficiating and pelletizing efforts managed by Cleveland-Cliffs. There are immediate hopes, however, to develop additional beneficiating housings on Upper Peninsula lands owned by the company. In expanding on this, Mr. Ray Satterly stated that Inland historically has stood by a standard of producing steel and iron ore at the lowest practical cost.1 Inland's operations have involved development for iron ore ex- clusively. Whenever a party has shown an interest in a parcel of Inland property for timber or recreation, the land in question has generally been sold, provided the geology indicated no mineral prospects. Satterly, as well as Philip Pearson and Donald Tripp, indicated a keen awareness of today's high-strung technology in the iron ore busi- ness.2 Satterly went so far as to say, "we don't even know what's going to happen by tomorrow morning. The mines, industry, economy, or tech— nology can reveal an entirely different setup just over night, but whatever the state of affairs, we will do our best to make steel." Addressing themselves to current and future issues, high taxes on certain holdings were mentioned, and Don Tripp noted that Inland has been considering selling marginal properties, but market reluctance and Interview with Ray Satterly, General Manager - Ore Mines, Inland Steel Company, January 13, 1966. 2Interview with Philip Pearson, Manager - Ore Mines, and Donald Tripp, Lands Division, Inland Steel Company, January 13, 1966. 60 the chance of iron ore discovery have put off major transfers. Once again, school consolidation was suggested as a solution to some of the tax burden. Mr. Tripp also suggested that Inland may consider ini- tiating a logging program (jobber contracted) to justify holding ex- cess land. Estimates of timber growth and total wood volume are currently being collected and evaluated. In another frame of reference, the three Inland officials ex- pressed the thought that all local mining has been, and is expected to remain, relatively cooperative, that working conditions have been good for many years, that mining technology will probably always involve highly speculative and mysterious elements, and that Inland Steel will continue innovating products, taking part in community programs, leas- ing land, and producing steel. In their last remarks, they stressed that public agencies suffer from bureaucratic ills, causing community development efforts in most of the Upper Peninsula to be shackled by competition between the bureaus. Yet they feel that the company stands to lose a great deal if it fails to stand by the community and cooperate in area promotion, particularly in rural Michigan. External Forces Affecting the Iron Companies An overview of the Michigan iron industry is a mirror image of copper. Steel production, and therefore iron ore extraction, is a ba- sic ingredient of capitalism--an ingredient that partakes of 95% of all minerals produced. What happens in depressions, in booms, in nadirs and zeniths, and in war and peace alike is affected by, and is sometimes controlled by, steel. In this interplay, the Upper Peninsula is a pawn in the hands of the giant decision-makers pontificating in Pittsburgh, 61 Chicago, Detroit, Youngstown, Wheeling, Toledo, Gary, and elsewhere. Good or bad, all action concerning steel has its impact on the Upper Peninsula. What can such a powerful industry exPect in the future? Even more than copper, the iron and steel producer, because of sheer size, is liable to receive more of what Dr. John L. Hazard calls "government leaning" (antitrust investigation). However, it should be realized that steel is necessarily in the heaviest of investment categories--one that necessitates a considerable agglomeration of men and equipment. Any thought of breaking up the industry must rest upon clear understand- ing of scale economies vis-a-vis monopolistic coercion. The current acceptance of, and apparent long-term investment in, beneficiated low-grade ores, as well as the financial advantages in- volved, suggest the permanence of an industry based on such ores. It follows that continued research and development by the three Michigan companies would be a wise move. Corporate integration is imperative for the future. The clam- orings for more merging and diversification are rising. U. S. Steel, Inland, and Cleveland-Cliffs are enlarging land uses, programs, and products; Cleveland-Cliffs is extending its ties closer to its buyers; all firms are entering into cooperative ventures. CHAPTER V COMPANY DIRECTIVES AND EXTERNAL FORCES AFFECTING TIMBER POLICIES Timber Companies A third category of primary resource landholders also exper- ienced changing postwar emphases. Like the mining industry, this group has had close ties with the land. These are the timber companies. Kimberly-Clark Corporation.--Kimberly-Clark, the largest single private landowner in Upper Michigan, is recognized as a national brand in paper products. A significant amount of the raw material for their diversified product line comes from Michigan properties. From.Mr. Ruben Greiwe of the Champion, Michigan, office it was learned that Kimberly-Clark is in the midst of a somewhat confusing and uncertain transition away from the open market connections of the past, away from the saw-log market, and toward short-term harvesting.1 According to Greiwe, the major problem facing Kimberly-Clark research- ers at present (and all paper-allied industries dependent on Michigan raw materials) is the question of which tree species and age-classes will emerge as the prime constituent of the fiber market. Whether it will be primarily aspen, or only 30-year low grades, or just any size- species no one knows. One thing that is certain, however, is that the 1Interview with Ruben Greiwe, Woodlands Division, Kimberly-Clark Corporation, January 14, 1966. 62 63 vast stands of low grades and cull hardwoods must somehow be incor- porated into the new markets if the land is to remain amenable to future managerial adjustments. At present greater amounts of low grade hardwoods are being accepted at Kimberly-Clark mills, and it is hoped that more of these trees will be cropped in the future. High freight rates impose ponderous restraints on Michigan tim- ber, and in this connection Kimberly-Clark is expanding its truck haul- ing capacities. However, Greiwe stated that the major cost-cutting problems lie with labor--particularly insurance benefits. He feels that industry's answer must be total automation of the chain saw, si- multaneous incorporation of tree harvesters, and a resulting drop in the required labor force. In this manner, a timber company could employ a smaller, mechanized harvesting crew at high, competitive wages, but this point in time is probably another ten or fifteen years away. Turning to the future, Greiwe noted that forward planning will include, in addition to labor-cutting automation, the necessity for fiber management, product development, and tax amelioration, as well as recreation planning including studies of Celotex-type programs. Compe- tition from cutting on Forest Service properties, in addition to the corporation's long-standing interest in area progress are other concerns, and Greiwe emphasized that these will fall more and more into the laps of trained professionals rather than on the self-made logger of the past. Regarding the possibility of building a large, integrated paper mill in the Upper Peninsula, Mr. J. B. Millar concurred with Mr. Greiwe that a multitude of elusive elements would have to enter into any such 1 . decision. Factors such as pollution abatement costs, transport costs 1 Letter from J. B. Millar, WOodlands Manager, Kimberly-Clark Corporation, November 23, 1965. 64 for additives, power costs, labor demands, freight rates, construction costs, and Kimberly-Clark's success in penetrating new markets and/or expanding old ones with a broadened product line would have to be con- sidered. Much of this information is either quite elusive, such as labor demands or the ability to penetrate new or expand old markets, or is unavailable, such as pollution abatement costs. With this in mind, and not believing that the market is ready for such a calculated risk, they are withholding any haphazard decision. Celotex Corporation.--In 1956, the Celotex Corporation acquired 185,000 acres of fee timberlands and 57,000 acres of timber cutting rights in Baraga and Marquette Counties from the Ford Motor Fund for approximately $6,800,000 to serve as a reservoir of raw material for the insulating fiberboard plant at L'Anse. This was the beginning of a captive land resource base. All of the properties acquired from the Fund had been unman- aged and uncut since Ford closed the Upper Peninsula mills and turned the land over to the Fund in 1953. Most of the timber was remote and in very poor shape when sold, but Celotex has since tried to change the tempo of management. Since the property contains hardwood logs, softwood pulpwood, and other forest products far in excess of the L'Anse mill requirements, a separate division was established to operate the timberland. In this program, Forest Manager, Lynn Sandberg, noted that about 12,000,000 feet of sawlogs and 25,000 cords of pulpwood other than aspen have been har- vested and sold to Michigan and Wisconsin customers.1 Added to this 1Interviews with Lynn Sandberg, Forest Manager, Celotex Corpora- tion, November 19, 1965 and February 17, 1966. 65 has been an annual cut of 30,000 cords‘of aspen pulpwood for the L'Anse plant. The new division has also platted and/or developed several miles of lake and stream frontage for sporting uses. Some of the improvements include power lines, water mains, gravel roads, and the construction of shell and completed houses. Among the problems confronting Celotex, Sandberg explained that forest product prices have been on a plateau for over fifteen years, while production and living costs have escalated over the same period, shrinking profit and stumpage margins. Variations in taxes from town- ship to township add another drag on profits. As an example, Sandberg noted that in the last decade real estate taxes have trebled and quad- rupled in many townships where company lands are located. In the same time the price of spruce and balsam pulpwood has dropped 25%-40%, and the price of hemlock and hardwood remains the same as or less than it was in 1950. Contemplating the future of Celotex, it is clear that efforts will be made to abolish the township form of government and increase the shifting emphasis to low-grade hardwoods. Lake pollution control, now also threatening profits, will have to involve some form of cost- sharing; product research and development will be a necessity; woods labor will be replaced by machines. Recreation may provide a quasi- panacea for some of the tax problems. In this regard, Sandberg indi- cated the company's interest in year-round recreation. Projects along the lines of Stowe, Vermont, and Sun Valley, Idaho, have received some serious pondering. 66 Connor Lumber and Land CompapyK--Connor has been in Northern Michigan woods operations since 1872. Over the years it has acquired nearly 150,000 acres of land primarily in Gogebic and Ontonagon Coun- ties, and in January, 1966, acquired 50,000 acres of Ford Fund lands in.Marquette and Baraga Counties. In the early days high-grade log- ging was commonplace. Pines and hemlock and later the best hardwoods fell. Signs of sound forestry appeared about thirty-five years ago, estimated President, Gordon Connor.1 Gradually the company has gath- ered in considerable physical assets in the Great Lakes lumber indus- try, presently including a staff of foresters, growth and cut studies, and market research. Yet, Connor is just pioneering. The land recently acquired from the Ford Fund will add consid- erable stability to resource reserves for the growing market for Connor products, which include juvenile furniture, pre-finished kitchen cabi- nets, maple flooring, interior trim, and hardwood lumber. Lately, the annual cut from Connor land has not been nearly enough to satisfy cus- tomer demands. Connor officials feel that the Ford properties will not only ease the urgency of this situation, but will enable the company to expand their markets. The land, according to Connor, is a medium for sustained crops of trees, as well as for recreation pursuits, with the high quality tim- ber growing sites receiving the best cultural treatment, and the lake and stream frontages and top hunting lands the most recreators. The uses and demands are so varied that abrupt differences are noticeable from one side of a road to the other. 1Correspondence from Gordon Connor, President, Connor Lumber and Land Company. 67 In the future, Connor hopes to broaden management on a greater share of the land (a problem of extending profit and cost margins). A new product sales division will be opened at wakefield, Michigan; mar- ket and product research will continue; more wood-use machines will be installed; efforts will be made to reduce the adverse effects of real estate taxes, and even more land will be sought. American Can Company (Marathon Division).--ln June, 1957, American Can purchased the assets of the Marathon Corporation, and with it their Upper Peninsula lands in Iron, Baraga, Gogebic, Ontonagon and Menominee Counties. Both companies had been in the wood pulp business, and the acquisition allowed American Can to broaden its base in the wood packaging field. The company then launched into sustained yield and multiple-use forestry, assured of a means of better control over often insecure primary markets. In the very early years before Marathon owned the land, the 1800's, most of the pine had been cut, and the remaining timber was either burned, used in the early mines, or some was left standing. Con- sequently, these pioneer firms had to cope with a regrowing forest, old growth culls, and lack of economic freight rate structures. As a result, the best and more accessible timber sites had been treated more inten- sively than remote, poor quality ones. Robert Burke of the WOOdlands Division related that continuous harvesting is presently and will continue to be American Can's proce- dure on the Upper Michigan lands.1 Cut timber, all contract logged, goes both to American Can's own mills and to the open market, but implying a 1Interview with Robert Burke, Manager, Lake States WOodlands, Marathon Division of American Can Company, December 14, 1965. 68 "one-log silviculture," Burke noted that greater general trend toward shares of future harvests will go to company packaging mills. Among current important issues, Burke cited the "ridiculous” freight rates as being a resounding blockade to sound forestry. Like- wise, American Can is distressed over increasing government ownership of forest lands, resulting in a depletion of the tax base and a shift- ing of same to the private landowner. Future plans undoubtedly will entail efforts to reduce labor requirements through automation. This--a goal common to all forest industries--is believed necessary to offset high logging costs, to bypass workman's compensation, and to instill efficiency and multiply profits. American Can's trial of the southern pine harvesting machine has the rest of the nation's wood industries watching. Another dilemma concerns the handling of tourism and wilderness advocates. While most company lands are not on highly preferred water routes, pressures are increasing nevertheless. To date, however, Ameri- can Can has not considered planned recreation as part of its business. Burke concluded on a note of optimism, noting that the packaging industry has a future with many opportunities for creativeness still open. He feels that the raw material end of the business has much matur- ing (i.e. better management) ahead, and that such progress will lead to a better packaging product for the consumer. Other forward plans will also be those common to the woods industry: augment innovation, reduce real estate taxes, cut more low-grade trees, step up improvement cutting, reduce hand labor, and advertise. Hoerner Boxes (Huss-Ontonagon Divisiop).--The Muss-Ontonagon Mill Division of Hoerner Boxes purchased 30,000 acres of Ontonagon 69 County lands, mostly from the Lake Superior Lumber Company, in 1950. Much timber had already been removed in the 1930's and 1940's, but some of the poorer land was not out too heavily, and there has been no cutting since. The division, which is not presently cutting, expects to start selecting in about five years, estimating 25,000,000 feet of hardwood, 150,000 cords of hardwood pulpwood, and 50,000 cords of hemlock, spruce, and balsam pulpwood. Present capacity comes from.jobber contracting on other industrial lands, including properties of the Copper Range Company. Edwin J. Reynolds, Woodlands Manager, mentioned that the area is used heavily for hunting and fishing and will continue to be under mul- tiple options.1 Mineral resources have not been developed, but accord- ing to Reynolds there is thought to be a large copper deposit. Reynolds presumes that the land will be used primarily to grow timber (an excellent northern hardwood site). It was also intimated that leisure uses will rise, that taxes must become more equitable, that woods automation will be forthcoming, and that pollution control will become an increasing problem. 'Ultimate policy decisions, dictated by the vicissitudes of the container market, will come from Hoerner headquarters in St. Paul. Mead Corporation.--Robert E. Schmeling, Division Woodlands Man- 2 In ager, described Mead's Escanaba Division forest land ownership. the mid-1940's the timber mills at Escanaba and the one at Manistique were bought. Along with the latter (Manistique Pulp and Paper Company), 1Interview with Edwin J. Reynolds, Woodlands Manager, Hoerner Boxes, Inc., Huss-Ontonagon.Mill Division, November 26, 1965. 2Interview with Robert E. Schmeling, Division Woodlands Manager, Mead Corporation, November 19, 1965. 70 there was gained an acreage of forest land being held by the mill under fee simple and timber permits dating back to the 1920's. Upon assuming management of the mills, Mead immediately launched a program to purchase additional forest land and at the same time acquired the fee simple rights to the lands previously held under timber permit. In 1951, after transferring title of the forest lands held by the Manistique mill to the Escanaba mill, Mead sold its interest in the Manistique mill. The total acreage of forest land owned by Mead, pri- marily in Delta and Schoolcraft Counties, has since been administered from.Escanaba, and Mead has continued to purchase raw material timber- land over the years. In 1947 Mead initiated a forest management program on its Upper Peninsula holdings. Initially it consisted of a 10% inventory from which a management plan was prepared and placed into effect in 1950. In 1958 permanent sample plots for continuous forest inventory were es- tablished, and in 1963 the first measurement of these plots was com- pleted. The mineral rights on most of Mead's properties are reserved to previous owners. Consequently, its mineral interest is limited. Regarding the future, Schmeling stated that the main use of the land retained by Mead will be production of forest products (mostly softwoods). He feels that recreation may take precedence over timber on a portion of the property, but as he suggests, "Many forms of rec- reation will be compatible with timber production, and the two will go on uninterrupted on the same acreage." Mead's lands are open to hunt- ing and fishing and whatever recreational use can be made of them in their present form. There is insufficient margin in owning forest land, 71 Mr. Schmeling believes, to provide any‘extensive recreational develop- ments like trailer parks or boat ramps free of charge. Any of Mead's lands having particular recreational value would likely be sold to ex- perienced interests, as Mead's business is paper rather than recreation. Problems that have been a source of concern to Mead are those of marginal returns on forest products and real estate taxes. In Schmeling's words, "Taxes on forest land can be proven to be out of balance with many other types of real estate in relation to ability to pay the taxes from monetary returns from the land." Finally, according to Schmeling, forest land is being more and more threatened by single purposes, such as rights-of-way, restricted park and wilderness areas, and industrial and residential developments. Vulcan Corporation.--Vulcan was incorporated in June, 1928, at which time the assets of the Vulcan Last Company (1911) were acquired. In the 1930's and early 1940's much of the timber was "high-graded," leaving the culls standing, and in the late 1940's a program of sus- tained timber management was launched. From 1953 to 1964 mergers in- volving last companies, several mills and properties were concluded. Since the mid-1950's Vulcan's market has been broadening--bowl- ing pins, shoe fittings, furniture, flooring, boxes, and lumber. When allowable cuts began falling short of promised contracts, Vulcan re- sponded by seeking new timberland. The recent Ford sale to Connor, Vulcan's chief competitor, came as a severe blow to Vulcan and to Stanley Shebuski, Vice President, for l he likewise wanted the property. However, while Connor was dealing 1Interview with Stanley Shebuski, Vice President, Vulcan Corpora- tion, February 17, 1966. 72 with Ford, Vulcan had been negotiating for several years with Philip Christiansen, one-quarter owner of the Sylvania tract. The deal was nearly finalized when the federal government stepped in, and since the latter's appearance on the scene, no transaction has been agreed upon. According to Shebuski, Christiansen surreptitiously intimated that he would be happy for Vulcan to have the timber, and he, Christian- sen, would then reserve most of the plats around the Sylvania lakes (thirty-six in number) on which he would construct and sell summer homes. In Shebuski's words, "Under Christy's plan, Vulcan would have the needed timber reserves, Christiansen would have the real estate and construc- tion businesses, and the county and communities of Watersmeet, Marenisco, and Ironwood would have the increased tax base and tourist and service business." Christiansen's only obligation, clarified Shebuski, is to appease the Fisher heirs, three-quarters owners of Sylvania, who have no preference as to what happens to the land in the future. At the same time, it might be added, Christiansen would like to increase his busi- ness, and the private arrangement was clearly a design pleasing to him and to Shebuski. I The Forest Service argues that Sylvania is a unique wilderness area not to be lost to private enterprise. In effect, the Forest Ser- vice would like control of the disputed parcel to develop a recreation complex including roads, trails, campsites, and scenic lookouts--and still cut timber for the open market. Vulcan's counterargument proposes that the region already has enough public wild land--semiwi1dernesses in the Porcupine Mountains, Isle Royale, and Tahquamenon Falls. Furthermore, the private arrange- ment would boost the local economies significantly more than the Forest 73 Service plan. Besides, the Forest Service would change the area consid- erably--enough to destroy any wilderness aspect therein. The private arrangement, on the other hand, would provide public access on some of the lakes. Most important, Vulcan's position in the very competitive woods industry would be seriously threatened if the additional raw mater- ial could not be procured. Clearly the transaction is most crucial to Vulcan. Expansion, designing, innovation, tax pressures are and will remain in doubt until some definite action is taken regarding Sylvania. So vital is this problem that Mr. Shebuski confided that a greater share, if not all, of the company's operations in Michigan could terminate if the appeal is lost. Said Shebuski, "Connor will get all of our customers unless we can supply timber at the right time and in the amounts they do. Remem- ber, they have 200,000 acres, and we have 36,000." External Forces Affecting the Timber Companies Again externalities dominate the interplay of natural resources. What may happen to the Upper Peninsula timber industries will not be the result of home construction in lshpeming, aspen growth on Celotex lands, Mr. Shebuski's success with the Forest Service, management on Kimberly- Clark's 450,000 acres, or Connor's newly gained wealth, but rather from all kinds of interconnections--business and otherwise. A change made in Milwaukee results in changes in many other places, including the Upper Peninsula, and the industry must be ready and equipped to adapt to them. They must innovate products and machines, incorporate greater markets, advertise, and plan for the unexpected. Few directives seem positive, but some are more predictable than others. Lee M. James, Forest Economist, and Aubrey Wiley, Wood Product 74 Specialist, suggest that timber products as a group will gain increas- ing per capita use, especially plywood and veneer, wood furniture, and papers. It is also professed that automation, slow to invade the wood harvesting industries, is imperative for survival. Finally, it is be- coming abundantly clear that the leanings toward corporate and product integration are not peculiarities or accidents of the industrial world, but are pragmatic adjustments to cost economies devised by knowledge- able businessmen and must, therefore, gain support by the rather inde- pendent and conservative woodsmen. CHAPTER'VI COMPANY DIRECTIVES AND EXTERNAL FORCES AFFECTING HOLDING COMPANIES Holding Companies Indirectly the holding companies have influenced the long-term consumption of Upper Peninsula resources. For several decades these developments have benefited stockholders, exploiters, and consumers alike. However, since about 1950, the departure into low-grade iron ore processing (the primary resource royalty) has considerably reduced the economic importance of the holding group. Also worthy of special mention are the expansive Ford lands, which at one time were very pro- ductive, but have since been sold to other firms. Keweenaw Land Association-Longyear Realty Corporation1.--The 400,000 acre land grant to the Portage Lake and Lake Superior Ship Canal Company gave Raphael Pumpelly and later John M. Longyear jobs exploring the land. Each man selected odd numbered sections on the grant lands in the western Upper Peninsula--Gogebic, Ontonagon, Iron, and Houghton Counties--as payment for the building of the canal, and in the course of surveying they looked for iron ore and/or white pine values, other uses being considered unimportant. The Canal Company's early operations 1Because of the identical relationship that Pumpelly and Long- year had with the Portage Lake and Lake Superior Ship Canal Company and because the two companies have developed interconnecting directorships, both are considered under one heading. 75 76 were meager. Consequently, it was soon reorganized with backing of eastern capital and renamed the Keweenaw Land Association, taking in all the Canal grants as of 1909. Longyear, himself, parlayed a fortune while exploring for the Portage Lake and Lake Superior Ship Canal Company. In his wanderings he purchased numerous government (even numbered) sections and acquired parts of the Fort Wilkins to Fort Howard Wagon Road grants-~all these lands together later forming the bulk of the Longyear Realty Corpora- tion. Although Pumpelly and Longyear played crucial roles in land transfers and iron ore discovery, they are primarily remembered as still blazing trails in the back woods fighting flies, mosquitoes, and bears and living a lost and lonely life while huge corporate structures rose all around them--those of Rockefeller, Carnegie, Pickands-Mather, etc. The economic contributions of these two Paul Bunyon types were consider- able, however. Both the Menominee and Gogebic iron ore bonanzas were in some part on.Keweenaw and Longyear land. Keweenaw-Longyear stockholders, management, and board of directors were truly iron ore conscious for many years. As holding companies, their incomes came from.the mine royalties contributed by various leasees. Recent mine shut-downs have been staggering to management and stockholders, and only recently has there been an attempt to concentrate on timber assets. In the 1930's and 1940's, under tax pressures and those of in- terested buyers, a large portion of the lands were sold to wood using industries. All land sales were terminated in 1950, and since that time the accent has veered in the direction of timber. Logs and 77 pulpwood are contracted to Michigan and Wisconsin mills, according to Mr. Peterson of the Marquette office.1 A skeletal professional staff plans timber sales and annual cutting units, but conducts little field improvement work. As Peterson implied, falling profits have had a down- ward effect on the scale of management believed necessary for the land. With the exception of the Groveland (Menominee Range) lease to Hanna (National Steel) and a few cottage site options, the holding companies are relying entirely upon timber sales. Pondering Keweenaw-Longyear's future, Peterson expressed bitter regret over rising taxes. He also mentioned a hoped-for spread of bene- ficiation to the Menominee and Gogebic Ranges and a need for expanding roads into interior timber cutting areas. The projected rise of recrea- tional demands and the need for consolidation of properties (alternate sections being hard to manage) are also receiving current consideration. Indeed, the holding company portrays a dubious destiny. Ford Motor Company (Fund)2.--The founder of the Ford Motor Com- pany was a pioneer land investor. Mr. Ford's activity in the north did not come as a surprise to anyone, for it was largely a manifestation of his love for rural settings, but he did not become really interested in Upper Peninsula land until 1919 when he requested, through the land agents, a large block of timber and mineral areas, "big enough to create a permanent supply." Soon his dream came true. In 1920 E. G. Kingsford, a real estate agent from Iron Mountain, found such a tract-12i21447 acres belonging to the Michigan Iron and ..-;- ,.~_-.- - ..."...- 1Interview with Mr. Peterson, Forest Manager, Keweenaw Land Association, February 4, 1966. 2Historical background from Henry Edmunds of the Ford Archives and Raymond Kooie, Director of the Fund lands. 78 Lumber Company. Kingsford informed Ford who consummated a deal late that year. Immediately upon purchase, Ford formed a subsidiary com- FF‘ win“. _. _ pany, the Michigan Iron, Land and Lumbeg;gompahyfi which took over all w... ...-nu.— --.-__—. activity in the Upper Peninsula. Not to lay idle, the land was quickly segregated into timber cutting units, and by November, 1921, the Rouge Plant in Dearborn was receiving regular shipments of lumber for auto body assembly. The first sawmill was built at Iron.Mountain--a modern structure with many conven- iences including drying kilns and charcoal ovens. At Sidnaw, the center for timber cutting, new office and living quarters dazzled and for a time embittered the hardnosed and unsophisticated lumberjacks. Ford, still not satisfied, purchased more land. To the north he acquired the Imperial Mine at Michigamme and reconditioned it accord- ing to company standards. Limited operation progressed as of October, 1921, and although the ore was low in quality and was received with fre- quent complaints at the factory, it did establish Ford as a producer of iron. The last land purchases came in 1922 and 1923, when dock facili- ties, a sawmill, and lands were bought at L'Anse, and at Pequaming port facilities, a sawmill, docks, towing outfits, tugs, scows, and 400,000 acres of standing timber were obtained. A final purchase involved the Blueberry Mine and 2,200 acres of land. Through his buying spree, Ford became a land kingpin in the Upper Peninsula. In the years immediately following, Iron Mountain became the center for lumber operations. Sawmills were buzzing at L'Anse, Pe- quaming, Big Bay, Sidnaw and Iron Mountain; two mines were producing iron ore off and on; the furnaces at Iron Mountain put out vast amounts 79 of charcoal for use in pig iron processing. Henry Ford liked to boast of his northern empire, the wild land, the rural life, etc., and he frequently took his friends--Avery, Fire- stone, Edison, Sorenson, and others-~and his son Edsel (later estranged) on chartered train excursions through the Upper Peninsula district. The truth of the matter was that the raw material reservoir fell far short of the needs of the expanding Ford Motor Company. With Mr. Ford's per- sistent denial, the land soon lost economic significance and the open market and term contracting became a far greater source of raw material. All extraction from Ford's Upper Peninsula properties ceased after Pearl Harbor. A brief period of life, through a governmental air glider contract, was provided the Iron Mountain mill, but Ford was never again to extract from.Michigan soil. Large Ford tracts went back on the market in the 1930's and 1940's, but a larger remainder was still unsold by 1950. In 1953, the Ford Motor Company gave the Upper Peninsula holdings, amounting to about 327,000 acres, to the Ford Fund (created in 1949 as part of the Ford Foundation). The land designated under the Fund was to be disposed of to parties displaying sound land management policies, and the case re- ceived was to be used for charitable, educational, and research purposes. The 1956 Fund exchange with Celotex amounted to approximately 250,000 acres, the Connor release to 50,000 acres, and the final one (reportedly going to Jacobson Veneer Company of Houghton) amounting to the residual 27,000 acres. 80 Externalities Affecting the Holding Companies What happens to Keweenaw-Longyear will largely be a response of mineral and timber leasees, who in turn answer to the clamorings of an admixture of other outside vogues. If the markets for iron ore in- crease beyond what can be supplied by present sources-~Marquette jas- perite, Minnesota taconite, Labrador and Venezuela ores--then the pro- pensity to innovate new methods may rise enough to permit technical breakthroughs on the world's abandoned ranges. Or if the universities, research foundations, or corporations find a way to reopen the old, disfavored ranges, then iron ore may again play a signifiCant royalty role for Keweenaw-Longyear. Likewise, if timber markets grow and if the timber industry's supplies call for supplements, then Keweenaw- Longyear timber royalties will climb. The Keweenaw Land Association and Longyear Realty Corporation are caught between the demands of the consuming public, the drain on supplies elsewhere, and the initiative of private and public groups to innovate. Without taking a very active part in fomenting a liaison be- tween the consumer, the research educator and the corporation, Keweenaw- Longyear might as well admit disaster. CHAPTER VII BACKWARD AND FORWARD GLANCES Reminiscences An account of the extractive industries in the Northern Penin- sula of Michigan is a colorful and eventful page in.American annals. There has always been something wild and unnerving about this perpet- ually distant land, its people and riches--a feeling that endures to this day. The yarns and tales form a kaleidoscope of myths, legends, and half-truths every bit as exaggerated as any ever spun. The Lake Superior region was imbued with this spirit even before the French and English explorers arrived, and the reports of these early comers--ex- plorers, missionaries, and trappers described as a comical mixture of roustabouts living by self-determined and self-reliant creeds--did everything to substantiate and fatten the legends. It was said that the sun rose and set on copper mountains, that iron could be carried out by the bucket, and that mammoth timber fortunes could be garnered with but an axe and a team of horses. The earliest people befriended and Christianized the native Indians, in addition to expediting the fur trade and surveying the tim- ber. Yet, once the land was "tamed," these same people left in search of other more distant places on the horizon, and perhaps their great- est legacy was in their contribution to the mounting legend. For it was in these terms that Lake Superior was described in the prestigious 81 82 journals, which undoubtedly sparked an irresistible urge in the capital- ists on the Eastern Seaboard. Before the actual assault of quantities of eastern dollars, how- ever, the region awaited professional appraisal and a means to private ownership. Wishing to dispose of federal lands and settle people on individual homesteads, Washington hired professional geologists as government surveyors. North of Mackinac, Douglas Houghton and William Burt, both highly respected, got the job. Their subsequent announce- ments describing the abundance of copper and iron kindled the spark in the speculators' hearts, and the first land boom in the Upper Peninsula began. The government responded by securing a major part of the Upper Peninsula via treaty agreements with local Indians, and for a five-year period leased the sought-after parcels, then sold them outright after 1850. In the years that followed, high-handed trades, continued federal sale, and homestead arrangements, as well as school and internal improve- ments and railroad grant lands resulted in the transfer of additional thousands of acres from public to private ownership. The unexpected rush of hard looking ruffians with their crude equipment and little or no knowledge of mining was a fascinating scene-- mushrooming boom towns, saloons, fortunes and near fortunes, gambling, scoundrels, and a rising number of imaginary heroes. Time was of the essence--the need for success was then and there. The people were un- educated, unprepared, disorganized, and overly optimistic; skill and technologies were crude; land was both supplier and enemy; the industry was copper and iron-~the forests were ignored. A drastic change occurred in the North once word of land dis- posal reached eastern and southern financial centers and capital moved 83 into the Lake Superior area. By 1870 the original stampede had all but played out, but if the earlier boom lacked anything, the Boston-Cleve- land group now supplied it. The new era saw the beginnings of corpor- ate financing and planning. Management consisted of Boston and Cleve- land aristocracy--educated, pragmatic, organized, and prepared. The workers were mainly European immigrants--mostly uneducated, but inde- pendent and folksy. The skill and technology, at first primitive, became modern and productive. The land was both supplier and hindrance, but not an enemy. The economy was still based on iron and copper, but the forests soon were cruised and cut. Railroads opened the Gogebic and Menominee Ranges; copper shook hands with the electrical industry; iron found new outlets in the home, on the farm, and in the locomotive, and the horseless carriage was fast approaching. Perhaps the great legends were coming true! The concept of rugged individualism inspired a personal kind of leadership as well as monopoly. In the tug-of-war for control, the Lake economy gravitated to a group of self-made giants--Quincy, Calumet & Hecla, Cleveland Cliffs Iron, Copper Range, U. S. Steel, Inland Steel, and Pickands-Mather. The movement toward corporate structure was at once striking, costly, sometimes dishonest, capital-efficient, a bit loathsome, but perhaps imperative. It was an era of risk-taking domin- ated by tycoons whom the economic historian, Professor Shumpeter, would call "advantage-taking entrepreneurs." However, although these self- made magnates did their share to stifle competition, they treated their employees as human beings. Safety measures received considerable atten- tion, and schools, libraries, theaters, and community centers were built or reinstated. Government remained aloof, espousing laissez-faire 84 precepts. On another front, equally dramatic though not as sophisticated, the white pine timber boom was under way. Financed by eastern, Detroit, and Chicago capital, Upper Michigan pine supplanted the northeastern supplies, helping to rebuild Chicago after the 1871 fire and adding immeasurably to the growing prairie states. These early timber ventures were temporary undertakings molded on cut-and-get-out philosophies. The protection given the logger and "river hog" did not compare with the care extended the miner, but the forest laborer was typically a diligent sort nonetheless, displaying his skills in a hazardous occupation and gaining little but spiritual rewards. Looking beyond the horizon, timber baronsjcutting Michigan (’whit;~pihé3were from the beginning sending cruisers on to the Pacific Northwest. The high-grading, burning, and scalping were disastrous setbacks, not only for the forest resource, but for corporate financing and sound management as well--improvements on which did not materialize until the middle of the twentieth century. The twilight of the 1890's was marked by national leadership in conservation, championed primarily by Theodore Roosevelt and Gifford Pinchot. Everywhere corporations were under attack for thoughtless dis- regard for and waste of resources. In Michigan, however, the idea of conservation was remote--a matter to be left to the Washington ideal- ists. Exploitation, cut-and-get-out, and market capture persisted. Land stewardship remained a myth. A preponderance of mineral discoveries and timber cutting out- side of Michigan in the early 1900's greatly altered the state's market picture, but until 1945 did little if anything to change attitudes 85 I about conservation, land use, and stewardship. Even the social service breakthroughs made by Franklin Roosevelt had little lasting impact on Lake Superior land use. Rather, throughout the period leading up to and beyond the Second WOrld War, the industrial managers-~offspring of the early tycoons--were busy marshalling an effort to survive single product economies. For the most part, they too ignored conservation, spurned product mixing, and overlooked many land potentials. World War II's drain on resources, the postwar burgeoning of a larger middle class demanding great quantities of durable goods and leisure intangibles, and the cold war pressures on resources have put a premium on Upper Michigan resources--copper, iron, timber, and scen- ery--and have presented the Michigan firm with the problem of how to gain market standing in what seemed to be a drained location. The firm has fought back with technology, increased product diversifica- tion, and multiple-use land management, and the results have been en- couraging. New, significant markets have been captured; permanent re- search programs have been instituted; the recreator's purse has been tapped. Looking back, it is clear that all the worldyhas some to know - ‘-..-- 0.] Michigan copper, iron,-and timber in their fabricated forms. Yet, ex- - ./’ \,_,~ " 1,1,!" cept for a few die—hard admirers of the northland, its history is un- known to a vast majority. An Akron housewife snaps on an electric light with no idea of Lake Superior copper; a new Pontiac automobile brings smiles to children of a proud father without any thought of Mar- quette and lshpeming iron ore; a posh suburban dining hall is paneled with Michigan white pine and cedar, but the owners have never heard of Seney, Sidnaw, or Grand Marais. The great store of achievement, so 86 entrenched in the Upper Peninsula, has failed to capture the understand- ing or respect and admiration of the American public. "If heard of at all,“ says Angus Murdoch, ”it has been in terms of dollars, cents, and annual dividends.”1 Beyond that, Upper Michigan has lived a century and a quarter in quiet anonymity. Withal, the Upper Peninsula is a rich land, comprised of people and customs from all over the world--Scandinavian, German, Irish, Eng- lish, French, Polish, Croatian, Cornish, Italian, Russian, and American Indian. Capital and leadership from the best Boston, Cleveland, and Detroit families came and remained, and mining and timber cutting tech- niques have been imported from all around the world. Michigan's Upper Peninsula is a land apart, but certainly not denied. Future Policy Trends Several projections concerning tomorrow's policies of the large landholder can be formulated. In this regard it is important to remem- ber that projections are extensions of trend lines based on chosen sets of assumptions, only by chance accounting for the unexpected, and conse- quently their validity is limited. It must be remembered also that eaéh projection is inexorably associated with all of the others, though they are discussed here separately so as not to shroud the salience of any one issue. ' Continued development of lowfiggade ores.--Although the possibil- ity of uncovering new mineral lodes always remains, high-grade mining is a part of our past. The geologic boundaries of the iron and copper ranges are well publicized and authenticated. The interiors of these 1 Angus Murdoch, Boom Copper (Hancock: The Book Concern, 1964), 87 ranges have been mapped, cross-hatched, spiked with drill holes, and mined. Yet, surprisingly, much remains unknown, and it is within these inner boundaries that all future activities will either accelerate or disappear. In April, 1966, over 100 years after Ed Hulbert disclosed the Calumet Conglomerate, J. J. Jung, Chairman of the Board of Calumet & Hecla, announced that a new body of commercially valuable ore estimated at 35,000,000 tons had been found on Calumet & Hecla property.1 In a similar case, Copper Range has announced its White Pine ore reserves are now believed to be twice the 300,000,000 tons originally estimated and that it would spend $85,000,000.00 in the next seven years to double production.2 In discussion with Cleveland Cliffs, Inland, and U. S. Steel personnel, this same type of possibility was expressed in refer- ence to iron ore. The new discoveries, as well as continuing production, are in lower and lower grades. Mineral experts and critical analysts of American economics sup- port the argument for low-grade development. To the studied mind, the law of nonreplenishable stock resources seems most evident in a parade of multiplying cold war and consumer demands. Recycling of used metals contributes only small, generally insignificant, fractions to the min- eral store. The answer, therefore, lies in a broadening resource base. In various articles McDivitt, Ciriacy-Wantrup and Zimmermann have men- tioned these patterns for the world in general. Gates, Murdoch, Havig- hurst, Benedict, and Dunbar refer to the low-grade shifts in their Michi- gan treatises, and a vote of confidence for low-grade production is also 1Detroit Free Press, April 13, 1966, p. 7-B. zlbid. 88 found among the natural resource people at the leading universities and prestigious writers for Fortune and the Harvard Business Review. The corporation must shift its emphases to the ever-changing store of resources and consumer desires. The efficiency of beneficiated pellets in steel processing and the market for silver bearing copper has favored some primary producers over others. For the most part, those who have innovated have prospered. Those less fortunate--those who have not innovated or are technically disadvantaged--face forced technological research or eventual disbanding. Continued exploration and development.--Any thought that the copper and iron interests will willingly abandon their Michigan search is incorrect. Today's exploration is as much a day-to-day concern as traditional mining, marketing and wage negotiations have always been. How long this incentive to explore will prevail is more a func- tion of macroeconomics than of Michigan situations. The balance of de- cision will undoubtedly lie in the federal court's attitude toward busi- ness and in the weighted strength of like and competitive minerals produced elsewhere. If Washington chooses to tax the corporation heavily and/or makes pleas for voluntary cutbacks in expansion, such measures will hamper the Michigan mining companies to some degree, perhaps per- manently if persistent, and will certainly depress Michigan before some of the larger, richer resource areas. Moreover, if the trend toward what Charles Adrian calls a "service state" continues, it is likely that federal policy may encourage, "for the benefit of all," resource develop- ment both inside and outside of Michigan. Though attitude setters in Washington will play key roles, the responsibility is not there alone, for iron and copper are found in many 89 parts of the world, and the manner in which the ore firms are managed elsewhere will affect Michigan firms. Once a world leader in copper and iron production, Michigan's contribution today is relatively insig— nificant compared with the totals. Future vicissitudes will not muster industry-wide pity for Michigan. On the contrary, Kennecott, Phelps- Dodge, American Smelting & Refining, Anaconda, U. S. Steel, Republic, Bethlehem, etc. will fight to stay in the competitive game just as Calu- met & Hecla and Copper Range do locally. The strategy for the Michigan group would be to try to match or beat competitors' costs. In Michigan, the cost matching goal has been partially met through forward integration from mine to fabrication. Whether this type of merger will be permitted to continue is up to the courts and "trustbusters." Some observers argue that a rational approach to anti- trust is still forthcoming, that the firm "should not be punished," as Max Ways says, "because of its size."1 If the intent of merger and/or integration is to conspire against the consumer, then dissent unques- tionably is called for. On the other hand, if enlargement is a mere means to product flexibility or market survival, then nobody is guilty of anything, except government if they pursue breakup. There are strong indications that antitrust echoes will continue lurking over corporate life, but as Ways says, "In an innovating society, no company can expect to maintain indefinitely a given product line or a given market position or a given technology or a given set of market- ing methods or a given set of financial arrangements."2 Merger is often 1 Max Ways, "Antitrust in an Era of Radical Change," Fortune, LXXIII (March, 1966), p. 129. 2Ibid. 90 a beneficial arrangement to both the corporation and society, and this is true for Michigan mining, timber, fishery, recreation, and other en- terprises. It is hoped that government and industry can redefine a workable dialogue with regard to antitrust and that it may be resolved that big- ness is not necessarily equated with badness. The important explora- tory work in mining, as well as research and timber management in for- estry, the building of appealing recreation communities, and indeed many other resource based undertakings will ultimately depend on this very idea of the boundaries of antitrust. Increased combined ownership.--The prediction that mining com- panies will increase combined ownership ventures rests on the fact that mining has been long divorced from a pick and shovel game. It is big from the power shovels to conveyers, from land holdings to pellet and flotation plants, from assets to liabilities. Across the board there is rising support for joint ventures. Business having grown into a complicated, costly, and massive institution, management has spread its decision horizons. These growth patterns represent responses to population pressures and scientific ad- vances. The ”general store” exchange of goods and services is an inter- action far removed from current business forms. What industry calls for is a huge massing of equipment, buildings, clientele, and a forceful set of managers to set production in motion. The successful corporation is now a combination of all of these--along with personnel, advertisers, differentiated products, interlocking loyalties, and research-mindedness. Joint ventures have been the outgrowth of this converging growth pattern whereby massing provides a means for both increased capitalizing 91 and guaranteed interdependence between primary and secondary producers. The Empire, Eagle Mills, and Groveland Mines are all joint iron-steel ventures, and others involving other resources and other companies should be concluded in the years ahead. Fiber management for pulpwood companies.--Ruben Greiwe of Kim- berly-Clark and Lynn Sandberg of Celotex consistently spoke of manage- ment in terms of "fiber," and the impression gained was that the pulp- wood companies will manage more for fiber than for one species in the future. Today, trees are only a physical description of a land incre- ment--quite dissimilar in form and purpose from the pulp product, fiber. Although the pulpwood industry's recent success and creative management can be admired, the scientist deplores its disregard for the elemental tree. He cannot escape the belief that quality control at all levels is a basic ingredient of firm and industrial success. There- fore, the pulp and paper industry, as well as other forest product con- cerns, should perhaps pay closer attention to species control. Certainly the ecologist would understand that cost is most lim- iting to timber and consequently species improvement, but he would also suggest that much more can be done when money is available. When, for example, a leading company says that they ”don't care what comes out of the woods just as long as it's fiber," one cannot help but think that lethargy motivates. When the question of cost comes to mind, it is pleasant to recall how the early mining entrepreneurs plowed back most of the profits--a tactic which led the local industry to world suprem- acy. Low-grade Upper Michigan timber, the specialist deliberates, would do well to gain market access, but certainly the entire forest, 92 under minimal managerial care should not revert to low grades. Until proven otherwise, it will be claimed that the most successful business- man always seeks ways of improving and developing raw as well as fin- ished products. The wood industry could take note. Enlarged market for low-grade wood.-—Upper Michigan has consid- erable acreage of the lesser used species growing on the stump, and if these trees are to serve usefully, they must not be allowed to rot. The pulp industry offers the major outlet for this type of raw material, as the final requirements are not as rigid as those for construction, furni- ture, and veneer. Consequently, it would behoove retailers to accept larger shares of low-grade trees in the foreseeable future. Continued reliance on less preferred trees is not encouraged, however--but rather reseeding with appropriate site species and any other treatment to en- rich the environment. The great advantage of the tree as a resource, besides a flow characteristic, is that any one parcel has a potential for a multitude of species, and to remain satisfied with a lower dollar/ social value tree over a period of time is a financial and societal waste of that particular plot. Professional forestry on the large private lands of Northern Michigan has come a long way in recent years, but it lacks finesse. Al- though woods work is maturing, the tree still suffers from limited under- standing. Either society will come to accept something less than the best, find a substitute, or demand a better product. Advertising the superiorities of an actually weaker primary resource will at best fool the public for a short while, and in the end woods people may be left with worthless weeds. Yielding_of traditional conservative philosophies.--The forest 93 products industry, and in particular lumbering, is in a precarious philo- sophical situation. Due to almost pure competition, the industry is close to stagnating. The conservative atmosphere in which the Michigan firms carry on their day-to-day activities is expressed well by Joseph Zaremba, who discusses the nation-wide lumbering industry. From the earliest times lumbering has been one of America's leading industries. It ranks high in employment, value of prod- ucts shipped, and value added by manufacture. . . . The lumber industry comprises more establishments (30,000-40,000) than any of the 447 manufacturing industries recognized by the census of manufacturers; concentration of production is among the lowest in the economy; ease of entry is high - the highest of any indus- try; with few exceptions there is no product differentiation; no major breakthroughs have occurred in lumber manufacturing since the beginning of the 20th century; most lumber producers are or- ganized mainly as proprietorships and partnerships and do not have adequate and dependable sources of long term capital; the industry is very labor-intensive; and the preponderance of small firms has been entirely unable to keep up with competing industries in re- search, development and promotion. There is cause also to agree with Dr. Lee M. James on the re- sults of his study done in collaboration with others.2 Three general conclusions may be drawn concerning Upper Peninsula practices which parallel the James case. 1. Despite evidence of increased timber volume, most large private forests now being harvested are still deterior- ating in terms of species composition. 2. Cutting practices are closely correlated with owners' concepts of timber management. Most owners' concepts (except with regard to fiber) are sophisticated and improving. 3. The outstanding obstacle to better cutting practices, which is recognized by management, is their inability to supervise because of physical limitations, capital 1Joseph Zaremba, Economics of the American Lumber Industry (New York: Robert Speller & Sons, 1963), pp. 25-26. 2James G. Yoho, Lee M. James, and Dean N. Quinney, Private Forest Landownership and Management in the Northern Half of Michigan's Lower Peninsula (Michigan State University Tech. Bulletin 261; East Lansing: Michigan State University Press, 1957), p. 3. 94 demands of other efforts (mainly mining), the severely competitive position of the market, the lack of improve- ment loan sources, and the lack of fruitful, innovative, labor—saving breakthroughs such as the automated harvester. Despite the discouraging market structure, however, the timber industry is not without recourse. The traditional conservative atti- tudes must give way to an open-minded pragmatism, and a comprehensive revamping of the firm toward a considerably larger, integrated, joint venture must take place. As revised, financing and product competition would at least be feasible to the firms. Timber is a paradoxical resource in high demand yet subject to the whims of nature, and as such it requires all possible support of a promotional nature in order to survive the inroads of professionally organized plastic and metal substitutes. To this end, money is the salient ingredient, and merger, integration, and innovation are the means. The possibilities are great, but they call for radical revision including elimination of most woods labor (definitely the disappearance of contract logging), incorporation of the automatic harvester, exten- sive public image development through mass media (the unique style of Weyerhaeuser--using wildlife running through tree farms, etc.--is an example), constant professional improvement of species and environment, reduction in the variable grades and sizes of trees, brand and product promotion, an ever watchful eye on the consumer, and (most important) money and the corporate power to make all necessary decisions. As far as can be determined, Upper Michigan timber firms still act independently, very conservatively, and without much consumer sway- ing force. However, there is a suggestion that the encroaching tourist, by his insistence on more land and facilities, may awaken the timberman to the advantages of big-time operations, multiple-use, and multiple 95 products. This hope is attested by Norton Clapp, the head of Weyer- haeuser, who has made it clear that his company has discarded the parochial outlook of the lumberman and become a modern, marketing oriented company.1 Non-price competition through recreational land development.-- Outdoor recreation is just beginning to erupt in the Upper Peninsula of Michigan, but by many standards tourism volume of participation already is great. Nearly 5,000,000 travelers visited the area in 1964, creating an estimated $118,400,000 in business. Of these tourists, about 98% came by automobile, 24,000 by air, 20,000 by boat, and the balance by other means including rail and bus, and they came from (in order by num- bers) Michigan, Illinois, Ohio, Wisconsin, Indiana, Minnesota, and On- tario. Characteristics of these visitors help to explain the present level of development and suggest opportunities for future expansion. The market drawn from is urban (the majority being professional, mana- gerial, business, skilled or factory oriented workers), of slightly above average means, and motivated to this area by previous satisfaction, recommendations from others, advertising and promotion. They are further motivated by their strong preference for viewing roadside scenery, visit- ing natural areas, historical sites, and for swimming, skiing, boating, hunting, fishing-~all of these activities being based on the use of the natural resources of the area. The greatest growth in tourism/recreation volume in the Upper Peninsula took place in the 1950's, and recent years have generally 1James Cook and Gladys Haak, ”The Weyerhaeuser Co.: A Permanent Enterprise,” Forbes, XCVI (April 1, 1966), p. 32. 96 shown an arrested growth or even a slight decline--this in the face of a nationwide rise in volume. Comparisons, however, with activities else— where suggest that newer, larger, and more complete attractions, services, and facilities might stimulate a new and increased demand. Hundreds of separate decision-makers who traditionally operate on an independent basis have control of land and facilities in the Upper Peninsula. The policies and practices of these many resource holders are crucial to expansion programs. Commercial enterprises, government, large corporate landholders, and small personal landowners are all im- portant. Here discussion is limited to the large corporate owner. The corporation has been a positive force for tourism in many ways, although this function was incidental. Their lands are frequently available without fee to hunters and fishermen, even at the risk of lia- bility. They have actually developed some facilities, and in some cases have enhanced the woods and waters by improving timber and impounding waters. In some instances their land policies have provided a type of zoning by holding development until a need is demonstrated. At such times several have given lands to government recreation agencies, or sold or leased land to private individuals. Of the major Michigan corporations presently encouraging recrea- tion, Celotex is the leader. Though all firms lease or sell land in one way or another for cottages, homes, or campsites and open them for hunt- ing and fishing, only Celotex has actually gone into the tourist business. Cleveland-Cliffs, Copper Range, Calumet & Hecla, and Kimberly- Clark claim not to have yielded entirely to Celotex with regard to rec- reation. They recognize that a movement is afoot, and most companies are testing and baiting the recreating public. 97 Lynn Sandberg, Celotex Forester, related that he made an effort to persuade top executives to design and build a recreation complex modeled after Stowe, Vermont. More recently, plans have been sketched and Celotex is warming up to the idea. Now, Sandberg pointed out, the people must be sold--a matter estimated to be five to ten years distant. Again there appears an opportunity, perhaps very significant, for private enterprise in Upper Michigan, and the opportunity is more entrepreneurial than otherwise. The fact that vacation land use will increase is a foregone conclusion, but that such pleasure seeking will occur on company lands in.Michigan's Upper Peninsula is far less cer- tain. The entrepreneur makes a marked difference, for it is he who can persuade or, as the case may be, finally dissuade the public. The ingredients that make a success out of Traverse City, Gay- lord, Tawas-Oscoda, Boyne Country, Northern Wisconsin, Disneyland, and Sun Valley perhaps can be analyzed with a view to contriving similar complexes in the Upper Peninsula. All of the aforementioned have that indefinable lure for repeat outdoor spenders, and it is in these types of areas, according to Dr. C. R. Humphrys, Professor in Resource Develop- ment at Michigan State University, that the dollar signs for much of Northern Michigan lie. All of these areas exhibit a blend of special features done tastefully in pleasing surroundings. There is no ques- tion that tourist attraction is a mysteriously complex endeavor, but more than anything else it may be as Humphrys suggests--not so much a matter of locality as of atmosphere. A wonderfully conceived idea along this line was organized in 1962, which commanded an area from Marquette to Big Bay and included a train ride, marinas, ski chalets, canoe and horseback riding, logging 98 tours, restaurants, and other interests. As time went on, however, the project met its demise--a consequence of the lack of funds to carry through the entire theme. Unfortunately, there is convincing evidence that the high cost of financing will outstrip the economic soundness of any publicly or privately administered recreational facility of that dimension ever dreamed up for the people of the Upper Peninsula. The challenge remains. In the long run, tourist promotion in the Upper Peninsula will have to overcome some unmistakable obstacles. The cooperation of both the public and private sectors is required. Government must legislate and enforce an orderly land use development program. A mass exodus to lakes and streams and over-subdividing are certain to transpire without a regional plan that includes zoning. Perhaps single-use bodies of water will have to be instated. Though unpopular, land controls are a necessary measure lest the fast food trade, junk yards, tourist tog shops, motels, signs, trailer courts, and the like take over. Industry, too, must provide leadership. Land long tied up in single, unproductive uses must be given a second look for a part it may play in the recreational scheme. Sincere thought to soliciting professional guidance in the controlled development of high value rec- reation sites would also tie in with a coordinated regional approach to attracting a shifting tourist market. Increased research in promotion and market penetration.--In a very few years one of the bywords of marketing will be "motivational re- search" as written about by Vance Packard.1 Cleveland-Cliffs, U. S. 1Vance Packard, The Hidden Persuaders (New York: David McKay Company, Inc., 1957). 99 Steel, Inland Steel, Calumet & Hecla, Copper Range, Marathon, and Kim- berly-Clark are beginning to talk in "hidden persuader" terms. While it is inadvisable to wholly subscribe to Mr. Packard's claim that the consumer is always an unknowing victim of the profes- sional persuaders, it is true that the public should be given the bene- fit of quality advertising. Many consumer markets are replete with cleverly written ads. Pepsi-Cola, Alka-Seltzer, Dupont, General Elec- tric, Kellogg, Budweiser, Canada Dry, Eastman Kodak, Shell Oil, Polaroid, United Airlines, Bordens, and several automobile companies, to name just a few, have long entertained and convinced without demeaning the customer. Creative advertising, though costly, is a potent source for both firm and product image--one in which the primary industries have fallen short. Said Edward Bursk, "Selling is not just satisfying present wants or playing up to old desires. Selling is a process of increasing wants or, even better, creating new wants."1 Somewhere along the line, there- fore, skillful selling pertains to defining and expanding wants, all of which suggests research. To this end Gardner and Levy have pointed out that advertising a product is not a matter of isolated messages, but calls for analysis of attitudes and motives and differentiated knowledge and judgment on the part of both management and advertising people.2 Increased cooperation and pooling of ideas.--Business competition is often interpreted as vicious, fear-ridden, and unethical. The major- ity of firms within the corporate milieu, however, have always conducted business in a reasonable and professional sense. In Upper Michigan 1Edward C. Bursk, "Opportunities for Persuasion," Harvard Busi- ness Review, XXXVI (September-October, 1958), p. 119. 2Burleigh B. Gardner and Sidney J. Levy, "The Product and the Brand," Harvard Business Review, XXXIII (March-April, 1955), p. 59. 100 cooperation has been particularly noticeable. Realizing the overwhelm- ing production power of the corporate giants outside the borders, Upper Peninsula mining management has held on to a long-standing united front. The more conservative timber companies have not yet formed any alignment similar to the informalities associated with the mining firms. A break in this reluctance is evident, however, with some pulpwood com- panies making token purchases of sawmill scraps. In the years ahead, it can be expected that cooperation among all resource groups will be- come more popular through economic necessity--especially in an area as socio-economically knit as Upper Michigan. Increased automation.--The amount of work done by machines in tomorrow's factory, whatever the industry, will be more than in today's. For management, automation is standard operating procedure, but for the bargaining unit it is another matter. Nonetheless, it is to be antici- pated that Michigan's extractive industries will take advantage of any workable, labor-saving device. Rather than flaunt automation as the foe of labor, there is rea- son to agree with Charles Silberman who champions the results of tech- nology as enlarging rather than restricting the sphere of human action and choice.1 The machine, for example, has released many laborers from the drudgeries of hard work and given them cause to pursue other facul- ties of the mind. Though an innovation may create havoc and displeasure over the short run, the long-term benefits provided by a choice of in- tellectually stimulating and financially rewarding pursuits in the ex- panding public service, teaching, administrative, managerial, aerospace, 1Charles E. Silberman, "Is Technology Taking Over?" Fortune, LXXIII (February, 1966), p. 222. 101 and leisure time professions are far more valuable than featherbedding a dying profession. The challenge, more correctly, is not to decry mechanical innovation but to devise ways to educate and train the labor force for the most promising skilled jobs in the future. Gunnar Myrdal put it another way: The main remedy for unemployment, independent of its causation and its character in the individual case, has been to keep total demand for products, and consequently for labor, at a high and steady level. . . . Looked at from this angle it is tempting for an economist to view the American labor-market problem as primarily one of low demand. What is needed in the first instance is an economic policy that stimulates total demand and total employment. Automation would then change its character and become a necessity for the dynamic enterprises - making it possible for them to expand under conditions of labor scarcity - instead of being a commonly recognized cause of unemployment. Large land base believed essential.--The belief that vast real estate is necessary for sustained operation is central to both timber and mineral philosophies in Northern Michigan. The ever present hope for ore discovery on inactive land and the profit advantage of greater annual cuts over larger timber holdings outweigh any suggestion that industry will willingly sell its lands. However, the tax burden, the closing of mines, and the power of eminent domain can separately or in combination force some land out of private control. Paul W. Robson, President of Calumet & Hecla, suggested the impact of taxes and mine closings when he stated that until the new (1966) discovery, his firm had been uncertain for several decades about whether it was going to stay in business in Calumet.2 Interestingly, this uncertainty is not unique to Calumet & Hecla. John Lake of U. S. 1Gunnar Myrdal, Challengg to Affluence (New York: Vintage Books Division of Random House, 1965), pp. 27-28. 3 2Detroit Free Press, April 13, 1966, p. 7-B. 102 Steel, Ray Satterly of Inland Steel, Melvin Johnson of Cleveland-Cliffs, Stanley Shebuski of Vulcan, and Robert Burke of American Can expressed similar doubts concerning land tenure in the face of increasing taxes, mine closings, and eminent domain. If property decisions can be totally company directed, unaffected by externalities, there will be no major sales. Although transfers--at least those made by choice--will remain minimal, leasing for housing, cottages, timber cutting, and perhaps company-sponsored recreation com- plexes will increase. Continued sponsoring of community projects and planning.--For years most of the mining and some of the timber companies have been members of organizations dedicated to improving the welfare of Upper Peninsula residents. Starting with the era of benevolent paternalism, management has been concerned with people. Today's representation per- vades everything from area promotion and sporting events to sponsorship of planning groups. Recent years have seen an increase in professional planning in the Upper Peninsula. This organizational approach to human needs has replaced the irregular, "crisis response" efforts of the past, although quite often the results of this planning have been stifled by committee indecision. Yet it is plans that have made Upper Michiganians aware of the advantages of regionalism over fifteen separate county proposals. It is suggested by several observers that in many cases failures of "planned direction" are blamed on the wrong people--often the very people who insist on living in such a "desolate" area. By contrast, the failures should probably be assigned to the professional planners them- selves. An example, mentioned earlier, is the Department of Conservation 103 and its policy on antlerless deer hunting. Only recently is camaraderie in the Department beginning to stir (still tied to legislative strings). The point is that bad public relations on the part of an esteemed plan- ning agency at best has put confusion in the minds of Upper Peninsula people about their Lower Michigan brethren. Comprehensive formulas and recipes did not build the Midwest or open up the Klondike, but such figures as Douglas Houghton, Jacques Mar- quette, John M. Longyear, Robert Graveraet, Alexander Agassiz, Jay C. Morse, James Pickands, Raphael Pumpelly, Samuel Mather, A. E. Pettermann, Lynn Sandberg, and Ray Satterly have carved Michigan's Superior shores. The copper-iron-timber legacies are embellished with stories of human luck and sweat--not with blueprinter's ink and draftsman's skill. Planning in general is not cherished north of the Straits, the contention being that planned direction is often poorly administered, quickly outdated, uncoordinated, and lacks sufficient financial carry- ing power. Perhaps these claims have had some truth to them, but organ- ized planning is only as good as the people behind the effort. It is people who live, love, react, build, destroy, encourage, trust, move, innovate, and grow--and it is the individual, not a plan, who leads, directs, and inspires others. In spite of what has gone forth, there is cause for some organ- ized guidance. What must be avoided is the markedly poor administration of these charted courses. Too often trained people receive the bulk of allotted monies as wages and traveling expenses, rather than having it filtered to those in real need. Such an example is the Detroit school dilemma where the Negroes consistently vote down millage proposals--not because they are alien to education, but because there are doubts that 104 the money will ever benefit the predominantly Negro schools of the cen- tral city. A similar situation is the Appalachia program where consid- erable money is Spent on official airplane trips to Washington. Maturing corporate wisdom.--The poor judgment concerning certain disruptive forest practices, the inadequacies of minimal advertising, the overlooking of recreation, and other management foibles noteworthy in Michigan's past will be improved upon in the years ahead. The pro- fessional managerial group will rise to new heights, bringing about long-needed changes. In place of toll-taking forest fires, high- grading, and ultraconservatism, companies that survive will evolve in what Peter Drucker calls a corporate setting that can shoulder the tre- mendous tasks of a rapidly changing economy.1 The effectiveness of these new organizations, moreover, will be measured by their ability to do the following: 1. Recruit, select, and train in a way which will stimulate rather than demean people. 2. Maintain psychological relationships based on a more realistic psychological contact. 3. Maintain an effective group action. 4. Successfully define leadership in the sense of goal ~ setting and value definition. Another aspect of corporate life that will play a greater role in the future is leadership. Theodore Levitt comments: No organization can achieve greatness without a vigorous leader who is driven by his own pulsating will to succeed. He has to have a vision of grandeur; a vision that can produce eager followers in 1Peter F. Drucker, The Concept of the Corporation (New York: The New American Library, 1946). 2Edgar H. Schein, Organizational Psychology (Englewood Cliffs: Prentice-Hall, 1965), p. 106. 105 vast numbers. To produce these customers, the entire corporation must be viewed as a customer-creating and customer-satisfying organ- ism. Management must think of itself not as producing products, but as providing customer value creating satisfactions. It is this type of individual eluded to by Mr. Levitt that may spell the difference in tomorrow's Upper PeninSula. George H. Mead, a pioneer of the Mead Corporation, illustrates the kind of magnetic personality necessary in building corporate power. Here was a man who became a success in private enterprise and yet never saw the company, industry, or the country as large, abstract entities to be manipulated in one direction or the other. Instead he saw groups of human beings with whom he always found himself in close relationship. He labored for both industry and the nation. He held posts including membership on the Business Advisory Council, the Industrial Advisory Council of the NRA, the War Labor Board, the War Mobilization and Recon- version Advisory Board, the Price Decontrol Board, the Hoover Commission, the Economic Cooperation Administration, and in the Office of Defense Mobilization. His life was a reflection of his personal philosophy. The great majority of business failures comes from jealousies, from conceits, from characteristics that do not make real men or real development. We are not on this world or in business solely to make money. It should be the object of our work and our daily lives, first, to make our families happy and then to make our fel- low men happy.2 John Gardner warns that yet another requirement for corporate survival is the elimination of "organizational dry rot."3 This danger, 1Theodore Levitt, "Marketing Myopia," Harvard Business Review, XXXVIII (July-August, 1960), in Marketing Planning & Strategy Series, Part I, p. 81. 2H. E. Whitaker, "Humane Enterprise: An Account of the Mead Corporation," Speech before the Newcomen Society, Dayton, Ohio, 1963. 3John W} Gardner, ”How to Prevent Organizational Dry Rot," Harpers, CCXXXI (October, 1965), pp. 20-22. 106 according to Gardner, is minimized if the organization: 1. Has an effective program for recruitment and development of talent—-positive, constructive careers. 2. Provides an hospitable environment for the individual. 3. Builds in provisions for self-criticism. 4. Allows fluidity of internal activities. 5. Insures adequate internal communications. 6. Combats the process by which men become prisoners of their procedures. 7. Combats vested interests at every level. 8. Emphasizes what is going to happen, not what has happened. 9. Insures motivation, conviction, and morale. To be sure, the larger Northern Michigan corporations will grow and prosper, but perhaps the long-run success will be measured through what Drucker calls an "adaptive corporation," through Schein's psycho- logical provisions, through the leadership of men like George Mead, and through schemes to minimize organizational dry rOt. Eugene Kelley may sum it up best: The entire business process is tested against its ability to develop, make, and sell products that satisfy customer needs profit- ably. Marketing management's function under this concept is to mo- bilize a firm's total resources in order to capitalize on marketing opportunities through serving customer wants and needs. The cus- tomer is the focal point through which marketing and, ultimately, all competitive business activity revolve. This is why consumer population distribution, income, age, sex, and educational levels, as they exist and as they change over time, have fundamental mean- ing to marketing managers. Increased pressures from recreational groups, conservationists, and preservationists.--The impact of ecology and recreation pressures 1Eugene J. Kelley, Marketing: Strategy and Functions (Englewood Cliffs: Prentice-Hall, 1965), p. 107. 107 will be determined by the sustained strength behind the lobbying group, the public philosophy in vogue, and the relative amount of use or abuse of the land as it stands under company guidance. If it is assumed that Upper Michigan will receive greater demand for public recreation and reserved areas, and if the areas now set aside for such purposes do not fulfill the need, then there will be pressure brought to bear on the private landowner. If, on the other hand, pri- vate enterprise chooses to provide certain recreation and other wilder- ness pursuits beyond the public effort and/or if the public sector takes a greater interest in private facilities (cottages, hotels, ski resorts, etc.), then less land selling pressure will befall the private sector. The safest guess is that something between these extremes will trans- pire, that is society will demand more public facilities, including a greater share of unique historic, geographic, and scenic areas set aside. Similarly, increasing affluence will produce a greater demand for cot- tages, deluxe resorts, and Boyne Mountain atmospheres. Rather than a choice, recreation must be a balance between public and private. Marion Clawson suggests that recreation policy has the task of deciphering the users' needs, coordinating the facilities, and deciding who should develop them; financing, preserving quality, and re- serving lands at the proper times.1 On one side of the issue, government must be allowed to develop in cases where a true market fails to allocate the resources or where market mechanisms ignore externalities, but government must not be al- lowed to overextend its powers in the name of "public good." The lMarion Clawson, Land and Water for Recreation (Chicago: Rand McNally, 1963), pp. 142-144. 108 Sylvania dilemma might be such a case of federal abuse. Since the For- est Service has gained control over Sylvania, Vulcan's Michigan opera- tions have suffered, a lake cottage community will not be built, and the affected localities will lose private development dollars. Perhaps these latter factors are more relevant to the welfare of Upper Michigan than an 18,000 acre public forest reserve. It would seem that Isle Royale, the Tahquamenon park, the Porcupine Mountains, the apparently secure Pictured Rocks National Lakeshore, and thousands of other acres would constitute enough public land. On the opposite side of the issue is the corporate landowner's burden. He, of course, can take action only where a profit can be fore- seen. The Celotex plan puts industry on the recreation map. The abun- dance of independent decision-makers controlling Upper Peninsula re- sources cannot independently bring about coordinated prosperity for a people. However, falling short of optimal prosperity is in the nature of public and private efforts. The social cost of private exploitation of all resources is far too great to permit the market to allocate only private goods. The in- divisible nature of public goods necessitates accountability for the negative externalities resulting from the use of that good. The preser- vation of clean air and water, a collective public good, for example, re- quires controls over pollution--a negative externality of producing pri- vate or public goods. A reexamination of economic trade-offs, including property rights, is in order as a step in minimizing social costs and in promo- ting a Pareto-better life. Furthermore, if these goals are to be sought, any reallocation of Upper Michigan resources must be accomplished through 109 middle-of~the-road targets. The entire Upper Peninsula can scarcely be dedicated as a wilderness, nor can it be left to the land sharks. Private economics lets us inquire into how individual resource users reach decisions on the distribution of resource use rates over time. It also teaches what are individual problems, motives, and ob- jectives, and suggests resource use rates that are optimal for the in- dividual. It further tells what major forces in the economic world affect decisions and how outside controls may either aid or detract from individual decisions. On the other hand, social economics is asking whether, why, and under what conditions conflicts exist between a dis- tribution of goods brought about by individuals and a distribution that may be more desirable in the interest of the group. S. V. Ciriacy-Wantrup gives us a clue on how to make social and private adjustments.1 He claims that individuals and groups are strong- ly influenced by social institutions which in turn can aid or hamper social, economic, or conservation policy. They include such institu- tions as those that bear on interest rates, income, prices, market form, the definition of prosperity, type of tenure, size of holdings, tax sys- tem, creditor-debtor relations, education, zoning, and prohibition. All of these institutions are as flexible as society chooses. Strategic changes in them can revolutionize or revitalize a community. Inaction or uncontemplated change can close the door to balancing public and pri- vate rights, goods, or institutions. 1S. V. Ciriacy-Wantrup, Resource Conservation Economics and Poli- cies (Berkeley: University of California Press, 1963). 110 Catalysts for Development If government and industry are each to play effective roles in the development of natural resources so that private and public satis- faction is maximized, changes are required. Business offers several comments. Says John D. Harper, Alcoa's President: I do not suggest that we blindly accept government's growing involvement in the day-to-day conduct of business. Rather, I propose that we be realistic about government's role; that by aggressive action we make our views known, and make sure these influence the action of government. We must become participants rather than opponents. To this, Inland Steel's Chairman Joseph Block adds: Corporations should not be confused with subservience. It is . . important for business to continue its strong advocacy for our free system and to point out potential dangers in this area. For it is this system more than anything else which has given our country its great economic strength and growth. Ford Motor President Arjay Miller agrees: When I suggest that business should be more responsive to the public needs, I am not suggesting it should abandon independent judgment. On the contrary, business has a strong duty to resist government actions that it believes are unsound, inefficient, or harmful. Encouragement of government/business dialogue should not be the responsibility of any one person, philosophy, agency, government, or industry; it should be all-inclusive. Comments Charles Adrian: In a democracy, public policy cannot be turned over to the specialist without any checks upon him. His desires must be bal- anced against those of other specialists, and in this sense, become yet another interest to be weighed in the total political process of making public policy. . . . The eternal problem revolves around PP- 1"A Declaration of Independence," Fortune, LXXIII (March; 1966), 103-1040 21bid. 31bid. 111 producing a compromise.1 A compromise is needed, but not one in the normal sense. What is urgent is a dual readjustment by social institutions and the indi- vidual resulting in a blend of imaginative pragmatism whereby the indi- vidual complements society rather than competing with it. Perhaps, as John Galbraith professes, "if we loosen our out-dated conventional wis- doms and ponder not on the past but absorb ourselves in the contemporary march of events, the compromise has hope."2 Nonrestrained cooperation is definitely possible. Peter Drucker, for one, espouses this cause: The traditional view of social order sees society and the indi- vidual as restraints or limits on each other. At best it seeks a compromise between them, through concessions to the society and the individual. In the new organization the two are functions of each other, mutually strengthening and complementing each other. The traditional view, so to speak, subtracts society from the individual or vice versa; the new organization multiplies the two. . . . The more the individual grows as a person, the more can the organization accomplish. But conversely, the more the organization grows in ser- iousness and integrity, objectives and competence, the more gcope there is for the individual to grow and develop as a person. The ability to foster new systems is in the realm of man's own imagination. Says David Riesman: Inevitably, our own character, our own geography, our own illu- sions limit our view. . . . The idea that men are created free and equal is both true and misleading: men are created different; they lose their social freedom and their individual autonomy in seeking to become like each other.4 1Frank W. Suggitt, John L. Hazard and Charles R. Adrian, Land and Water Policies for the Future (East Lansing: Midhigan State Univ- ersity Press, 1959), p. 36. 2John K. Galbraith, The Affluent Society (New York: The New American Library, 1958), p. 274. 3Peter F. Drucker, Landmarks of Tomorrow (New York: Harper & Row, 1959), p. 109. 4David Riesman, with Nathan Glazer and Reuel Denney, The Lonely {ggnfll (New Haven: Yale University, 1961), p. 307. LIST OF REFERENCES LIST OF REFERENCES Books Adams, Walter, et al. The Structure of American Industry. New York: Macmillan Company, 1961. Benedict, C. Harry. Red Metal: The Calumet and Hecla Story. Ann Arbor: University of Michigan Press, 1952. Ciriacy-Wantrup, S. V. Resource Conservation Economics and Policies. Berkeley: University of California Press, 1963. Clawson, Marion. Land and Water for Recreation. Chicago: Rand McNally, 1963. Davis, Charles M. (ed.) Readings in the Geography of Michigan, Ann Arbor: Ann.Arbor Publishers, 1964. Drucker, Peter F. Landmarks of Tomorrow. New York: Harper & Row, 1959. . The Concept of the Corporation. New York: The New American Library, 1946. Eichmeier, A. H. Climate of Michigan by Stations. East Lansing: Michi- gan Weather Service and Weather Bureau, U. S. Department of Com- merce, 1963. ‘ Galbraith, John Kenneth. The Affluent Society. New York: The New Amer- ican Library, 1958.‘ Gates, William B. Michigan Copper and Boston Dollars. Cambridge: Har- vard University Press, 1951. Havighurst, Welter.' Vein of Iron: The Pickands Mather Story. Cleve- land: WOrld Publishing Company, 1958. Hudgins, Bert. Michigan - Geographic Backgrounds in the Development of the Commonwealth. Detroit: Edwards Brothers, 1961. Isard, Walter. Location and Space-Economy. New York: John Wiley & Sons, 1956. 112 113 Kelley, Eugene J. Marketing; Strategy and Fupctions. Englewood Cliffs: Prentice-Hall, 1965. Murdoch, Angus. Boom Copper. Hancock: The Book Concern, 1964. Myrdal, Gunnar. Challenge to Affluence. New York: Vintage Books, Division of Random House, 1965., Olson, Philip (ed.). America as a Mass Society. London: Collier- Macmillan Limited, 1963. Packard, Vance. The Hidden Persuaders. New York: David McKay Company, Inc., 1957. Perloff, Harvey S., et al. Regions,yResources,yand Economic Growth. Baltimore: Johns Hopkins Press, 1960. Riesman, David, Glazer, Nathan, and Denney, Reuel. The Lonely Crowd. New Haven: Yale University Press, 1961. Schein, Edgar H. Organizational Psyghology. Englewood Cliffs: Pren- tice-Hall, Inc., 1965. Suggitt, Frank W., Hazard, John L., and Adrian, Charles R. Land and Water Policies for the Future. East Lansing: Michigan State University Press, 1959. Zaremba, Joseph. Economics of the American Lumber Industry. New York: Robert Speller & Sons, 1963. Zimmermann, Erich W. World Resources and Industries. New York: Harper & Brothers, 1951. Articles and Periodicals Bursk, Edward C. "Opportunities for Persuasion," Harvard Business Re- view, XXXVI (September-October, 1958), 111-119. Cook, James and Haack, Gladys. "The weyerhaeuser Co.: A Permanent Enterprise," Forbes, XCVI (April 1, 1966), 28-30, 32, 35-36. Detroit Free Press, April 13, 1966, 7-B. Eastby, Dudley T. "Early Metallurgy in the New World," Scientific American, CCXIV (April, 1966), 73. Gardner, Burleigh B. and Levy, Sidney J. "The Product and the Brand," Harvard Business Review, XXXIII (March-April, 1955), 53-59. Gardner, John W. "How to Prevent Organizational Dry Rot," Harpers, CCXXXI (October, 1965), 20, 22. 114 Levitt, Theodore. "Marketing Myopia," Harvard Business Review, XXXVIII (July-August, 1960), in Marketing Planning & Strategy Series, Part I, 81. Silberman, Charles E. "Is Technology Taking Over?" 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New York: McGraw-Hill Book Company, 1965. Barlowe, Raleigh. Land Resource Economics. Englewood Cliffs: Prentice- Hall, Inc., 1958. Clawson, Marion R. and Held, Burnell. The Federal Lands. Baltimore: Johns Hopkins Press, 1957. Clawson, Marion R., Held, Burnell, and Stoddard, Charles H. Land for the Future. Baltimore: Johns Hopkins Press, 1960. Dana, Samuel T. Forest and Range Policy. New York: McGraw-Hill Book Company, Inc., 1956. Doell, Charles E. Elements of Park and Recreation Administration. Minneapolis: Burgess Publishing Company, 1964. Drucker, Peter F. "The Romantic Generation," Harpers, CCXXXII (May, 1966), 12, 14, 16, 18, 21-22. Dunbar, Willis F. Michigan: A History of the Wolverine State. Grand Rapids: William B. Eerdmans, 1965. Hazard, John L. Michigan's Commerce and Commercial Policy Study. East Lansing: Michigan State University Press, 1965. Herfindahl, Orris C. Minerals Economics. Baltimore: Johns Hopkins Press, 1961. Herfindahl, Orris C. and Kneese, Allen V. 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