Industry

The popular image of Tennessee is dominated by country music, Opryland, Elvis, the Smokies, Jack Daniel’s, and other icons of mass culture. The essence of the Volunteer State, however, is found in its history of hard working people tilling the soil, extracting raw materials from the earth, and fabricating products for shipment across the nation and around the world. Late twentieth-century Tennesseans, while not totally abandoning their agricultural heritage, have moved into an age of advanced technology and global competition symbolized by electronics, chemical production, and automobile manufacturing. Tennesseans today may wear cowboy hats and listen to the Grand Ole Opry, but at work they are more likely to produce automobiles or sophisticated machinery than to till a small farm or make country crafts.

Most pioneer Tennesseans were farmers who produced many of their own goods through household manufacture. Early settlers made yarn and cloth at their spinning wheels and looms; produced farm implements, tools, and furniture; ground wheat and corn to produce flour and meal; processed hides to craft clothing, saddles, shoes, and other leather goods; and produced lumber at small sawmills. Early industrial activity happened in the towns. Knoxville produced flour, cotton, and leather goods. Cotton factories were operating in Davidson County around the turn of the nineteenth century. Some claim that the South’s first cotton mill was established near Nashville in the early 1790s. The most important early industries utilized local raw materials. Industrial leaders in the antebellum period produced iron, machinery, hardware, lumber, flour and meal, leather products, cotton goods, tobacco products, and liquor. Iron manufacture was most significant in the early period, although by the eve of the Civil War, grain milling and saw milling led the state in investment and production value.

East Tennessee may have had some iron and lead production as early as the Revolutionary era. By the early 1830s several producers were turning out nails, cast iron ware, and other products for both local and regional markets. Some operations were fairly extensive, including furnaces, forges, bloomeries, nail manufacture, rolling mills, factories, and mining operations. Iron production in Middle Tennessee began in the 1790s. There were over fifty operations by the mid-1850s. Early iron operations were located on rivers or streams, since the metallic iron was produced by water-powered trip-hammers in small forges or bloomeries. Cast, wrought, and rolled iron came from water-powered bellows in blast furnaces and from crude rolling mills. By 1860 Tennessee ranked third nationally in bloomery output.

None of Tennessee’s other antebellum industries were of national significance. While there were textile operations in Knoxville, Nashville, and several smaller towns by the middle of the century, Tennessee’s production trailed far behind neighboring states, not to mention those of New England. Tennessee ranked at about the middle among the states in manufacturing throughout the pre-Civil War period. Even within the state, industry lagged far behind agriculture. Economic, political, and social power and prestige were primarily associated with landowning and such cash crops as tobacco and cotton. State leaders lauded the economic and moral superiority of agriculture, and many small farmers were prejudiced against work in factories.

The Civil War brought an upheaval in economic thought and priorities. After the war, many southern leaders advocated economic reconciliation with the North and industrial development as the keys to a better future. The attraction of capital and industry from the North and foreign countries became a continuing pursuit, and the South became, as some have put it, “industrially articulate.” Inspired by promoters like Henry W. Grady of Atlanta, the concept of a “New South” with a balanced economy of agriculture and industry became a regional crusade. States and cities issued promotional literature and provided tax breaks and various other kinds of subsidies for industrialists who would invest in their communities.

Tennesseans joined in enthusiastically. Politicians, promoters, and newspaper editors preached the gospel of industrialization. Tennessee’s larger cities were the greatest beneficiaries. Speculators and promoters rushed into the Tennessee mountains hoping to exploit their iron deposits and virgin timber. Knoxville and Chattanooga were centers of activity for the agents of northern financiers who were investing in the area. Knoxville attracted a large iron manufacturing company as well as factories producing paper, flour, soap, and other products. By 1870 Chattanooga had some fifty-eight industrial operations, including iron works, furniture factories, sawmills, gristmills, and other factories. During this decade capital investment in the city increased by nearly 450 percent. Nashville had new liquor distilleries, sawmills, paper mills, gristmills, stove factories, and a petroleum refinery. Memphis became the nation’s largest cottonseed processor and attracted many other industries. Other large operations included woolen mills in Tullahoma and Jackson. Jackson also acquired a flouring mill and benefited as well from the migration of midwestern lumbermen, who established sawmills and woodworking plants.

By 1870 Tennessee’s industrial production exceeded pre-war levels. The value of manufactured goods had nearly doubled since the beginning of the previous decade. Throughout the late nineteenth century, however, Tennessee ranked in the lower half among the states and territories in the number of industrial establishments, and its total value of products was dwarfed by the leading manufacturing states. Tennessee industries tended to be labor intensive, depending upon low-skilled, cheap labor. The most important, by value of product, were flouring mills and gristmills, iron works, and lumber manufacturing.

Despite the hopes of promoters, Tennessee did not become a major force in the textile industry during this period. By the middle of the 1870s no cotton mills were in Chattanooga, Knoxville, or Memphis. By the 1890s, southern textile manufacturing was booming, but while there were significant gains in Tennessee’s production of cotton and wool goods, the state lagged far behind the leaders. On the positive side, by 1885 Chattanooga was an iron-making center. The city had nine furnaces with seventeen foundries and machine shops and was regarded as the iron-making center of the South. Memphis remained the national leader in cottonseed oil manufacture. During the 1880s over one hundred new factories were built in Knoxville, including new flouring mills with the latest technological improvements. By 1890 the value of products from Tennessee’s flour and gristmills ranked eleventh among the fifty states and territories.

Lumber products also were important during the late nineteenth century. Significant logging and lumbering occurred in the hardwood and cypress forests of the Big Hatchie Bottoms of West Tennessee and in the mountainous regions of East Tennessee. By 1909 Tennessee led the nation in the production of oak, yellow poplar, and hickory. In addition to lumber and paper, wood from the Southern Highlands was used for the manufacture of photographic print stock at Kingsport, and wood pulp was used for the production of rayon at Elizabethton. After the turn of the century the timber industry of the Cumberland Plateau gave ground rapidly to the coalmen. Logging continued in the Smokies until the last great tree was cut or until the federal government took the land for national parks and forests.

The Census of 1890 reported that, for the first time, Tennessee manufacturing led agriculture as a producer of wealth. The state had moved into a new era. The number of manufacturing establishments had not changed much during the 1880s, but their total capitalization had more than doubled. The state’s leading industries, however, continued to be low-wage and labor intensive. This remained the case long into the new century, and Tennessee ranked about midway among the states in industrial importance. The leading industries continued to include grain milling, lumbering, and iron production, but by World War I, lumbering and the iron industry were declining. Apparel manufacturing, chemical production, and printing and publishing began to appear among Tennessee’s leading industries based on value added by manufacture. World War I stimulated industrial development, with some plants constructed to turn out war-related goods converting to civilian production in the postwar period. By the 1920s Memphis remained the world’s largest center for the manufacture of cottonseed products and was the largest hardwood lumber producer in the United States. Nashville had more than five hundred manufacturing enterprises, and Chattanooga was second in the country in the production of steam boilers and hosiery products. Kingsport was home to the nation’s largest book-manufacturing plant, the Kingsport Press.

The Great Depression of the 1930s hit Tennessee hard, but recovery was faster than in many other states. Tennessee benefited greatly from the creation of the Tennessee Valley Authority (TVA) in 1933. The TVA created construction jobs, provided cheap power for developing industries, and became active in industrial promotion. The state’s industrial mix did not change significantly, and it remained at about the midpoint of manufacturing output among the states. World War II helped Tennessee recover from the depression and also facilitated the transition from an agricultural to an industrial economy. In Memphis the two largest manufacturing facilities converted from automobile parts to aircraft parts production. Nashville turned out aircraft, submarine chasers, and mine sweepers. The Hercules Powder Company in Chattanooga produced TNT. In Kingsport the Tennessee Eastman Company became a significant manufacturer of explosives through the Holston Ordnance Works.

After the war Tennessee renewed its efforts to attract investment. Communities competed feverishly with one another to secure industries and jobs. During this period there were intensive efforts to unionize southern workers, including the CIO’s “Operation Dixie.” Tennessee’s industrial appeal largely rested on a plentiful supply of cheap and tractable nonunion labor and the assurance that community leaders would help prevent workers from organizing. Opposition arose in some southern circles to the influx of higher-wage or unionized firms that might alter traditional business and labor patterns. Local communities subsidized incoming industries with tax breaks and even in some cases compulsory employee contributions to help finance free facilities for their employers. Also, southern leaders traditionally held a tolerant attitude toward pollution and exploitation of natural resources. In fact, some critics argue that other industrial nations such as Germany and Japan removed polluting industries from their own countries and dumped them in the American South.

The composition and location of Tennessee’s industrial mix changed as many plants located in rural areas and small towns rather than the major cities. By 1947 chemical production was the state’s leading industry. Food and kindred products and textile manufacturing ranked second and third respectively. Industrial establishments had increased more than 50 percent since World War II began, and the total value added by manufacturing had more than tripled. Among states with 250,000 or more industrial jobs, Tennessee made the greatest gains during the decade 1955-65.

By the time of the “Sunbelt” ballyhoo of the 1970s Tennessee was considered one of the South’s major success stories. During the first half of the decade, increases in the state’s gross product exceeded the growth rate of the Gross National Product by more than 10 percent and moved closer to per capita equality with the nation. Apparel manufacturing recorded the greatest employment growth of any industry, but most of the state’s increase occurred in high wage operations such as those producing transportation equipment and machinery and chemicals. By 1976 manufacturing accounted for a greater share of total employment in the Volunteer State than in the rest of the nation. With the increasing importance of manufacturing, however, the state became more vulnerable to economic fluctuations and outside factors. The Tennessee Valley region suffered more severely than other areas in the 1975 and 1980-82 recessions.

Now industrial promoters were forced to consider “quality of life issues” as they courted industry. Lawrenceburg constructed a municipal golf course in order to woo an electronics firm, and Union City, after losing a plant, undertook a civic improvement campaign to upgrade its schools, hospital, and recreational facilities. Tennessee also began to build vocational education facilities and community colleges as another inducement for industry to locate in the Volunteer State. Following the old patterns of industrial subsidies, Tennessee offered tax exemptions to industries that would utilize pollution abatement facilities. Meanwhile, state leaders continued to use opposition to organized labor as a selling point to prospective industrial investors.

A 1985 TVA report observed that the pace of economic development in the Tennessee Valley region from 1959 to 1979 was extraordinarily rapid but that future manufacturing employment would decline in the face of foreign competition. Changes in manufacturing employment were already underway that reflected basic structural shifts in the economy. Some factories improved their productivity through new equipment and technology, making them less labor intensive, while many of the traditionally low-paying, labor-intensive operations disappeared or moved to third world countries. Other trends in the national economy, however, promised an even better future for Tennesseans. These included the tendency of many large companies to manufacture their products at lower cost in branch plants away from their corporate headquarters.

The completion of interstate highways and the improvement of air transportation services facilitated decentralization. The Tennessee Valley’s excellent access to growing Sunbelt markets combined with labor surpluses, abundant water and energy sources, pleasant communities, and the pro-development attitude of the region’s leaders to attract branch manufacturing plants. Then, in the 1980s, Tennessee attracted two major companies that built enormous plants and established the state as a major force in the automobile and motor vehicle supply industries.

First to arrive was the Nissan Motor Manufacturing Corporation, U.S.A., which began to produce small trucks near Smyrna in 1983. Tennessee won this plant in 1980 after intense competition with Georgia and other states. The state and local community offered a lucrative package of tax incentives, infrastructure construction, and other inducements. They were rewarded with a plant that would cost more than $300 million to build, produce roughly ten thousand small trucks per month, and employ more than two thousand workers at roughly twice the average yearly wages prevailing in the Smyrna area. By the early 1980s, a dozen Japanese companies were operating in Tennessee, but the Nissan plant represented the largest foreign manufacturing investment ever made by a Japanese company. It was the largest by any new industry in Tennessee history and represented one-sixth of all Japanese industrial investments in the United States.

The Nissan operation was significant not only because of the number of jobs and income it brought to the state, but also because of its advanced technology, innovative participatory management practices, and “just in time” production parts supply system. Tennessee was immediately thrust into the forefront of U.S. motor vehicle production and achieved national recognition as a “hot” location for industrial investment. The spin-off opportunities for secondary suppliers and service providers were obvious.

General Motors soon joined Nissan in Tennessee. Less than two years after the first truck was produced in Smyrna, General Motors formed the Saturn Corporation. In a process very similar to that of its Japanese competitor, the American giant searched for a factory site, put together its preliminary staff, and in return for various inducements from the state and local governments and TVA, announced the decision to locate its production facilities near Spring Hill.

Nissan and Saturn affected the perceptions of Tennessee by outsiders and changed the state’s industrial mix. The 1982 U.S. Census of Manufactures showed that the top five industries of Tennessee, on the basis of value added by manufacture, were chemicals and allied products, food and kindred products, machinery, electric and electronic equipment, and apparel. Transportation equipment ranked tenth. By 1987 apparel had fallen to tenth place and transportation equipment had risen dramatically to third. Other manufacturing areas that supplied the motor vehicle industry, such as tire producers, showed dramatic gains. By 1993 chemicals, transportation equipment, and industrial and commercial machinery were by far the state’s leading exports based on dollar volume.

In the 1990s Tennessee enjoyed stronger economic growth than the nation as a whole, despite a declining employment share in manufacturing and stagnant industrial productivity growth. Manufacturing fell to second place behind the service sector as an employer. Tennessee ranked third nationally in number of manufacturing jobs created from 1991 to 1994, third in overall automotive parts production, and in the top ten in more than seventy-five industrial classifications. In 1995 state exports totaled more than eight billion dollars, led in order by transportation equipment, chemicals and allied products, nonelectric machinery, and electronic and electrical products. Tennessee shipped products to 157 countries and the export trade was responsible for more than 100,000 jobs. Danger signs included labor shortages in Middle Tennessee, high unemployment in some other areas of the state, weaknesses in automobile sales, and the continued slippage of the textile and apparel sectors.

To ensure continued industrial growth Tennessee offers an extensive package of incentives that are consistent with the spirit of southern industrial promotion programs dating all the way back to the late nineteenth century. They include various kinds of sales tax exemptions; investment, excise, and job tax credits; and community development block grants which may be used to assist industries. According to Governor Don Sundquist, the major economic selling points of Tennessee include “a pro-business climate; a high-quality, right-to-work labor force; [and] a superior transportation network.” A state promotional booklet boasts that “‘Goldbricking’ is not part of the Tennessee mindset. Tennesseans take a hearty attitude toward work that matches the state’s right-to-work status.” (1)

State promoters make sure that their message reaches industrialists and investors across the country and around the world. In recent years state advertising supplements have been printed in such publications as Business Week, Financial World, Site Selection, and Plants, Sites and Parks, as well as in slick and colorful brochures and booklets issued by state government agencies, various city and county chambers of commerce, industrial development agencies, and the TVA. The state government’s Web page (www.state.tn.us) contains significant information about Tennessee’s businesses and communities. The Volunteer State has come a long way from its pioneering agricultural roots in the mountains and valleys of East Tennessee.