Looking Back to Look at Now

As economic developers, we have a responsibility to be as fully present as possible in the work we do. Each of us has ideas about the future. Each of us has a history. It always has been and it always will be about "now." Capitalize on the power of now!

The past week or so has allowed me to explore the history of various companies, industries, and communities. I give thanks for each and the "goodness" they represented and "presented" to the world.

In the weeks ahead, I will continue to look back, look at the now, and maybe even look ahead some.

Allow life's mysteries to lead you in your work as you endeavor to "breathe new life into your local economy."

Latest Global Entrepreneurship Trends

More than 12 percent of American adults were engaged in starting a business or running a new one in 2005, according to the latest Global Entrepreneurship Monitor. That's up from 11.3 percent in 2004.

The United States ranks No. 6 globally in early-stage entrepreneurial activity, behind Venezuela, Thailand, New Zealand, Jamaica and China.

Nearly 5 percent of Americans own established businesses, compared with an average of 6.6 percent for the 35 countries in the survey.

The United States and Canada, however, lead the world in high-expectation entrepreneurship -- early-stage businesses that expect to employ at least 20 people within five years. About 1.5 percent of North Americans are high-expectation entrepreneurs, according to the survey.

These entrepreneurs are especially important because 10 percent of new firms expect to create nearly 75 percent of the new jobs generated by early-stage businesses.

The GEM survey, which is directed by Babson College and London Business School, also found that high-expectation entrepreneurs tend to be males less than 44 years old.

For more information, see www.gemconsortium.org.

India's Rise by 2025

India will by 2025 emerge as one of the foremost nations in the world politically and economically, according to a global scenario report compiled by leading energy company Royal Dutch Shell.

The report, titled "Shell Global scenarios to 2025", highlights India's young population, vibrant entrepreneurial spirit and strong institutions as its drivers of growth.

"India has been much more efficient than China at using capital. China has invested twice as much as India over 10 years and yet only achieved an average growth rate that is about 50 percent higher than India's," it says, according to INEP agency.

Read more here.

Why the Focus on History?

A friend asked me last night why I was giving so much attention to the "past" in the ED Futures' series on business and industry history. He commented that too many communities he works with try to live in the past, instead of living in the present and planning for their future.

I replied that I agreed 100% with him that communities need to live in the "present," and should give attention to shaping their future. The present is actually "ever present." It's always the present. The "past" and the "future" are temporal concepts. Nothing more. Communities that are "fully present" are those most likely to succeed.

Now, why the historical focus on business and industries? Simply it gives us an opportunity to watch the movie that a specific industry or company represents. A look at history can help us understand why things are the way they are today; that is why we have the present we have now. As economic developers, we need to be more "mindful" of the present and power that lies in it. History can help us access that power.

Here is a statement about the value of history from Tulane University's History Department: "The true value of history lies in what it tells us about the world in which we live. At birth we enter a world which we did not create, and which we come to understand only in part, and then only gradually. With time, in our own day, our awareness of that world extends beyond household, neighborhood and region to encompass many other parts of the world. But even the most distant parts of the world represent only that portion of humanity which is presently alive. All aspects of our existence are products of much longer periods of development, and their continuity and change remain only dimly evident to us until we begin to learn something about the past." That kind of sums up what I am trying to say."

History of the B&O Railroad

My Granddad worked on the railroad in Wheeling, WV. My Dad remembers hopping boxcars from Benwood to Wheeling as a young boy. The railroad has a rich and interesting history. You might find this short piece on the B&O Railraod to be of interest.

The Baltimore and Ohio Railroad (B&O) is one of the oldest railroads in the United States, with an original line from the port of Baltimore, Maryland west to the Ohio River at Wheeling, West Virginia and Parkersburg, West Virginia. It is now part of the CSX network, and includes the oldest operational railroad bridge in the world. The B&O also coincidentally included the Leiper Railroad, the first permanent railroad in the U.S. The railroad's former shops in Baltimore, including the Mt. Clare roundhouse, now house the B&O Railroad Museum.

American Business History: Rise of Big Business

Taken from: The Rise of Big Business (Digital History Website)

"Between 1869 and 1910, the value of American manufacturing rose from $3 billion to $13 billion. The steel industry produced just 68,000 tons in 1870, but 4.2 million tons in 1890. The central vehicle of this surge in economic productivity was the modern corporation.

In recent years, Americans have often been told that we have entered a "new economy." The older industrial economy, it is said, is giving way to a new global economy based on computers, the Internet, telecommunications, and entertainment. This is not the first new economy in American history. Following the Civil War, a new economy emerged in the United States resting on steam-powered manufacturing, the railroad, the electric motor, the internal combustion engine, and the practical application of chemistry. Unlike the pre-Civil War economy, this new one was dependent on raw materials from around the world and it sold goods in global markets.

The transformations that took place in American business following the Civil War involved far more than a change in industrial techniques or productivity. Business organization expanded in size and scale. There was an unparalleled increase in factory production and mechanization. By the beginning of the twentieth century, the major sectors of the nation's economy--banking, manufacturing, meat packing, oil refining, railroads, and steel--were dominated by a small number of giant corporations."

Click here to continue reading this interesting story.

Georgia Economic History Program

Imagine a program that educates children, and anyone else with an interest, about their local economic history! Georgia has one and I think it's great. Learn more by visiting the program's website here.

Did you know that Georgia is the birth place of the tufted carpet industry? Through the late 1800s, Dalton, Georgia, struggled with cotton mills and steel manufacturing works to forge a small town in the north Georgia hills. Northwest Georgia, with its hard-packed clay, poor farmland, and rolling hills was among the last areas of Georgia settled. Rich in a heritage of Cherokee Indians and Civil War battles, that northern corner of the state was rugged and spawned people who were independent and self-sufficient. Those were the people who brought forth and nurtured the tufted textile industry. The industry's infancy was in Dalton; it has gone through intense growth in Dalton; and it has now matured in and around Dalton. The carpet industry's impact is great on this region, this state, and the nation; and the story of its growth is unique.

Get RCA's 1939 Annual Report Here

Looking for "old" corporate annual reports. Check out the University of Pennsylvania's Library.

(Postcard Photo): Victor Building, Camden, NY, early 1900s

Here is an excerpt from the 1939 RCA Annual Report:

"In 1939 Radio Corporation of America (RCA) completed its twentieth year of operation.

Organized in 1919 primarily as a wireless telegraph company, it has expanded its activities to all fields of radio, and its products and services are known and used throughout the world.

This report covers the operations of the Corporation and its wholly-owned companies for the year 1939.

Operations of all RCA companies were on a profitable basis. Consolidated gross income was $110,494,398, anincrease of $10,526,288 over the preceding year. Consolidated net profit was $8,082,811, an increaseof $670,739 over the preceding year."

What will we think of Microsoft, Wal-Mart, and our other current corporate giants in 65 or 70 years?

Michigan Technological University's Industrial Archeology Studies

Did you know you could get a Masters Degree or a Ph.D. in Industrial Archeology? If industry isn't growing in your area and an Industrial Development Degree won't do you any good, consider Industrial Archeology. In all seriousness, this is a valuable resource to economic developers trying to understand and call attention to their area's industrial heritage.

(Photo) Early Ford Motor Company Headquarters Building, early 1900s, Detroit, Michigan. Credit: Industrial Ruins of Detroit Project.

Broadly speaking, Michigan Technological University Industrial Archaeology Program (IAP) is about the recording, study, interpretation, and preservation of the physical remains of industrially-related artifacts, sites, and systems within their cultural and historical contexts.

These remains may be as old as a seventeenth-century bloomery forge, or as recent as an abandoned mid-twentieth-century steel mill. In practice, IA in the US and UK generally focuses on the period of the industrial revolution and later, though there is a strong connection to the study of earlier technologies, particularly in the area of archaeometallurgy.

Industrial Archaeology emerged as a distinct field of study in the United Kingdom in the 1940s and 50s, when historians, preservationists, archaeologists, and engineers became concerned that many of the key relics of Britain's industrial heritage were disappearing. By the 1960s and 70s, the IA movement had spread across the Atlantic to the United States, as well as continental Europe, spawning several journals, and a number of professional associations, including the Society for Industrial Archeology, based at Michigan Technological University.

Great Lakes Industrial History Center

The Great Lakes Industrial History Center provides a resource where the public can gain an appreciation for the efforts and accomplishments of business and industry which led to the opening of the Great Lakes and the industrial development of adjacent regions and where visitors are inspired to continue the pursuit of inventiveness, ingenuity, and excellence. Learn more about the Center here.

Cleveland's Industrial Flats shown in 1939 at the peak of the area's industrial history. Photo credit: Cleveland Memory Project

History of Southeast Ohio's Coal-Mining Industry

I grew up in Ohio's coal-mining country (Belmont County) in the 1950s and 1960s. I knew firsthand what the industry was like, how it treated people, and the land. In a nutshell: not so well, but it was a source of income to many families in the region.

"To the person not a native of the coal regions, it is difficult to comprehend how completely coal mining dominated every aspect of the life and physical appearance of the communities in the coal counties. At the peak of hard coal mining, patch towns were as ubiquitous as the breakers and mines. The term "patch town" originated with the custom of the wives of the miners having small garden patches to supplement the meager wages of their husbands. These patch towns were constructed by the mine owners to house the throngs of immigrants from various European nations who were recruited to work in the mines. The houses were built cheaply and crudely near to the mine workings so that the miners could walk to work." Eric McKeever

Click here to read more about the history of the industry in the region.

Click here to read what the Ohio Dept. of Natural Resources has to say about the history of coal mining in Ohio.

History of the Amusement Park Industry

As a child, you, like millions of other children, enjoyed going to a nearby amusement park. I know it did. For me, it was Kennywood Park in the Pittsburgh area.

Here is a short history of the amusement park industry, which is reprinted from the National Amusement Park Historical Association (NAPHA) website. All credit is due the NAPHA.

The amusement park industry is a major economic generator. Click here to see some industry statistics.

"The roots of the amusement park industry go back to medieval Europe when pleasure gardens began to spring up on the outskirts of major European cities. These gardens were a forerunner of today's amusement parks, featuring live entertainment, fireworks, dancing, games, and even primitive amusement rides. Pleasure gardens remained extremely popular until the 1700's, when political unrest caused many of these parks to close. However, one of these parks remains: Bakken, north of Copenhagen, which opened in 1583 and now enjoys the status of the world's oldest operating amusement park.

In the late 1800's , the growth of the industry shifted to America. Following the American Civil War increased urbanization gave rise to electric traction (trolley) companies. At that time, utility companies charged the trolley companies a flat fee for the use of their electricity. As a result, the transportation companies looked for a way to stimulate weekend ridership. This resulted in the amusement park. Typically built at the end of the trolley line, amusement parks initially were simple operations consisting of picnic facilities, dance halls, restaurants, games, and a few amusement rides often located on the shores of a lake or river. These parks were immediately successful and soon opened across America.

The amusement park entered its golden era with the 1893 World's Columbian Exposition in Chicago. This World's Fair introduced theand the amusement midway to the world. The midway, with its wide array of rides and concessions, was a huge success and dictated amusement park design for the next sixty years. The following year, Capt. Paul Boyton borrowed the midway concept and opened the world's first modern amusement park -on Chicago's South side. Unlike the primitive trolley parks, the Water Chutes was the first amusement park to charge admission and use rides as its main draw rather than picnic facilities or a lake. The success of his Chicago park inspired him to open a similar facility at the fledgling Coney Island resort in New York in 1895.

The amusement park industry grew tremendously over the next three decades. The center of the industry was Coney Island in New York, which at its peak was home to three of America's most elaborate amusement parks along with dozens of smaller attractions. Around the world, hundreds of new amusement parks opened, while many early trolley parks expanded by adding new rides and attractions. New innovations provided greater and more intense thrills to the growing crowds. By 1919, over 1,500 amusement parks were in operation in the United States. Unfortunately, this glory did not last.

In 1929, America entered the Depression, and by 1935 only 400 amusement parks still remained; many struggling to survive. World War II further hurt the industry, when many parks closed and others refrained from adding new attractions due to rationing.

With the end of World War II, America and the amusement park industry enjoyed post war prosperity. Attendance and revenues grew to new records as new parks opened across America. A new concept, the Kiddieland, took advantage of the post-war baby boom, introducing a new generation to the joys of the amusement park in the rapidly growing suburbs. Unfortunately, this resurgence was short lived.

As the 1950's dawned, television, urban decay, desegregation, and suburban growth began to take a heavy toll on the aging, urban amusement park. The industry was again in distress as the public turned elsewhere for entertainment. What was needed was a new concept and that new concept was Disneyland.

When Disneyland first opened in 1955, many people were skeptical that an amusement park without any of the traditional attractions would succeed. But Disneyland was different. Instead of a midway, Disneyland offered five distinct themed areas, providing "guests" with the fantasy of travel to different lands and times. Disneyland was an immediate success, and as a result, the theme park era was born.

Over the next several years, there were many unsuccessful attempts to copy Disneyland's success. It wasn't until 1961, when Six Flags Over Texas opened, that another theme park was successful. Throughout the 1960's and 1970's, theme parks were built in many major cities across America. Unfortunately, while theme parks were opening across the country, many of the grand old traditional amusement parks continued to close in the face of increased competition and urban decay. However, some of the traditional parks were able to thrive during the theme park era because the renewed interest in amusement parks brought people back to their local park. In addition, many older traditional parks were able to borrow ideas from theme parks and introduce new rides and attractions to their long-time patrons.

As the 1980's dawned, the theme park boom began spreading around the world. Meanwhile, theme park growth slowed considerably in the United States due to escalating costs and a lack of markets large enough to support a theme park.

Today the amusement park remains an international favorite. Many developing nations are experiencing the joys of the amusement park for the first time, while the older, more established amusement parks continue to search for new and different ways to keep their customers happy. Rides are taking advantage of technology to reach heights and speeds that thrill seekers only dreamt about not too long ago. Perhaps this is a new golden age."

Insurance In Connecticut

The battle to keep Connecticut an insurance industry capital continues. Click here to read the article.

What's happening to the insurance industry? Let's look at the major business issues in the industry. Here are a few insights Connecticut officials might consider.

OVERVIEW

In the U.S., 5,000 companies provide insurance coverage of various sorts, with combined annual revenue of about $1 trillion. Large companies include American International Group (AIG); MetLife; Aetna; and Allstate. The industry is highly concentrated: the 50 largest companies hold more than 60 percent of the market. Within product segments, concentration is even higher.

COMPETITIVE LANDSCAPE

Demand is driven by demographics and commercial transactions. The profitability of individual companies depends on the ability to accurately estimate the future claims or benefits they will have to pay. Large companies have big economies of scale in administration and in access to capital. Small companies can compete successfully by specializing in particular products or industries.

PRODUCTS & OPERATIONS

Major products are accident and health insurance; property and casualty (P/C) insurance; life insurance; and the sale of annuities. Premiums earned from these products account for about 30 percent, 28 percent, 10 percent, and 12 percent of industry revenue, respectively.

All insurance carriers operate in essentially the same way: they collect premiums today in exchange for paying claims or benefits in the future. Their revenue consists of insurance premiums and income from the large investment portfolios they hold. The number of insurance products is large, and each has different premium plans and claim options.

CRITICAL ISSUES

Investment Income Depends on Economic Conditions - The revenue of insurance companies depends highly on economic conditions. During economic slowdowns, fewer business transactions (like home sales) occur that require new insurance, and investment income can be sharply reduced if the stock market or interest rates are lower. Investment income typically accounts for more than a third of total revenue at large insurers.

Real gross domestic product, the output of goods and services produced by labor and property located in the US, increased at an annual rate of 3.8 percent in third quarter 2005, according to the Bureau of Economic Analysis.

Individual Insurers may have Catastrophic Losses - Large-scale claims have become more common and individual insurers may have concentrations of risk. Katrina is a major loss to be considered. Although insurers often spread risks through reinsurance, unknown risks can be large enough to drive insurers out of business. Fortress Re, a large aviation insurer, went out of business following the 2001 terrorist attacks.

US property/casualty (P/C) insurers paid an all-time record $40.8 billion to homeowners and businesses for insured property losses in 14 states in 2005, according to preliminary estimates by ISO, making it the costliest year for catastrophe damage.

Rates Depend on Regulators - Because insurers have difficulty forecasting future claims for a variety of coverages, including auto and health insurance, they've frequently had to appear before state insurance commissions to ask for higher rates. Although insurance commissioners wish to maintain the financial health of insurers, they're also influenced by political considerations, and frequently grant lower rates than insurers ask for.

Specialized Risk Difficult to Assess - The rapid expansion of the US economy during the 1990s created strong demand for insurance products to cover a wide variety of commercial and industrial needs. However, the more specialized or customized the insurance policy, the more difficult determining the actual risk is. Insurance companies may be holding risks that they're not fully aware of.

Exposure to Unknown Risks - In the past decade, insurers have sustained large losses on hitherto unknown risks, such as asbestos' exposure, environmental cleanup costs, and terrorist attacks. Although insurance policies are being written more carefully by insurers in a bid to exclude coverage for certain types of catastrophic events, other unknown future liabilities may arise. The difficulty of collecting reinsurance is increasing for property/casualty (P/C) insurers. Although many P/C insurance companies are building large reserves with higher premiums, most still depend too heavily on reinsurers to pay up in case of catastrophic loss.

Competition from Foreign Insurers - In recent years, large foreign insurers like ING, Axa, and Converium (formerly Zurich Re) have expanded their US operations.

Terrorism Risk - Terrorism remains a major unknown for the insurance industry, since insurance underwriters have no foundation for accurately pricing its risk. As a result of federal legislation signed into law November 2002, all commercial insurers must offer terrorism coverage, which makes the insurance business riskier because of uncertainty about losses from future attacks, how the federal backstop actually works, and if insurers will be able to buy reinsurance protection against future attacks.

Mixed Results for Managed Healthcare - To contain the rapidly rising costs of healthcare, insurers have enrolled policyholders in managed care plans on the premise that healthcare can be delivered more efficiently if it contains systems for review of medical necessity. While managed care had early successes in reducing wasteful medicine, US healthcare costs have recently resumed high rates of growth, while patient and doctor dissatisfaction with the intrusion of insurance companies into medical practice has grown.

Medical Malpractice Insurance - The rising cost and frequency of malpractice claims are leading many medical insurers to stop offering coverage. Insurers say medical malpractice reforms are necessary to stop soaring medical liability insurance rates. Medical malpractice premiums in the US jumped 400 percent in the past 30 years. Insurers are pushing for tort reform legislation that, among other things, would cap non-economic damages in medical malpractice cases.

Contact ED Futures for a price quote on a full profile of this sector. enail: dtia@don-iannone.com, and phone: 440.449.0753.

Urban Centers Fuel Saskatchewan's Growth

Lower taxes and larger urban centres are key to growing Saskatchewan's rural economy, according to three agricultural economics professors at the University of Saskatchewan.

"Sometimes we think of urban versus rural. I think that's very destructive. It has not served us well," said Rose Olfert, U of S professor and associate director of the Saskatchewan Institute of Public Policy.

Read more here.

China's Foreign Direct Investment Outlook

China expects foreign investment to remain at about $60 billion in 2006 and has no plans to restrain such flows from overseas, a state media report said Monday.Foreign direct investment in 2005 totaled $60.3 billion in 2005, down 0.5 percent from 2004, when such investment totaled $60.6 billion, the Commerce Ministry reported.

Read more here.

ED Futures Newsletter

Dear ED Futures Reader,

Welcome to the latest issue of the ED Futures newsletter.

I hope your New Year is starting off in a productive and meaningful way. Mine is doing just that.

History! It is too easily forgotten in our rush to the future. It's important to understand the history of our communities, industries, and companies. Most importantly, we should know the people who made our history (and our future) possible.

Whose shoulders are you standing on to see what lies ahead? Invest in an understanding of your area's history. You will learn a lot about why things are the way they are today.

I would encourage you to review the many company histories I have posted to the ED Futures website in the past week. Please feel free to share your thoughts. They are only examples, and none is a complete history. View them as starting points.

I hope to hear from you.

Best wishes,

Don Iannone
ED Futures Publisher
Email: dtai@don-iannone.com
Phone: 440.449.0753

Corporate History: Chiquita Brands International, Inc

Chiquita Brands International, Inc.

Lorenzo Baker sailed into Jersey City, New Jersey, in 1870 with 160 bunches of Jamaican bananas. Baker arranged to sell bananas through Boston produce agent Andrew Preston and, with the support of Preston's partners, the two formed the Boston Fruit Company in 1885. In 1899 Boston Fruit merged with three other banana importers and incorporated as United Fruit Company. Soon the company was importing bananas from numerous Central American plantations for expanded distribution in the US.

United Fruit entered the Cuban sugar trade with the purchase of Nipe Bay (1907) and Saetia Sugar (1912). It bought Samuel Zemurray's Cuyamel Fruit Company in 1930, leaving Zemurray as the largest shareholder. Zemurray, who had masterminded the overthrow of the Honduran regime in 1905 to establish one favorable to his business, forcibly established himself as United Fruit's president in 1933.

In 1954, when Guatemalan president Jacobo Arbenz threatened to seize United Fruit's holdings, the company claimed he was a communist threat and provided ships to transport CIA-backed troops and ammunition for his ultimate overthrow.

Diversifying in the 1960s, United Fruit purchased A&W (restaurants and root beer, 1966) and Baskin-Robbins (ice cream, 1967). Eli Black, founder of AMK (which included the Morrell meat company), bought United Fruit in 1970 and changed its name to United Brands. Through American Financial Group, Carl Lindner began acquiring large amounts of United Brands' stock in 1973; he became chairman of the company in 1984. During the 1970s and 1980s, United Brands sold many of its holdings, including Baskin-Robbins (1973) and A&W (restaurants, 1982; soft drinks, 1987).

The firm became Chiquita Brands International in 1990. Chiquita acquired Friday Canning two years later. It then began divesting its meat operations, and all were sold by 1995.

In 1993 the European Union (EU) set up trade barriers against banana imports from Latin America, favoring banana-producing former European colonies in the Caribbean. The preference system angered Chiquita, whose bananas come from non-favored countries, although it retained more than 20% of the European market. In 1997 the WTO ruled the EU's trade policy illegal; the battle continued, however, over just how open the market should be.

Chiquita bought vegetable canners Owatonna Canning (1997), American Fine Foods (1997), and Stokely USA (1998) and merged them with Friday Canning in 1998. Also that year Hurricane Mitch destroyed Chiquita plantations in Honduras and Guatemala, costing the company $74 million. Sales were not affected though, as Chiquita was able to turn to growers in Ecuador and Panama. In 2000 the company announced cost-cutting efforts that included job cuts and a reorganization of some divisions.

Beset by a weakened European currency and a banana glut, the company announced in January 2001 that it was unable to pay its public debt. Chiquita also sued the European Commission, demanding $525 million in damages, due to the EU banana trade policy. The EU and the US later reached an agreement modifying quotas and tariffs until 2006, when all such restrictions are set to end. In November 2001 Chiquita filed a debt-restructuring plan under Chapter 11 seeking approval for an agreement the company made with bondholders to change more than $700 million of debt into equity. The plan was approved and the reorganization went into effect in mid-March of 2002 and the company began trading again on the NYSE. That same month, Chiquita announced the resignation of Steve Warshaw as the company president, CEO, and director. Cyrus Freidheim Jr. was named new chairman and CEO.

In 2002 Chiquita sold its interest in the Midwest wholesale produce distribution business operated by the Castellini group of companies to Castellini management for about $45 million, which includes debt assumption and $21 million in cash.

The company sold its Los Angeles-based Progressive Produce to Progressive's management for about $7 million in 2003. Also that year Chiquita acquired Atlanta AG, one of Germany's leading fresh fruit and vegetable distributors.

In a move to further concentrate on its fresh produce business, in 2003 the company sold its subsidiary, Chiquita Processed Foods (vegetable canning), to Seneca Foods for $110 million in cash, as well as stock, and debt assumption.

Also that year Chiquita sold its unprofitable Pacific division, located in Panama (Puerto Armuelles Fruit Co.) to a cooperative of banana workers. It sold its joint venture with The Packers of Indian River, a grapefruit grower and packer, to its joint venture partner. Chiquita also sold its interest in the Florida joint venture with The Packers of Indian River.

In May 2004 Chiquita voluntarily disclosed that it had paid "protection money" to terrorist groups at its banana-growing operations in Colombia. In June the company sold its Colombian banana operations to Columbian banana company C.I. Banacol SA for about $52 million. In February 2005 the Court of First Instance ruled against Chiquita in its suit against the European Commission.