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                    <text>RATIONAL
REINDUSTRIALIZATION

-

-

an economic development agenda
for detroit
dan luria

jack russell
$3.00

�--------------------•

RATIONAL REINDUSTRIALIZATION
Copyright © 1981
Rational Reindustrialization is an
agenda for the creation of 100,000
secure, well-paid industrial jobs in
Detroit.
It consists of the phased
implementation of a program that includes converting idle, mainly automotive, productive capacity to the
manufacture of energy hardware for the
oil, gas, and coal gasification industries. Because private capital cannot
be counted on to assume the risks
associated with such a conversion
program, Rational Reindustrialization will be at least partially based
on public/worker enterprises.

Dan Luria is principal energy and automotive
regulatory analyst in the Research Department of the United Auto Workers Union (UAW).
He has been politically active in Detroit
since moving there in 1976.

Jack Russell has lived and worked politically
in Detroit for the past decade. Since 1978,
he has served as economic development policy
analyst on the staff of Detroit City Councilman Kenneth V. Cockrel.
Orders
Widgetripper Press
c/o Russell, 19660 Stratford, Detroit, MI 48221
Make checks payable to authors
Bulk Rates Available

First Printing
Text preparation:
Cover photo:

Beverly Bydlos
Russ Marshall

�0

T E: LIB

Preface
As we enter the 1980s, is there any compelling
reason to believe that the cities of America's midwestern
industrial crescent will survive as productive human settlements? Detroit and Cleveland, Akron and Youngstown, Buffalo,
Gary and the rest have suffered massive economic dislocations;
the specter of regional disaster
looms.
Accelerating
ind us trial dis investment may destroy the American Foundry,
wasting productive lives and capital, as the once-thriving
workshop cities become austere reservations containing a
surplus, unemployable population.
In benighted homage to
"market forces," some observers baldly court such a future,
holding that frostbel t cities are beyond help, and that pouring
resources into their redevelopment is a bad investment.
we reject this prospect as morally indefensible,
politically destructive, and economically wasteful and irrational. we believe that reasonable human beings with different stations in the economy and with distinct needs and interests can nevertheless find a rational common ground from which
to advocate and plan the regeneration of our region, even as
our political contests continue.
In this essay, we seek such a common ground by
offering an agenda for the revitalization of Detroit, one which
in generic form applies to other northern cities as well. We
argue that frostbelt reindustrialization requires moving beyond past exercises in wishful thinking, right and left alike,
about how to plan an economy.
Some readers may find our

�2

Rational Reindustrialization

contribution too pragmatic and apolitical, while others may
judge it hopelessly left-utopian. We yield to both er i tic isms,
asking only that they be made as forcefully as possible.
Rational Reindustrialization was written to help
advance the level of debate in Detroit and the United States
over questions of industrial policy and urban revitalization.
we openly seek the attention of investment bankers and UAW
local education committees, of frostbelt politicians and corporate leaders, of urban planners and the urban unemployed,
of Detroit's Economic Growth Corporation and Detroit's community organizations, of Felix Rohatyn and the thinking left,
of Doug Fraser, Roger B. Smith and the hundreds of thousands
of workers who depend on the organizations they lead.
We do not pretend equal solidarity with all of
these groups and representatives. We are unabashedly opposed
to most aspects of laissez-faire and state capitalism alike.
We are not impressed with what orthodox economic development
policy has to offer the working majority of America's Detroi ts.
We see scant evidence that either the free market ideologues
of the Reagan right or the stunned liberals groping for poli tical survival have a program to reindustrialize Detroit and
other frostbelt centers. We speak with conviction from the
left, but reject as irrelevant the vagaries of those sectarian
"leftists" who seem incapable of understanding the strategic
politics of reform. Amid the chatter, however, we hear increas~ng interest from a number of quarters in the planned restructuring of the urban economy and the innovations that might enable
such an undertaking.
.
~ational Reindustrialization is the product of two
Detroiters without formal training in the field of economic
development.
We have been schooled in such matters by the
J?ressures of. t1:ade union and local government politics in Ameri~a's most d1sinvested city. This essay is our modest contribution toward the program around which a coalition to rebuild
Ame~ica's cities and industrial base must someday unite if a
rational economy is to be constructed.
Detroit
August 1981

�Table of Contents
5

INTRODUCTION
THINKING RATIONALLY
ABOUT REINDUSTRIALIZATION

12

OUR PRODUCTION LINE:
ENERGY HARDWARE

15

Deep Gas and Heavy Oil Equipment

16

Cogenerators and Industrial
Process Engines

17

Minemouth Gasifiers

18

ON THE PUBLIC ACCOUNT

28

TOWARD THE RATIONAL
REINDUSTRIALIZATION OF DETROIT

35

Pilot Project Phase

38

"Mixed Enterprise Zone• Phase

44

Mature Plan Phase

51

NATIONA~ POLICY AND
RATIONAL REINDUSTRIALIZATION

52

Policy for the Auto Transition

52

Policy for the Energy Transition

55

Policy for Capital Targeting

56

OUR AGENDA CAN WORK

60

�Introduction
Detroit is wounded.
For thirty years, we have
bled jobs and capital to the suburbs, to the South, and overseas.
During the past five years, Detroit's condition has become
critical. New wounds have been opened. We have hemorrhaged
economic life as never before. In the 1980s, a city once the
vital hub of America's Great Lakes industrial heartland is
becoming a grim monument to the waste of an unplanned economy.
While the Mayor exhorts the taxpayers to save our City, a
Presidential Commission has concluded that America's Detroits
are disposable containers of economic activity which, now
nearly empty, may be cast aside.
Detroit's economy is being killed by industrial
disinvestment.
Detroit's major manufacturers have not returned to the city the weal th we have created. On the contrary,
the profits produced by Detroit labor have built new factories
elsewhere, or been distributed to stockholders, or funded often
ill-advised corporate adventures. In 1947, the city held over
280,000 manufacturing jobs in some 3,300 firms. Today, Detroit
hosts less than 100,000 such jobs in fewer than 1,700 firms.
This industrial disinvestment has eroded our tax base and distorted our expenditure priori ties. It is the fundamental cause
of the municipal fiscal crisis we now confront and with which
we will continue to struggle for years.
Proclamation of Detroit's Renaissance will not end
the trauma of industrial disinvestment.
Downtown recommercialization can replace neither the number nor the quality
of the jobs lost as our industry dies.
The family of the
unemployed auto worker is not saved by employing one daughter
as a file clerk at the Renaissance Center or one son as a
security guard at Riverfront West. Indeed, the past four years
have shown the fragility of the downtown Renaissance and how
clearly its full development is endangered by the continuing
destruction of Detroit's industrial base.
We believe that the 1980s will determine Detroit's
fate: either industrial Detroit will be rebuilt and recover
an important position in the national economy, or disinvestment
will destroy the life chances of our youth, our capacity for
local self-government, and much of the useful wealth created
by three generations of Detroi ters.
By the 1990s, Detroit
will either be a diversified manufacturing center of~ new
kind, or it will be a discarded city of vacant factories and

�6

Rational Reindustrialization

abandoned homes from which the remaining affluent shield themselves in residential enclaves and a well-fortified downtown.
If Detroit is to survive as a city in which working
people can prosper, we must ~edefine and reord~r our develo?ment priorities.
we believe that a rational economic
development strategy for Detroit must be a least-cost program
to retain and create tens of thousands of high-wage, cyclically
insensitive industrial jobs. This essay is a first sketch of
such a program. Before we present our arguments, however, we
should enter three caveats.
First, we are not opposed to the relocation of investment capital within cities of a metropolis, regions of a nation, or
even the nations of the world. We oppose only its unplanned,
socially wasteful, and privately con trolled movement.
Once
the relatively high wages enjoyed by Detroit auto workers had
filled up the city's available space with single family homes,
it was inevitable and desirable that those forms of auto production requiring extensive space would subsequently be built in
suburban and rural greenfields. But it was neither inevitable
nor desirable that metropolitan Detroit be politically balkanized into hostile municipalities differentiated by class and
race; that metropolitan tax base sharing would thus become
impossible; that a powerful auto/oil/construction/consumer
durables lobby would decree the federal highway and mortgage
policies that replicated the suburban phenomenom section by
section to 26 Mile Road and beyond; that Detroit would be
gutted by freeway trenches rather than served by mass transit;
nor that the city's commerce would be mauled by the placement
of major shopping centers just beyond its borders. The spatial
catastrophe of metropolitan Detroit is a sufficient argument
for greater social control of investment.
Similarly, the siting of some new auto plants in
the We~t and the South has been a logical and desirable response
~o regional growth and the development of new markets. But it
is hardly in the interests of society as a whole that some
firms leave Michigan because unionized workers can claim a
greater share of the wealth they produce and because our citizens have organized politically for better protections from
unsafe work and the vagaries of the capitalist business cycle.
.
We w~ll not a~vocate the socially irrational imP71s~nment of private capital within Detroit or southeastern
Michig~n. _we will argue for radically increased government
au~hority 1n. the economy; for new structures that allow barga~ned planning beween private capital labor and government;
an for an overall economic developme~t pla; that will eventua!ly allow the City and its agencies to appropriate and reinves locally some of the weal th the planned semi-public economy
creates.
'

�Introduction

7

Second,
we
are
not
opposed
to
Detroit's
Renaissance.
We do believe it should be demystified.
The
much-celebrated rebirth is in essence an attempt to protect
the
value of existing
investments and future profit
opportunities in the downtown hub.
The banks, retailers,
utilities, and other businesses downtown have been threatened
by the disinvestment of Detroit, especially since 1967. The
Renaissance was their self-interested redevelopment strategy
long before it became the keystone policy of the Administration
of Mayor Coleman Young. By logic and law, many of the down town
businesses are less mobile than industry. They must stay and
protect their futures. We hope they build and succeed.
We do challenge, however, the terms they offer for
development, the logic of their strategy, and the absurd conceit
that somehow their success will be the salvation of a city
ravaged by industrial disinvestment. This is not the place
for an exhaustive review of the terms that business has demanded
and won for the investments that have moved downtown Detroit
forward, fitfully, since the mid-1970s. When and if just the
beachhead projects (Trolley Plaza, Riverfront West, the
Millender Center, and the Cadillac Mall) are completed, hundreds of millions of federal and local public revenues will
have facilitated these private developments.
Even with this huge taxpayers' subsidy, the downtown commercial renaissance is risky business. Unlike, say,
Chicago, Detroit is a post-automobile city. Detroit grew up
between 1910 and 1930 as a low-density, spread-out city with
development determined primarily by industrial locations. The
financial/commercial/cultural/administrative functions associated with the downtown hub were less substantial than in
other cities, and never generated a significant nearby residential community. Depression and War caused a 20-year hiatus
in any further hub development, and by the 1950s the freeway
network converging on the central business district insured
that the vast majority of the region's affluent households
would locate in the suburbs even if the primary breadwinner
worked down town.
The grand designs for the future development of
downtown Detroit are based upon the questionable belief that
many thousands of salaried professionals and managers can be
induced to settle there with their families. Some will surely
be attracted to the amenities of the river and the hub, but
with Detroit's extraordinary upper-middle-class home bargains
and the comfortable, secure suburbs just minutes away by freeway, we believe the downtown Renaissance may well abort. Given
the high risk, the developers' current terms, the narrow strata
of the population served, and the limited impact on the local
economy, we do not believe that the downtown strategy should

�8

Rational Reindustrialization

have priority claims on the City's precious economic development resources.
Even if our skepticism is unfounded, and downtown
Detroit is recommercialized on the foundation of a substantial newmarket-rate residential community, it is not at all
obvious what that offers most Detroiters. To what extent, we
ask
would the huge economic damage wrought by ind us trial
disinvestment be repaired by a flourishing service economy in
the hub?
Unfortunately, even a booming commercial Renaissance on the riverfront and downtown would not meet the needs
of working class Detroit. It would not deliver the jobs. When
built, the Riverfront west luxury apartments will employ fewer
than 15 people; the Trolley Plaza building will provide no
more; nor will the other contemplated residential developments.
The proposed Detroit Hilton might contribute 1,000.
The
Cadillac Center, if ever built, would add at most 2,000 new
jobs to the Detroit economy. Each job is welcome, but it is
fantasy to hope that hotels, a shopping center, some office
buildings, and the service needs of wealthy condominium owners
will be able to employ the workers, and the children of workers,
who have been discharged from our closed factories. Moreover,
the jobs that the commercial Renaissance may provide will contribute far less to the families of the employed and to the
economy of the city than have the high-wage, national market,
industrial jobs they "replace."
During the past 30 years, Detroit has lost 27% of
its population but nearly 70% of its jobs in manufacturing.
In 1981, over 400,000 Detroiters -- one in every three -- receives some form of public assistance. No rebirth of downtown,
,, even if it succeeds against heavy odds, will provide the resources to heal our community. A different conception of economic
development must address the needs of the majority.
.
Third, we acknowledge the important efforts at
community develop~ent in Detroit, but argue that these efforts
at best only partially balm the wounds of disinvestment; they
do not c~nst1tute a cure for the disease. Detroit needs all
the housing dollars a~d programs we can get, but we should
understand ~hat the neighborhoods created by a high-wage, high
employment industrial economy between 1910 and the 1950s will
not be renewed, especially at today• s cos ts
in an economy
based on trans!er payments from the federal g~vernment and on
low-w~ge service employment.
The best housing program for
Detroit would be one that reopens our plants and employs our
homeowners.
.
.
Similarly, most neighborhood commerce cannot survive drained by the suburban malls and dependent on the Detroit

Ir

�Introduction

9

poor. If Detroit can reindustrialize and employ our people,
then neighborhood merchants will have a chance. If industrial
disinvestment continues unchecked, we will have boutiques for
the downtowners and party stores for the people.
The small manufacturers and job shops,
portant element in most Detroit neighborhoods, are
gered by disinvestment. As the big plants close,
up; family owners are forced to consider relocation

long an imalso endanorders dry
or closing.

Efforts to regenerate our housing stock, stabilize
some neighborhood commerce, and assist our small manufacturers
are essential. During the Reagan years, we will have fewer
resources for this work. But even if we had twice the funds,
this work would only slow our decline rather than rebuild our
economy.
What will rebuild it? This essay argues the outlines of an answer.
Let us begin with a paradox: the very
severity of Detroit's industrial disinvestment may create an
opportunity. While we have been losing industrial jobs for
many years, the exodus has become particularly acute since the
mid-1970s. Two rounds of OPEC price increases; the failure
of the federal government to adopt a rational gasoline pricing
policy; the loss of market to fuel-ef f ic ien t, inexpensive,
quality imports from Japan; two deep national recessions; the
shift to smaller engines, front-wheel-drive, lighter materials, and smaller cars; and the downsizing of the Chrysler
Corporation have all contributed to a sudden, severe, and
traumatic decline in automobile industry activity in the city
of Detroit. Tens of thousands of workers have been permanently
dismissed. Sever al rnaj or plan ts have closed; more will follow.
Smaller plants that built components for obsolete technologies
or products have been abandoned. Orders from smaller parts
suppliers have ceased. Tool and die shops are without work.
In less than 30 months, multiple shocks have broken many of
the crucial links that had held together Detroit's ailing but
still viable automotive industry.
Are these links permanently broken, or can they
be reforged?
In some quarters, optimism about Michigan's
future in the automotive economy runs high. Transport economies
and attempts to emulate Japanese-style inventory management
may recentralize in our State some of the previously lost major
elements of the industry.
Southeastern Michigan still has
important comparative advantages in labor skills, transport
infrastructure, abundant water, and the substantial remaining
share of auto production. But Detroit cannot hope to win back
much of what we have lost; our built environment is a huge
barrier to major new industrial construction. The staggering
public costs borne to prepare the new Cadillac Plant site indicate the price extracted for merely retaining 6,000 of the

�10

Rational Reindustrialization

14 000 Cadillac jobs we had less than a decade ago. Detroit
wiil do well to retain just the auto jobs we still have in 1981.
Much of our auto industry, then, is gone or going.
But in the wake of its passing there remain crucial resources
which we argue, constitute the opportunity to rationally reindustrialize the city. Capital leaves, but labor skills remain.
Plants are closed, but not razed. Railways and freeways still
tie the factories together and connect them to the nation.
The links between the hundreds of small- and medium-sized vendors and the major facilities are damaged, but not broken
beyond repair. The engine of production that was built over
the span of a half-century has not yet been scrapped, nor
should it be. Detroit can still bend metal.
We believe that Detroit can and must take a bold
step forward during the 1980s. To survive as a city where
working people can prosper, Detroit must forge a new role for
local government in planning the redevelopment of industry in
a frostbelt city.
There are industrial products that the
American economy and the world must have. If we are bold, we
can build them, and as we do so rebuild our city.
To have any hope of success in such an undertaking,
it is first necessary to shed the constricting assumptions of
orthodox economic development thinking. Specifically, we must
leave behind four axioms:
1. Only the private sector can produce goods and
services aimed at more than the local market and hence the
overriding goal of public policy is to create~ context conducive to private sector growth;
2. The realms of work and residence are inexorably
split, with the former ceded to private interests but the
latter subject to intense parochial struggle;
.
3. Pu?lic policy operates at the margins of a
basically sound priv~te economy, seeking to solve only those
problems that the private sector can't or won't; and
.
4 •. Local government is the mediator of conflicting
con st ituency interests and, as such cannot plan the local
economy bu~ merely facilitate the prdcess of compromise among
th e competing groups' claims and interests.
f th
We begin from a perspective that rejects all four
. tese assumptions.
First, we believe that currently there
ex1s s · -d
no workable prog ram f or 1nduc1ng
•
.
•
d
econo
privately-finance
proce:~cb evel?pment. Th~r~ is, moreover, no self-correcting
Y which urban d1s1nvestment creates the conditions
necessary for expanded reinvestment of the kind and on the

0

11111----------- ~ ~

v

�Introduction

11

scale required. From this outlook flows the need to project
our own concept of "rational economic development," one which
transcends wishful thinking about an orderly transition from
an industrial economy to a service economy and seeks to build
upon the actual history of Detroit as a producer of durable
goods for the national and international economies.
Others before us have, to be sure, seen the need
to preserve and revitalize Detroit's aging industrial base
through planned conversion to the production of socially useful
goods needed by America and the world. Walter Reuther, for
example, popularized demands for reorienting facilities supplying the 1941-45 war effort to making building supplies for
low-cost housing. Our effort seeks to apply this legacy of
intent to the now very much more difficult circumstances of
Detroit in the 1980s.
Second, we reject the inevitability of a public
sector role limited to creating a context in which private
business, if it wants to, may invest.
Put another way, we
dispute the value of using government as a tool to "improve
the business climate" in pursuit of chancy rewards, and project
the possibility that we, the citizenry, through government,
can actually choose the rewards we want and use increasingly
public resources to achieve them.
Third, we refuse to cede to the private sector
complete control over the realm of work, where workers produce
their standards of living.
We reject the option of simply
making ourselves cheaper to house, clothe, and transport without any guarantee in return that we will have increasing control
over what we produce and how we produce it.
The cost of
reproducing our labor-power, our ability to work, will be
reduced only to the extent that what may be lost in earnings
is more than made up by gains in income security, service
quality, and the other non-wage aspects of our living standard.
Fourth, we in Detroit are uniquely situated to see
the absurdity of a public policy that assumes a healthy private
economy.
The problems left unsolved by private development
history are not merely "rough edges" in an otherwise successful
game plan. This is not a case of a boom town that must figure
out how to house the small number of families whose property
is needed for a mine, a railroad spur, a freeway, or a convention
center. Rather, Detroit's plight is that of a city whose basic
industry is being abandoned because the assumptions on which
it was bu i 1 t - - an ever-growing mar k et for 1 a r g e cars and
trucks, cheap energy, and unconstrained private decisionmaking -- have been rendered historically obsolete. Despite
a few downtown residential projects and one new auto plant,
the game plan of the private sector is to leave.

�12

Rational Reindustrialization

Fifth and last, we find it bizarre that, with the
ship quickly sinking, intelligent people continue to see the
government ' s role as limited to the resolution of disputes
over who gets a porthole seat for the drowning. At this point,
most community efforts amount to little more than annoying
nuisances to the basic, uncontested job of the City's governance: funneling public money into questionably effective induc ements for slower disinvestment. There is, that is to say,
no re a l public development plan, only a random bag of ad hoc
inducements to a few private developers. What is called the
"Overall Economic Development Plan" of the City is a dreamwork
fiction constantly subverted by unilaterally private decisions . Therefore, a different and more rational plan is imperative . What follows is a sketch of the parameters of a qualitatively new role for workers and local government in the realm
of production .

Thinking Rationally About
Reindustrialization
A rati_onal economic development agenda must be
c~ntered on replacing the declining private activities of the
c~ ty -- auto assembly, parts, and machining -- with new acti vit:es th at take maximum advantage of the existing industrial
linkages. The~e are many activities that produce desirable
i~odsfa~d services for a national as well as a local market
at ail to exploit these linkages. For example a bakery
~~Y ~ro~uce dbre~d for the Midwest market, but it does~' t salvage
up~ ~fmif~rl die shops whose _au_to_ industry orders are drying
. t·
.
Y, th ere are activities that require inputs from
e xis
ing intermediat
d
.
.
and subwa ca
b e goo s_suppliers, such as buses and rail
pates no p~edi~~, btt for which existing public policy anticinational demand~ e unmet local, regional, national, or inter-

1

�Thinking Rationally

13

What process, then, can be followed to identify
workable production activities? A rational response to this
question begins with the identification of a set of key criteria
across which potential economic development ventures may be
compared. These include:
1.
Scale of Job Creation.
would the ventures
provide substantial employment to residents of Detroit?

2. Conservation of Capital. Would the firms producing the proposed outputs be able to reuse a significant
portion of Detroit's existing stock of industrial facilities
and idle or underused machinery and equipment? Could they
take advantage of the city's in-place ind us trial infrastructure
(see also #5 and #9, below)?
3. Local Economic Impact. Would the new activities, at full scale, play a role in the local economy similar
to that of auto in the past? Would they constitute a set of
major "exports" from Detroit to the national and even international market, bringing resources in from faster-growing
regions and from abroad?
4. Characteristics of Markets. Are the demands
for the proposed product lines suf f ic ien tly strong and enduring
to justify large capital investments? Are the markets located
properly?
5. Use of Detroit's Comparative Advantage. Would
the contemplated ventures take full advantage of the city's
existing skilled metal-working labor, industrial infrastructure, and of the key linkages among cognate metals industry
activities spawned by the region's legacy of auto dependence?
6. Market Countercyclicality. Is demand for the
ventures' outputs stable or highly cyclical? If it is cyclical,
does its cycle counteract or reinforce the shocks to the local
economy that come from dependence on auto?
7. Labor Cost Barriers. Do the private sector
firms producing similar or identical products pay wages as
high as those to which Detroit workers are accustomed as a
result of auto's past high profitability? And are they as
high as those they could expect in light of the decline of
U.S. auto companies' market power?
8. Transport Cost Barriers. Is the cost of moving
the p ro posed products from Detroit to market destinations prohibitively high? Or are there classes of products whose size,
price, and existing production sites allow Detroit manufacture
more readily than others?

�Ill

14

Rational Reindustrialization

9. Advantages of Publicness. Do some products
make more sense than others as candidates for public or
public/private production? Are there produ~ts who~e.cost of
production could be especially reduced by City policies?
10.
Profitability for En try.
Are the private
firms now producing similar outputs characterized by aboveaverage, and less cyclical than average, profitabili~y?_ Does
selection of the product lines we propose move Detroit into a
national sector growing fast enough to allow new entrants?
Translating these er i ter ia into an answerable question about new production in Detroit, we can ask: What projects
can re-employ a large number of skilled and semi-skilled workers, at or near their accustomed wage, taking maximum advantage
of the area's concentration of metalworking capital stock and
labor force training and of the city's northern deep waterway
location, producing products for a growing, under supplied,
long-lived national and international market for which the
business cycle is either absent or opposite to the auto/auto
parts demand cycle?
Others have asked the "diversify into what?" question.
In a study for the Detroit Metropolitan Industrial
Development Corporation by John Mattila and Wilbur Thompson,
the answers were meat packing, industrial inorganic chemicals,
farm machinery, and electronic instruments.
Unfortunately,
Mattila and Thompson used our criteria 5, 6, and especially 7
only, being innocent of 1, 2, 3, 4, 8, 9, and 10. Moreover,
having. i de_n ti f ied the new product 1 ines, they ended their
· analysis without offering any ideas on how to move into their
production.
.
. Chamber of Commerce commentator George Moffett
tried to fill the gap, saying that "if it can be proved that
there are large-scale [presumably local or regional] demands
[th~t] _cannot be filled by local producers, we would have
:·· an ~ndisputable selling point for involving ••• prospects
rn_mee~ing those demands." To the contrary, we will show that
cri~eria ~, 2, 3, and 4 require proof that unmet demands be
nat~onal rn . scope•
Even if in some cases they are, many
rationa~ P: 1vate firms would still hesitate to initiate
produ~tion in Detroit on anything close to the required scale.
~he_C~t~ 0 ~ Detroit and its people however have an interest
what many ra t·1onal private
' •
•'
·
din 1nit1ating
.
investors
will
no t
o on th eir own. We believe that in the 1980s and beyond only
l ocal government 1't
·
·
k
'
s agencies,
and its close associates in
:~~ er-co~trolled organizations can create the new productive
tor which can arrest the destruction of Detroit's industrial
base.
To be sure
the
·
.
• 1
d
Prof i· t a bl e role for p' · tre 1s · an .important ' essent1a an1
t 0 th e extent that 1· t riva e capital 1n such a sector ' but on Y
.
conforms to the rational mandates of the
pu bl 1c development plan.

�Energy Hardware

15

Let us return to our ten criteria and the question
we generated from them.
It is our view that the industries
into which Detroit can move must be high-wage, metals-based,
and national market-oriented ones. The new activities should
take advantage of Detroit's superb rail and Great Lakes transport advantages, and should be characterized by a pattern of
demand that counters the roller-coaster ups and downs of the
automotive sector. These criteria favor production of physically large, heavy products not all of which are purctased
by individual consumers whose incomes are subject to the cyclical swings that are quickly mirrored in auto and other consumer
durables sales figures.
Finally, because the start-up costs for the production of capital goods are substantial, the period between
investment decisions and payoffs may be relatively long. Thus
our precious venture capital must be targeted only on those
producer goods for which a rapidly growing and long-lasting
market can be conclusively demonstrated.

Our Production Line: Energy Hardware
Has this set of criteria, and the exclusions it
dictates, exhausted the stock of viable projects?
Hardly.
There are at least four that meet all of the criteria: (1)
deep natural gas and heavy oil production and upgrading equipment; (2) residential and industrial steam/electric cogeneration units; (3) large coal- and diesel fuel-fired industrial
process engines; and (4) mine-mouth coal gasifiers.
A rational economic development plan for Detroit
would invest in the conversion of abandoned or underutilized
industrial capacity to production of deep gas and heavy oil
equipment -- steam injectors, compressors, pumps, and the like
-- and make a serious effort to capture significant shares in

�16

Rational Reindustrialization

the developing regional, national, and even internatfonal m~rkets for mine-mouth gasifiers, congenerators, and 1ndustr1al
engines.I

Deep Gas and Heavy Oil Equipment
As easy-to-tap reservoirs of natural gas and crude
oil are exhausted more and more energy industry resources are
being invested in 'prospecting for deep deposits of natural gas
and "completing" known fields Of heavier crude oils. The stock
of structures and machinery that require gas and oil products
will not be junked despite waning supplies of cheap, easy-toextract hydrocarbon fuels. Thus a massive market in the hardware associated with drilling deeper, faster, and in more
If one assumes a different set of national energy,
transportation, and tax policies, a number of other product
lines meet the ten criteria. For example, if a set of tax and
regulatory changes transferred all or most nuclear power and/or
synthetic fuel subsidies to manufacturers and consumers of
solar equipment, Detroit could capture a significant share of
what would be a burgeoning midwest market for flat-plate solar
collectors for space and water heating and cooling in new
structures. Similarly, a shift in policy toward more rational
urban commuter and national freight transportation systems
would swell demand for product lines -- buses, light and heavy
rail cars, and rail electrification equipment -- for which
major componen try could be manufactured in oetroi t for the
national market.

1.

It would not be sound local-level economic development
planning, however, to base a reindustrialization agenda on
outputs for which existing national policy, however mistakenly,
promises no predictable mass market. on the other hand, while
this paper is confined to product lines realistic under current
national policy~ a more speculative and generic application
of our perspective would study which cities could expect to
capture significant shares of the bus rail car
and rail
elect~ification markets, should they :volve in t'he future.
Detroit woul? appear t.o ?ave the means to stake a major claim in
a. fu~ure ~ail electr1f1cation hardware industry; Cleveland,
C1ncin~ati, Dayton, and Philadelphia appear to enjoy advantages
that might earn them a large part of the rail car market; and
Youngstown, _Pit~sburgh, Seattle, and Memphis seem suited to
st rong entries in the bus manufacturing business. Finally,
th e:e.are markets that, while currently speculative, can be
anticipated . . For_ example, it is a good bet that there will
~o~n be" a maJo~ international market for $200-300 receiver
dishe~ th at will process transmissions from direct broadcaS t
sate~lites (DBS)· Any city with a substantial stamping/metal~orking sector should prepare for entries into that market as
it develops.

�Energy Hardware

17

locations is assured. In addition to the traditional equipment
required -- pipe, rigs, bits, derricks, masts, wellheads, etc.
-- the depth, viscosity {thickness), impurity, and pressure
conditions of oil and gas below about 8,000 feet promise a
growing market in pumps, steam injection engines, steam compressors, and oxygenators. Simply put, to ta~e full advantage of
reserves of "sour" oil and gas, horsepower must be available
to force the fuels out and upgrade them to pipeline {gas) and
refinery {oil) quality.
Orthodox industrial location thinking would not
immediately link the need for oil and gas field equipment with
the underused capacity of Detroit; but in the new energy world
of the 1980s and 1990s we may well have a major comparative
advantage for the production of the pumps, engines, compressors, tubular goods and other componentry now demanded in the
field.

Cogenerators and Industrial Process Engines
A legacy of cheap, accessible, domestic hydrocarbon fuels has not only produced an economy that runs on oil
and gas; it has also stimulated a pattern of use that, at
today's pr ices, is unaffordably wasteful of them.
The best
case in point is the structural divorce between the use of
heat and the use of electricity. When oil or gas products are
burned, the energy embodied in them is released in the form
of heat.
In both structures {homes, office buildings, and
factories) and processes {steelmaking, smelting, etc.), however, individuals and corporations purchase fuels for heat and
electricity for light, for appliances, and to power non-oil/gas
machinery. The heat lost in burning oil and gas -- from 30%
in most residential burners to over 55% in some industrial
processes -- is simply wasted: it does no work.
Meanwhile,
electric utilities purchase oil, gas, coal, and uranium, burn
{or, in the nuclear case, bombard) them to make the steam that
drives electrical turbines. On average, they lose over 60%
of the available heat content in the fossil fuels they burn.
An increasingly attractive alternative, and one
assured a growing market, is to cogenerate heat and electricity from the same fuel input. Engines or burners that do this
are called cogenerators.
Markets exist, and are expanding
rapidly, for cogenerators that heat houses and halve electricity bills all the way to massive cogenerators that provide
virtually all of the heat and power needs of multi-plant industrial complexes. The smallest units look, weigh, and are built
much like relatively low-compression small car engines; those
that wo uld suit a small factory, like truck engines; and the
largest types, like industrial process engines. Two Detroitsuited product lines thus emerge; small, medium, and large
cogenerators; and, as a spinoff as well as a lease on the life

�18

Rational Reindustrialization

of existing investments, industrial process machine-driving
engines.

Minemouth Gasifiers
Finally, the U.S. is unquestionably on_the verge
of a major new industry geared to reconcile the existence.of
a 400-year supply of coal with a capital stock that was bui~t
to run on what appears now to be a 40- to 70-year supply of &lt;;Hl
and gas. For all the talk of making Colorado's shale deposits
into a 500-year supply of diesel fuel or of producing m~ssi~e
volumes of heating oil from West Virginia and Kentucky bituminous coal, the only proven technologies that resolve the mismatch between the form in which u. S. hydrocarbons exist in
nature and the forms in which they are consumed involve the
conversion of coal into gaseous fuels embodying between oneseventh and two-fifths of the heat content of natural gas. A
full discussion of the "energy path" that diverts natural gas
to replace heating oil, replaces it with coal-derived gaseous
fuels, and upgrades oil refineries to make less heating oil
and boiler fuel appears later in this paper.
For now, the
important fact is that, in the face of uncertain policy, the
investment community is voting in the marketplace for the machinery that turns coal into "synthesis gas" at the coal-mining
site.
There are at least three attractions for Detroit
in the production of such gasifiers. First, unlike the equipment used to liquefy shale or coal, gasifiers need not be huge
to be commercial scale. There are today at least three companies
straining to meet the demand for gasifiers that cost just
$830,000 and that convert as little as 25 tons of coal per day
into "syngas"; 92 percent of u.s. coal mines
it should be
noted, have daily output exceeding 50 tons. 'second, unlike
coal liquefaction equipment, which must be custom-built and
optimized to process a particular type of coal, syngasifiers
can /r~n~form coals of widely differing heat, water, and sulfur
con en 1n~o ?lean gaseous fuels. This greatly increases the
range and siting of their application. Third where commercial
scale liquefaction equipment must be built n~ar, and partially
assembled on, the process site, minemouth gasifiers are small
enough to be transportable fully-built, allowing their producers t~ capture most of the value-added they embody. In fact,
Detroit may ~ell be the one place in the u.s. that could hoS t
all_ of the Jobs required to produce gasifiers
from steelmaking from scrap all the way to final product ~ssembly.
There is an important overlap between the equipmen~, ,labor and technical skills, and structures used for Detroi~ s current Product lines (cars, trucks, buses, and th e
machinery needed to transform the metals from which their components are made) and the factors of production necessary to

�Energy Hardware

19

make the equipment used in deep natural gas, heavy oil, and
coal gas production, and to fabricate cogenerators and engines.
Table 1 lists components used in exploratory and . developmental
oil and natural gas drilling. Among the product lines that
are both compatible with Detroit's current "metal-bending" infrastructure and in short national supply are pumps, engines,
blowout preventers, wellheads, and storage tanks. Many items
on Table 2 's list of production hardware, among which are
tanks, platform parts, pumps, compressors, and cogeneration
power packs, also meet our complementarity/shortage test.
TA 8 LE

EXPLOAATIO:l AND DEVELOPMENT DRILLING

I

EQUIPMENT

TRI\NSPORTATIOO

TRUCKS
BOATS

HELICOPTE

H/\TERIAL/SUPPLIES

I

DRILLING FLUIDS

DRIL1.ING

DRILLING RIG
DRILL PIPE'.
ORI LL COLLARS
O?.ILL BITS
PUMPS
ENGINES
T/\NKS
Sfl/\KERS

DIESEL
Proi'ANE
GASOLINE
NAT. GAS

I

WELL EQUIP.

.

WEIGHTING MAT'L.

WELL CASING,

CHEMICALS

CARBON ANO

CLAYS
IDST RETUIIN MAT'L

ALLOY STEEL
WELLHEADS

FORM/\TJON
EVALU/\TION

CORING
ELEC. LOGGING
NUCLEAR LOGGING
SONIC LOGGING
DRILL !lTEH TEST

&lt;mlCR

OVEHSllOT
MI LI.
W/\SIIOVER
Pil'E ,
OTHER
FISIIING

DIR£CTIIJNl'.L
SURVEYS
DIRECTIONAL
DRILLING
CEMENTING

TOOLS ,
SERVICE

BLOWOUT
PREVENTERS

T A B L E

DERRICKS r.

2

HASTS

LIVING QTRS.

I
PIPE

FLOWLWES
SALT WATER LINES
GAS LIFT LINES
INSTRUMENT
PIPHIG
FIELD GATHER
SYSTEMS
WELL MANIFOLD
TANK BATTERY
PIPING

I

STRUCTURES

OIL TANKS
WATER TANKS
FOUNDATIONS
OFFSHOFE
PLATFORMS

I

OIL PRODUCTION FACILITIES

HARDWARE &amp;
ACCESSORIES

VESSELS

GAS-OIL
SEPARATORS
OIL-WATER
FLOW TREATERS
FREE WATER
SEPARATORS
PRODUCED WATER
CLARI FIERS
SURGE
VESSELS

CONTROLLERS
ACTUATORS
FLOAT CONTROLS
SENSORS
OIL METERS
GAS METERS
WATER METERS
CORROSION
PUMPS
POWER SUPPLY

FLANGES
FITTINGS
NIPPLES
HEADERS
PLUS VALVES
BLOCK VALVES
GATE VALVES
CONTROL VALVES

ASSOCIATED GAS
FACILITIES

FIELD GAS GATHERING
SYSTEM
SCRUBBERS
FIELD COMPRESSORS
METERS
INSTRUMENTATION
VALVES &amp; FITTINGS

-

�20

Rational Reindustrialization

Some may object that, despite Detroit's apparently hospitable climate for such production, the locations in
which such products are used are largely extra-regional. Why
would anyone choose to make oilfield equipment in Detroit when
much of the demand for it is in Oklahoma, Texas, and Louisiana?
wouldn't transportation costs be prohibitive? Our work indicates that these seemingly reasonable objections are not factually based. First, while rising oil and gas prices will not
lead to increased aggregate domestic supply, they will -- and
already do -- mean greatly increased effort. A well not worth
drilling when oil sold for $5 a barrel and gas for $1 per
mmBTU2, as they did as recently as 1973, is often a potential
gold mine when oil goes for $40 a barrel and gas for $7 per
mmBTU. Already, Michigan drilling -- mostly for natural gas
-- is exploding, with both Devonian and Silurian zones producing
commercial finds. In addition, there is no strict relationship
between the location of drilling and refining and where energy
hardware is manufactured. U.S. Steel, for example, chose its
Lorain, Ohio mill as the one to which it is adding tubular
capacity, and Algoma Steel is in the process of building a
200,000-ton seamless tube addition in Ontario.
With the number of wells drilled rising from 28,000
per year in 1972 to 62,000 in 1981, and slated to rise to
135,000 in 1990, oil industry sources see continuing shortages
of all sorts of energy hardware, especially such devices as
pump jacks and related equipment needed to bring exploratory
operations up to full production. The increase in the number
of wells drilled, in fact, understates the expected rise in
~rill in~ effort. With wells going ever deeper, footage drilled
is predicted to rise from 288 million feet in 1980 to 700
million i~ 1990. Moreover, there's an equally grave, and even
more predictably long-lived, shortage of storage and refining
equipment.
With its geology, Michigan is already a major
natural gas storage area; that means that the pumps,
compressors, valves, tanks, and upgrading equipment used in
gas ~torage, "sweetening" (of impure, or "sour," gas) and
retrieval are a natural market for Michigan producers.
But do our four proposed product lines meet all
ten of th~ criteria with which we began? First, our work to
date convinces us that they satisfy criterion #2 by conserving
the. value of the existing capital stock. All are manufactured
of iron, steel, and.aluminum; many are made using machine tools
of th e ~ype used 1n the auto industry (certainly, the tool
conversion problem is far smaller than that posed by the autoto-warplane transition of the 1940s).
some -- notably the
2(m.cfT)herfe are one million BTUs (mmBTU) in each 1000 cubic feet
. o natural gas • one b arrel (42 gallons) of crude 01·1
contains 5.8 mmBTU.

�Energy Hardware

21

smaller cogenerators and pumps -- can be made using idle capacity in engine plants, whether now open or closed down. Others
-- valves, gasifier chambers, and the castings used in their
production -- are typically not assembly-line outputs; hence,
many existing multi-story plants are suitable for their manufacture.
In fact, the use of multi-story plants may not be as
inefficient relative to single-story, land-intensive ones as
most planners assume. Important new innovations in high ·-rise
storage and counterweight inter-floor stock movement, co~pled
with rising land and site prepa·ration costs, are making refurbishing of existing multi-story structures an increasingly
attractive alternative to single-story, greenfield construction.
The transition from auto to energy hardware manufacture requires planning. Some of Detroit's advantages will
be lost if the area's remaining large car and light truck
assembly, engine, and casting plants are allowed to put their
equipment up for auction in the international machinery market.
A serious effort at rational diversification would include the
immediate inventorying of the capital stock of the city and
the region.
We contend that past efforts by government to
attract new enterprises would have fared better had Detroit
and Michigan assumed an activist role in the capital goods
market; after all, a cheaper lathe can make the same contribution to the "business climate" as a cheaper worker compensation
program.
Second, the product line descriptions above should
suggest why we are satisfied that all four product areas meet
criteria #3-6.
They can replace auto's "export" role; they
supply strong, growing, and long-lived ind us trial markets;
they take advantage of Detroit's human and physical capital
base; and they are relatively immune to major demand variation.
The energy hardware market is fully national, universally
agreed to be a major growth center, and -- to the extent it
exhibits any cyclicality -- reacts favorably to precisely the
energy price and supply shocks that devastate auto production
levels.
But what about criterion #1, the contribution they
could make to large-scale Detroit employment? And what about
our four product lines' relevance to criterion #7, the labor
costs of firms producing them?
To study employment impacts of different product
line investments, we have used Bureau of Labor Statistics (BLS)
employment requirements tables published in May 1980 and based
on input-output relationships that existed in 1977.
These
tables show the number of full-time jobs, direct and indirect,
created or maintained by each $1 billion (in 1972 dollars) of
sales. We have examined the jobs per billion dollars in sales

�22

Rational Reindustrialization

in a number of industries that produce outputs similar or
identical to the four we are proposing for Detroit's new sector.
To illuminate the method, imagine an industrial
park, a set of buildings and rail spurs surrounding a onceabandoned truck assembly plant.
Imagine further that this
industrial park, this complex, produces minemouth coal gasifiers; in fact, the finished gasifiers exit from the old truck
plant. Many of the inputs that go into the gasifiers are made
within the complex; others are trucked in from other Detroit
shops; and still others have to be brought in from outside the
city. Using the BLS input-output tables for the industry group
that produces "construction, mining and oilfield equipment,"
Table 3 below presents the number of jobs that each billion
dollars in gasifier sales could be expected to generate. It
also shows, under the "Jobs Detroit Could Capture" heading,
the maximum number of jobs producing inputs to gasifiers that
could be created or retained in Detroit if the City were to
aggressively exploit potential linkages, both on and off the
complex site. To the extent that the planners of a new sector
failed to assemble land and pursue procurement targeting as
effectively as they might, the gasifier plant would be less
well linkaged to the local metalworking economy; the number
of non-gasifier jobs would thus be lower.

�23

Energy Hardware
Table 3
Employment Impact Per$ Billion of Sales in
Construction, Mining and Oilfield Equipment
Industry in which Jobs
Created or Maintained

Construction, Mining and
Oilfield Equipment
(e.g., Gasifier} Itself

Number of
Such Jobs

Number of Such Jobs
Detroit Could Capture

21,429

21,429

634
924
2,145
619
331
215
4,424
216
488
325
183
220
376
248

634
924
2,145
619
331
215
4,424
5-108
30-488
20-163
3- 45
220
0
0

Assorted other industries,
from zinc mining to rivet
making to intercity
trucking
18,355

1,240-9,200

Engines, turbines and
generators
Metalworking machines
Industrial machinery
Machine shop products
Motor vehicles and equip.
Ferrous stampings
Steel furnaces &amp; foundries
Scientific instruments
Material handling equipment
Screw machine products
Railroad equipment
Tire and rubber
Metal and coal mining
Aluminum production

Total

51,522

a
b

a
C

d

C

31,839-40,545

a

First figure based on Detroit share as of latest Census of
Manufactures; second figure based on a potential share ceiling of 50 percent.

b

Same as "a" except that, given sufficient lead-time, all
material handling equipment procurement could be done
locally.

c

Sarne as "a" except that the potential share ceiling is only
25 percent.

d

In theory, but sadly not in fact, at least a part of the
Uniroyal plant could be reopened to serve not just the gasifier complex but other tire users (e.g., the police) as
well.
It won't happen: the land on which the plant sits
is slated for a riverfront commercial venture.

�111111

Rational Reindustrialization

24

Table 3 should be read to mean that the development
of a gasifier-producing capacity that generates one billion
dollars in annual sales could provide local employment for
between 32 and 40 thousand workers, depending on the extent
to which Detroit's metalworking industry could be mobilized
as part of the effort. Repeating the process embodied in Table
3 for cogenerators, pumps, and industrial process engines
("Engines, turbines and generators") and for steam injectors,
compressors, and oxygen a tors (various "Standard Industrial
Classifications," or "SICs"), we conclude that a new energy
hardware sector generating about $6 billion in annual sales
(in 1980 dollars) could employ 100,000 Detroiters. 3 The capital
base that produces that level of sales obviously presupposes
a large-scale infusion of capital. Sources of such capital
are discussed in the "National Policy" chapter.
But will Detroit's infamous high wage barrier disqualify it from taking advantage of this major opportunity for
reindustrialization? Can the product lines we propose replace
the disappearing auto sector jobs at similar wage and benefit
levels? The answers appear to be "no" and "yes," respectively.
Using another BLS source for data on hourly wage rates, and
using Bureau of National Affairs conference surveys on fringe
Table 4
Hourly Labor Costsi January 1981
SIC
No.

371
351
354
356
355
336
344

Industry
Title

Base Hourly
Ratet incl. COLA

Motor veh. &amp; equip.
$10.69
GM, Ford Masters
10.87
Chrysler Master (U.S.) 9.48
Engines &amp; turbines
10.50
Metalworking machinery
8.68
Gen. indus. machinery
8.42
Spec. indus. machinery
7.91
Non-ferrous foundries
7.79
Fabricated metal prod.
7.61
U.S. manufacturing avg. 7.73

Hourly Cost
of Fringes

$7.04
7.59
6.35
6.23
5.92
5.66
5.32
4.66
4.44

4.08

Total Hourly
Compensation

$17.73
18.46
15.83
16.73
14.60
14.08
13.23
12.ss
12.os
11.81

3 · For purposes of comparison the Big Three auto compani:s
~!~:~at$ ~bi~t B_oo,ooo u.s. jobs on annual sales of approx1Thr Y 9 . ill ion· About $40 billion is spent by the Big
~~ on inputs from suppliers; that $40 billion generates
~~o _er 7 oo,ooo jobs.
All told, car and truck sales of $90
y~~!~~n T~~~ as~&lt;;&gt;ciated with about 1. 5 million domestic jobthe same as ra ;o 0 ~ about $60,000 per job is, interesting~y,
per 100 000 ~eb o~n$ for our product lines (i.e., $6 billion
'
JO s - 60,000 per job).

�Energy Hardware

25

benefits as a share of total hourly compensation, we can determine hourly labor costs for the SI Cs now important to Detroit's
economy as well as for the SICs covering the product lines we
have proposed for the future.
It appears that Detroit's blue collar, primary
labor market workforce is accustomed to highly-paid, if
insecure and seldom year-round, employment. Certainly, most
of our proposed product lines fall in SICs -- 344, 351, and
354-56 -- that do not offer average remuneration at the GM and
Ford Master Agreement level. It is not obvious, however, that
the core Big Two hourly compensation figure is the relevant
standard of comparison. First, Chrysler is the largest auto
employer in Detroit; its hourly compensation averages only
$0.42 per hour more than the average of SICs 351, 354, and
356. Moreover, without cost-of-living protection, by mid-1982
Chrysler workers will make less than the 351/354/356 average.
Second, there is severe downward pressure facing auto industry
wages in this period. The U.S. policy of protecting low-wage,
low-productivity industries while not protecting high-wage,
high-productivity ones such as auto has undermined the
oligopoly power of the Big Three; when oligopoly power wanes,
super-profits dry up, and when that happens labor rates tend
to fall relative to those prevailing in other industries. It
seems obvious to us that, in the long run, Detroit's working
class is better off taking part in a transition into industries
producing for g r owth markets than crossing its f~ngers that
both wages and employment levels in auto hold up.
In the short-term, however, no new public or
public/private production sector can guarantee to provide employment at Big Two labor rates. What can be fought for, and
eventually won, is secure employment at adequate wages.
A
city government not tied to a redevelopment strategy wholly
dependent on luring private capital, along with organized workers who can realistically assess the future of an unprotected,
unplanned, and dis invested auto sector, could choose to bargain
a wage/security trade-off, provided that policy and planning
were able to keep fringe benefits and the "social wage" relatively high. workers value job security highly; thus, when one
conceives of security as a "fringe benefit," it becomes possible
to think of workers in a new publicly-managed energy hardware
sector receiving a social wage superior to that of today's
autoworkers, but at a direct hourly wage rate as low as $8 an
hour. We will return later to the role of other public sector
4.
We oppose wage-cutting.
Later in this paper, we argue
that go vernment policy should protect both living standards
and employment levels in auto by legislating requirements that
vehicles sold in the U.S. contain significant North American
value-added.
Opposing reduced real earnings is one thing;
predicting that auto workers' living standards will not fall
is quite another. As planners, we find it wiser to argue on
the basis of what we fear rather than what we hope will happen.

�26

Rational Reindustrialization

activities in reducing the wage cost of a given ~iving standa~d;
for now, we stress that job and income sec~r1ty, along w~th
the potential benefits of the new and less alienated produ&lt;?tion
relations that might be possible in such a sector, constitute
major parts of our living standard. 5
Moving on to determine whether Detroit's distance
' demands represents a market-constrain.
from non-local equipment
ing force {criterion #8), one must find out how much of our
proposed product lines' delivered cost would be accounted for
by transportation. Examination of rail and truck freight rate
charts makes clear that transport costs are dependent on a
constellation of nine factors:
weight of products being shipped
number shipped per order
dimensions of products shipped
extent to which one-way movements are matched by return trips
degree of product containerization
speed with which delivery must be made
whether destination is on or off main rail lines or highways
whether products require special handling
level of carrier insurance coverage required
To see how these nine factors impinge on the product
line choice calculus, we compare Matilla and Thompson's top
choice, packaged meats, with a 35-ton engine representative
of many of the outputs suggested in our agenda. Converting
our findings into shares of delivered cost, we conclude that
5. The social wage is composed of three additive elements.
First, and dominant, is the direct base wage.
Second, and
much more important than most people are aware, is direct nonwage compensation, i.e., fringe benefits. In organized, highwage industries such as auto and steel
form of
. amounts to close to 40 percent' ofthis
compensation
total hourly
labor costs. Thus an auto worker who receives a wage of $11
per hour actually costs the company in excess of $18. Third,
there ~s what m~ght be called the "political wage," composed
of Soci~l Security (actual or prospective), the value of laws
pro~ect1ng ?urrent or future pension income, the value of
social services that contribute to the quality of life, the
value of certain principles such as statutorily limited
overtime,. programs such as unemployment insurance, worker
compe~sation '. TRA,. etc. What business mainly means, in fact,
whe~ _1 t deer 1es Michigan's "business climate" is that this
political wage -- which it partly pays for __ is too high: too
mu~h U~, too m~ch _Comp, too many services to pay for.
our
point 1s that. 1t is cheaper, in the long run, to reduce the
need for services than to reduce the quality of services.

�Energy Hardware

27

production of low-volume, high unit price goods is the best
way to obviate any comparative locational disadvantage that
Detroit may suffer.
Product

Dimensions

Weight(lb)

Industrial
cogenerating
engine
40'xl4'xl0'

Packaged
meats

70,000

Full truck:
48'x9'xl3'

30,000

Mode/Destination

1-Rail/Los Angeles
2-Rail-barge/Gulf
Coast
3-Barge/Chicago
1-Truck/Los Angeles
2-Truck/Gulf Coast
3-Truck/Chicago

~3,400
2,800
1,100
4,700
1,900
800

The critical variable, of course, is not the absolute dollar cost of shipping the two sample outputs being compared, but rather shipping cost as a share of value-added.
Assuming conservatively (see Table 3) that Detroit could capture 60% of the value-added in the cogenerator, and assuming
very liberally that city producers could capture 50% of the
value-added in packaged meats, we can compare the ratio of
shipping cost to local value-added for the two product lines.
Price at
Delivery

X

Local
"Local
value-added = Pr ice•

Shipping Cost
As Pct. of
Local Price

Industrial
cogenerating
engine
$1,800,000

0.60

$1,080,000

123-

Packaged
Meats

0.50

32,000

123-

64,000

0.32%
0.26
0.16
14.69
5.94
2.50

Packaged meats, we infer from the above, could at
most compose part of a Detroit industry that sought to capture
slightly more of the value-added in the meat products sold in
Southeastern Michigan. As a national "export" product line,
it is d istinctly inferior to large capital goods. The best
way to minimize the disadvantages of Detroit's distance from
major markets is to strive to supply those markets with high
unit cost products. our proposed product lines qualify.

�On the Public Account
Having dealt with the extent to which our age~da's six proposed product areas satisfy our first eight criteria, we recognize an additional responsibility to reade~s
who may be justifiably skeptical about our agenda because it
seems to fly in the face of past events. Why, one might well
ask, hasn't Detroit's economy already begun the transition
from auto dependence to industrial diversification? If the
linkages indeed exist, if the existing captial stock is to
some significant extent reuseable, and if labor costs are not
an insuperable barrier, why hasn't private investment in energy
hardware already occurred?
✓

The answer, to which we have already alluded several times, is that the full potential of the linkages is unrealized because real planning exists now only at the firm level.
The private sector employs a restrictively narrow accounting
method that foregoes the full value of the efficiencies provided
by a sound industrial infrastructure, while overvaluing the
quick achievement of returns that allow high dividend payouts.
In the next several pages, we contrast this narrow, socially
irrational method of allocating resources with the method David
Smith has labeled "public balance sheet accounting" or "social
cost-benefit analysis."
To assess whether and in which activities a public
sector or joint public/private sector set of enterprise might
succeed where purely private ones would not even venture

�29

Public Account

(criterion #9), we present a matrix constructed from work done
by Barry Bluestone and Bennett Harrison in their Capital and
Communities. It shows that there are at least two "cases" in
which a public or public/private mode might produce where in
a private mode production would not occur. The reader will
quickly see that the energy hardware products described above
fit into case #4; this genre of analysis also suggests that
more product lines are feasible, those that fall into cases
#2 and #3.

Case

1
2
3

4
5

Profitable?

No
No
No
Yes
Yes

Socially
Cheaper Open
than Closed?

No
Yes
Either
Yes
No

Productively
Linkaqed?

No
Either
Yes
Either
No

In Case 1, the firm in question is unprofitable,
so much so that it would be cheaper to close it and pay unemployment insurance and even welfare to its workforce than to keep
operating it, particularly since it's not importantly hooked
up to the rest of the local economy. Both "full cost enumerators" and "private accounters" would, and should, shut such a
plant.
In case 2, the firm is losing money, but not so
much that a rational social cost-conscious accountant would
shut it, whether or not it was significant to the economy.
Full cost enumerators would keep the plant open; private
accounters would shut it.
In case 3, the firm isn't profitable, and the
losses may be so great that it would appear cheaper to shut
it down and pay workers off; but it's central enough to the
local economy that the economy-wide social costs of closing
it might exceed the total costs of operating it. Full cost
enumerators, if the planning mechanism valued its linkages,
would keep such a plant open, while private accounters would
unambiguously close it.
In case 4, the firm is profitable and may be welllinkaged. Full cost enumerators would let it close only if
there existed full employment and better uses for the resources
invested in it. Private accounters, however, might well choose
to clos e it, if its profitability were below some target rate
of return believed to be available elsewhere.
Finally, in case 5, the firm is profitable, but
for the community in which it operates its costs exceed its

�Rational Reindustrialization

30

benefits. For example, it may be a heavy polluter. Full cost
enumerators would want such a plant closed. Its private owners,
however, would keep it open unless they could make more profit
investing elsewhere.
A survey of the new business school literature on
corporate strategies backs up our analysis that private capitalists make decisions on a fundamentally conservative basis, one
that renders potentially and even some actually profitable
ventures victims of a self-fulfilling prophecy of failure.
Reproduced below is a 4-quadrant graph taken from the curriculum of the Harvard Business School, a graph that tells private
managers what to invest in and disinvest from.

Annual Market
(Sales) Growth

20% -

QUESTION

STAR

15% 10% -

--------------------,----------------------8%
I
I
I

5% DOG

:

cow

1

- - - - , - - - - - - - - -_
0.5

l
_:__ _ _ _ _ _ _ _ _ _ _ _
1.0

2.0

~

Ratio of
market
share to
that of
nearest
competitor

.
Note that in any case in which the annual growth
~n dema nd for the product line exceeds 8-10 percent -- as it
_oes_for all of the projects we have proposed -- the venture
1s e 1 th? r a " star " or a "quest ion • 11 s inc e Detro i t ' s pub 1 i c
prfoduct7on sector begins from a O percent market share all
o our ideas are "qu es t ions.
·
" The essential
.
' · 1
venture capita
for . 0 urb st artup enterprises will be more available -- and more
ava1 1 a 1. e from privat e as we 1 1 as public
· sources -- 1f
· these
en t erpr 1ses can capt
·
the' f' ld
ure enough of the strong market growth 1n
b ~r ie s to approach the B-School's "star" category. we
e 1 ieve our proposals can meet this standard of performance.

�Public Account

31

If they can, even skeptical private capital will
be made available. But what if they fall a little short? Are
there social benefits of job-creating investment that are overlooked in private sector accounting but explicitly enumerated
in our approach? Might a city deem an enterprise requiring
an ongoing subsidy "socially profitable" and hence worthy of
support? Yes. There are three such benefits which, if large
enough, justify investment where the private sector might instead withdraw:
1. direct and indirect local employment;
2. retention of a reinvestible surplus; and
3. the effect on the "business climate" of supplying low
cost goods and services consumed by Detroit workers.
We will treat each of the three in turn. First,
by creating or retaining jobs, a social cost-benefit approach
results in capturing the gains of not having to provide as
much unemployment insurance, general relief, and crime control;
to settle as many insurance claims; to incur such exorbitant
health costs; and to levy such high tax rates. Many jobs are
sacrificed today because the costs enumerated above are borne
by the public sector, rather than by the private investors
whose decisions are responsible for them.
Imagine a Detroit enterprise that employs 250 workers earning $15,000 each per year, of whom two-thirds own
homes and half live in Detroit. The enterprise, let us say,
is losing $500,000 per year. Assuming that closing the facility
makes private accounting sense to its owners, let us ask whether
closing the facility is also rational for the total society.
On the negative side, operating the plant costs society
$500,000, the private loss. On the positive side, keeping the
enterprise open garners the society about $172,000 in property
taxes, $57,000 in worker-paid city income taxes, $138,000 in
state income taxes, and $~87,000 in federal income taxes. It
also saves $920,000 in unemployment insurance (a one-time
cost), welfare, and food stamp transfer payments. Adding these
social benefits, one gets about $1,770,000 in year one and
$850,000 each year thereafter. Netting out the annual $500,000
loss, over a decade society is better off to the tune of $4.4
million by keeping the plant open.
Second, this sort of calculation understates
society's saving: by keeping the plant open, the city may be
preserving other jobs in enterprises supplying the plant.
While the degree of "linkagedness" of a firm to the rest of
the local economy is difficult to quantify, it is important
to understand that it can be increased by rational planning.
In fact, planning an ever-more-interconnected sector is the

l

'
I

.l

I

�32

Rational Reindustrialization

essence of the reindustrialization task in Detroit. In return
for a subsidy, for example, the City can require _that a f~rm
increase its ties with other local firms. By making the firm
do so, the City (a) earns a return on its subsidy, (b) captures
tax revenues and their future stability, and (c) foregoes the
costs associated with continued disinvestment.
The savings
can then be used to seed new enterprises in the sector, to
invest in cost-cutting infrastructure projects, or even to
reduce local tax rates.
Third, to the extent that keeping the plant open
constitutes part of a broader plan to integrate salvaged labor
and capital resources into a new, planned public or
public/private sector, the city's new sector planning authority
can reduce its subsidy liability by offering workers in the
enterprises the income-job security trade-off described earlier. Success in doing so can be a powerful tool in convincing
private captial that, if it is willing to play by the rules
-- secure employment, accountability to a citywide enterprise
linkage plan, etc. -- it too can enjoy the benefits of what a
private accountant would consider lower labor costs.
These aspects of publicness are difficult to cost
out. When and if Detroit goes shopping for investors in its
emerging new sector, its pitch will have to include quantitative
estimates of what publicness promises the venturesome lender
or partner. It would not do merely to argue that inter-firm
sectoral planning is more efficient; investors will want to
know how much more efficient.
Again, a precise estimate of the cost advantage
accruing to public/worker production is not feasible; but a
lower limit -- a minimum -- figure can be derived. Basically
and over-simply, it is composed of~at part of our private
sector counterparts' after-tax profits that leak out of the
investment stream as dividends. Based on a financial analysis
of the firms appearing in the table on the next page, we calculate that approximately 39% of those companies' net income is
lost to these uses. Thus, 39% of a 7.4% after-tax return on
sales, ~r 2.9%, constitutes the quantifiable minimum advantage
of public/worker enterprise for our product lines.
.
We maintain, of course, that the true "public edge"
1s far greater than that.
In addition to non-quantifiable
factors such as planning to maximize linkagedness there may
be ways _to exploit two other programs to swell the' advantages
of public/worker production. First, to the extent that the
sma~ler sc~le of our start-up enterprises allows them access
to ~ndustr1al revenue bond financing, they might realize a
capital cos~ edge of as much as 5-6% over other, larger producers, depending on Prevailing interest rates. Preferential use
of tax abatement policy -- an altogether appropriate use of

�Public Account

33

this oft-misused tool -- might assist in lowering the interest
rate the bonds would have to pay to attract buyers.

I

Second, as we will discuss in describing the second
of three phases of Rational Reindustrialization, another piece
of flawed free market tax bribe policy, the "enterprise zones"
of Kemp-Garcia, could be stood on its head to target tax advantages toward firms in the new, publicly-managed sector.
Based on a minimum, quantifiable public edge of
2.9%, and convinced that intelligent use of bonding, abatement,
and zoning tools can add at least another 4-5% to that, we
will proceed on the still-conservative assumption of a net
total advantage to publicness of 7.5%.

l

I

Finally, we turn to criterion #10. Is our nascent
sector's private counterpart profitable and countercyclical?
This, of course, has important bearing on its appeal to the
City, to private financiers, and to potential bond purchasers.
If the new sector's activities can pass this set of tests,
their 7.5% estimated cost edge will make possible the steady
generation of a significant reinvestible surplus with which
to finance further sectoral expansion.
Despite the fact that most of the corporations now
producing our proposed outputs also produce other, more cyclically-sensitive products, Table 5 makes clear what a strong,
stable sector we are seeking to enter.

'I

�Rational Reindustrialization

34

Table 5

Profitability and its Cyclicality for
Selected Candidate Product Lines

Profitability
1975-80 Average

Resistance to Recession
Pct. Gap between recession
qtrs. (1975-I and 1980-I) and
1975-80 Average Rate of
Return on:
Sales
Net worth

Product
Line

Manufacturers
Studied

Rate of Return a/ on:
Sales
Net worth

Oil and gas
p::oduction
and upgrading equipment and/or
industrial
process
engines

Hughes Tool
Ideco (Dresser)
Halliburton
Struthers Wells
McMaster-Carr
NL Industries
Cameron Iron
Crawford Ent.
Reading &amp; Bates
Schlumberger

9.85%

24.06%

Coal
gasif ication
hardwa.:-e

Westinghousec,d
Wilputtec
McDermott
Dresser
NL Industries

6.02

14.87

16.6

12.9

Cogenerating
engines
(gas- and
dieselfueled)

Gen. Electricd
Westinghoused
McGraw Edisond
S &amp; C Electric

5.96

14. 39

18.0

15.1

Average, manufacturers
listed abovee
7.40

20.83

12.9

10.2

Average, all U.S.
manufacturing
5.14

14.98

32.3

24.4

5.8%

5.2%

SOURCE: Quarterly and annual corporate reports; FTC-SEC.
Notes: a - Defined as after-tax profits as a percenc of sales or net worth.
b - Net Worth defined as beginning-of-year stockholder equity.
c - Currently produce minemouth gasifiers.
tord - 1975-80 earnings adversely affected by collapse in light water reac t
st
rel~t~d electric power plant supplies.
In addition, earnings under a e
gasifier and cogenerator profitability: all but Wilpucte are large,
diversified companies.
e - Sales used as weights for determination of average.

a

�Toward The Rational Reindustrialization
of Detroit
We have called for the redeployment of Detroit's
idled industrial resources in the production of an initial
group of products particularly suited to our city's existing
capacities. Believing that the challenges of industrial disinvestment must be met with a bold political departure, we have
looked to local government to take the lead in initiating a
continually bargained economic development plan in which workers and government join private enterprise as co-planners in
the realm of production.
Such bargained planning is not business as usual
in America. We therefore face a tangle of problems which would
encumber such a departure.
Before we can claim that our
economic development agenda is a pragmatic possibility, we
must address several current legal, financial, structural,
spatial, and political obstacles.
Legal:
At present, Michigan law narrowly
constrains the public role in economic development. The Michigan Constitution clearly limits the types of money-generating
enterprises in which a city may be engaged. Cities may own
and operate hospitals, cemeteries, and all works involving the
public health and safety; public service facilities providing
water, light, heat, power, sewage disposal, and transportation;
and, with the approval of the State legislature, airports.
But the Constitution prevents the State or any of its subdivisions from owning stock in a privately-operated enterprise,
or from establishing a State- or municipally-owned bank. In

�36

Rational Reindustrialization

Section 26, the Constitution also limits the role of public
credit: "Except as otherwise provided in this Constitution,
no city or village shall have the power to loan its credit for
any private purpose or, except as provided_ by law, fo~ ~ny
public purpose." While the pressure of regional competition
for investment has led to increased flexibility in the definition of "public purpose," the difficult-to-amend Mich~gan Constitution still intensely regulates all forms of public enterprise.
State law also regulates permissible investment
of public employee retirement funds.
Only 1% or less of a
given fund's assets may be in the common or preferred stock of
a given corporation, and that stock must have paid a dividend
in five of the past seven years. No fund may own more than 5% of
a given corporation's stock. In Michigan, start-up enterprises
seeking capital through equity offerings to public employee
pension funds clearly face severe limitations.
The strict limits imposed by the Michigan Cons ti tut ion are reiterated in state development finance legislation.
Section 15 of the Michigan Industrial Development Revenue Bond
Act of 1963 begins, "Nothing herein contained shall be interpreted to grant to any municipality the authority to operate an
industrial building or any industrial machinery or equivalent
for its own use." Similarly, the Economic Development Corporation Act of 1974 provides in Section 8 (7), "The corporation
shall not operate a project or an enterprise in a project,
other than as lessor." This proscription does not appear, as
such, in Michigan's Tax Increment Finance Authority Act of
1980, but nothing in the sections defining the powers of authorities suggests that they may operate an enterprise.
The portals of Factory Michigan are fiercely guarded by the legal lions of free enterprise.
Financial: To fully implement the rational reindustrialization of Detroit will require, over time, billions
of dollars of both private and public investment.
But the
Reagan supply-siders are currently eviscerating the existing
federal progr~ms that could provide some of the public capital.
The Small Business Administration and the crucial Economic Development Administration are slated to be destroyed. Budget
cuts and the new federalism will damage the economic development
capacity of the Housing and Urban Development Department. The
huge d_evelopment potential represented in the Carter-era Energy
Securit~ ~rust Fund may be compromised by the emerging energy
non-policies of the Reagan Administration •
. E_ve_n if these federal programs were to remain in
pla~e, mobi~izing capital for the start-up enterprises of
rational reindustr iali zation would be challenging.
Private

C

�Toward Rationality

37

providers of debt or equity capital will look carefully at new
f ~rms with unusual owner.ship and management structures, especially when they have neither a track record nor the investment
tax advantages of established, profitable corporations.
Existing Michigan economic development programs
such as industrial revenue bonds, tax abatement, or modest and
targeted loan guaranees could cheapen the price of capital or
reduce the cost of enterprise, but by themselves could only
facilitate, rather than assure, .access to development capital.
While public and private employee pension funds
represent the single largest potential source of development
capital -- and their resources are growing at the rate of $100
million each day -- major legal and political battles must be
won before this pool could be tapped to reindustrialize Detroit.
Structural:
Rational reindustrialization as we
conceive it would involve new firm structures in which workers
(and eventually perhaps the City) with equity would join private
owners in the governance of the shop floor, the plant manager's
office, and the corporate board room. Further, we envision
the emergence of a general planning mechanism in which the
needs and interests of participating firms, major financiers,
unions, and the City would be bargained and temporarily composed
in a binding, time-limited contract. At both the level of the
worker-owned or joint venture firm and that of the general
planning mechanism, implementation of our agenda will require
that these abstractions be made concrete.
Spatial:
Most of the Detroit plants that have
been or will be idled by disinvestment are multi-story buildings
constructed between 1910 and the 1940s. Although many of the
product groups discussed earlier as the core of rational reindustrialization can be produced efficiently in such facilities,
this is not so in all cases at all scales.
Some potential
private investors in a reindustrializing Detroit may require
new facilities; this poses the costly and politically painful
task of land assemblage in an intensely built environmen~.
The continuing agony of providing the 465 cleared acres said
to be necessary for the new G.M.A.D. plant in the Central
Industrial Park is well known: a $200 million public expenditure
(excluding the cost of financing debt), the complete destruction of a community, and abject capitulation by governm~nt to
the dictates of a potential private investor.
The City of
Detroit controls but one 60-acre site with industrial potential, and has identified only a handful of privately-held sit~s
in even t he 15-40 acre range. Industrial land assemblage in
Detroit wi 11 require a new relation ship with pr.i vate in ves to:s,
s~per ior replacement housing for relocated reside?t~, a con tinuing public presence in the developments facilitated, and

�38

Rational Reindustrialization

access to public development capital at the federal level on
a scale unlikely under Reagan.
Political:
Negotiating the legal, financial,
structural and spatial obstacles discussed above will require
great political dexterity from adroit leadership. Moreover,
there is an additional, more truly political task. Advocates
of rational reindustrialization can expect some degree of
purely ideological hostility from business leadership, especially as public and worker authority increases and the proponents of the downtown Renaissance strategy feel the pinch of
their now-subordinate status in the City's redevelopment
effort. This hostility must be contained.
Building broad support for the bargained social
wage we have discussed, developing understanding of the tradeoffs involved, and protecting the social wage from erosion
will be major challenges.
We look to the government of the City of Detroit
as the key source of the initiative and coordination necessary
to rational reindustrialization. However, since many of the
valuable industrial linkages we seek to protect from dis in vestment exist in a metropolitan web of agglomerated interdependence, a higher level of working class cooperation on a metropolitan scale eventually will be necessary. The workers of
Warren and Detroit will have to join forces to protect their
futures if their respective local governments are to help coordinate what should ultimately be a regional development plan.
It is not possible to take up all the problems and
tasks we can anticipate. We possess neither the space, the
necessary special knowledge, nor the bravado. we will, however,
engage some of the major obstacles defined above by imagining
the specific forms they might assume in three distinct phases
in the long march of rationally reindustrializing Detroit.
For the sake of orderly exposition we will discuss an early
P 1· 1 ot ProJect
.
'
Phase; an intermediate
"Mixed Enterprise Zone "
Phase; and a more distant Mature Plan Phase.

Pilot Project Phase
The event that creates the
P?ssibility of implementing this initial phase has becom~ a
bitter commonplace in contemporary Detroit: a major industrial
facility is closing and hundreds, perhaps thousands, of workers
f&lt;;1ce permanent unemployment. We assume a year or more of le~dti~e between announcement and closing; the presence of a maJor
~nion i a _plant W&lt;?rkforce with strong leadership; and s?me
intere~t 1n averting disaster on the part of the surrounding
community, the vendo 7s to the facility, and local and state
gov7r~men t •
The obJ ecti ve in this phase is to reopen the
facility as an enterprise in which the workers and community

�Toward Rationality

39

hold equity and thus can participate in bargained planning of
the new company's development. The product line of the new
venture would be based on the criteria, and probably selected
from among the examples, we have described.
Hence 1 as the
firm eventually prospers, the legitimacy of the Rational
Reindustrialization
agenda
will
be
reinforced:
local
government, other endangered workers and manufacturers, and
potential investors will be emboldened to attempt similar
ventures.
Feasibility: The first step must be a campaign to
mandate and properly conduct a feasibility study for reopening
the closing plant. The initiative of the threatened workers
and the affected union will be crucial.
They will have to
gather the support and generate the momentum to enlist local
and state government, vendors, community organizations, and
perhaps even the existing corporation.6

The key participants in the study would be the
workers and the union; local and state governments and their
economic development agencies; representatives of community
organizations whose memberships include many plant workers;
and, at some point, one or more Detroit-based financial institutions interested in investing in the proposed venture. The
participants would retain necessary consultants for special
studies on the proposed product line's current and future market; on current prouction technology, costs, and anticipated
improvements; on financing options; on the forms of corporate
governance and management structure suited to the purposes of
the participants; and on how best to accomodate existing or
pending state law and regulations.
The feasibility study
should be conducted so as to maximize the educational impact
of the inquiry and public support for the proposed undertaking.
The feasibility study process would be consummated in a final
report that could also function as the initial business plan
of the new enterprise.
In the pilot project phase, legal a1:d spatial I?roblems would be minimal; the political and especially the financial obstacles would not.
Supporting even a single-factory
new venture would require political boldness of local government and the union.
Fashioning a corporate structure that
facilitates worker and community equity would require
6. The costs of a full feasibility study could be distributed
among the City (Community Development En ti tlemen t Grant funds) ,
the Detroit Economic Development Corporatio~ (hereaf~er, _the
EDC), the State Department of Commerce_ (in-kind_ contributions
of personnel from the Office of Economic Expansion), the State
Department of Labor (personnel from the Job Development Division) , the federal government {planning grants from HUD or
EDA, should funding survive), and the union.

Ill

J

�40

Rational Reindustrialization

ingenuity. For the initial projects of Rational Reindustrialization, however, the major challenge will be to secure
adequate financing.
Governance: The new enterprise should be structured to max1m1ze access to potential capital while insuring
a strong worker and community voice. We propose a model with
five components. 7 An operating company with a management including elected union representatives would organize production, marketing, planning and the other traditional aspects
of enterprise as a for-profit business.
An Employee Stock
Ownership Plan (ESOP) with a committee, under union control,
would provide the vehicle for worker equity, facilitate access
to certain sources of capital, and confer significant tax
advantages.
A non-profit, tax-exempt community corporation
would provide a locally-accountable entity that could accept
contributions from local and national charitable organizations
to provide capital for and assume equity in the new enterprise.
The community corporation might also prove useful as a passthrough mechanism for donated buildings and equipment. Individual investors would be offered stock, though care must be
taken not to unnecessarily dilute worker and community equity
and influence in corporate governance. Finally, the Detroit
EDC would function as a conduit for government grants, as a
lessor of equipment and/or plant if industrial revenue bonds
are used, as a continuing source of technical assistance, and
as an indirect voice of local government in corporate affairs.

How would such a complex structure be governed,
and how would bargained planning occur at the level of the
firm? The common stockholders would be sovereign, electing a
board of directors that would make policy for management. To
max1m1ze the policy impact of worker equity and to strengthen
the hand of the union, both the allocated and unallocated
shares in the ESOP would be voted by the workers (or by their
elected representatives in the ESOP Cammi ttee
which might
overlap with the union lea~ership or be a special ~nion off ice)•
~he_s~ock held by the ESOP, the community corporation, and by
ind1v1dual local residents would be voting common stock. If
7. During the late 1970s, a team of consultants coordinated
by the National Center for Economic Alternatives did extensive
work on behalf of the Ecumenical Coalition of the Mahoning
Valley in their campaign to reopen the Campbell Works of the
Young s to~ Sheet &amp; Tube Company as a community-con trolled
corporation.
The N.C.E.A. team did imnortant work on the
st ruc~ure of worker and community ownership. We have benefitted
especial~y from the insights of Brad Dewan and Karl Frieden.
See their Recommendations of Worker/Community OwnershiE
S t ruct~re for Reopened Campbell Works, National Center for
Economic Alternatives, Washington, 1978.

�1111

Toward Rationality

41

it would not compromise the general appeal of firm offerings,
the by-laws of the operating company might require that both
the ESOP- and community corporation-held shares elect a certain
minimum number of di rectors.
Addition al capital would be
sought through non-voting preferred stock available to all.
The procurement of high quality -- but controlled
-:-- management personnel would be essential. To attract private
investors and government support, to navigate the dangers of
the launch, and to build the operating company's standing in
the marketplace will require experienced and aggressive managers.
But these managers must also understand the unusual
character of the company.
They must be prepared to accept
policy direction from a board in which the voice of the workers
and the community is strong, even dominant. They must conduct
relations with a union strengthened by the equity position of
its members. And they must willingly participate in both the
formal and informal processes of bargained planning, often
yielding to the voice of the shop floor on the organization
of production, heeding the union or the ESOP Committee's recommendations on local procurement targeted to union shops and
accepting the dictates of the City on hiring. Such unusual
individuals may well find work in such new enterprises highly
attractive: a workforce inspired to exceptional productivity
by its equity position and policy role; a plant equipped with
state-of-the-art technology; the special support of local government; and high visibility in a nationally-known innovation
are all benefits to be expected. To recruit the best available
talent, however, substantial material incentives may also be
necessary.
Direct salaries above the norm in the industry,
cash bonuses for top-flight performance, and advantageous options on non-voting preferred stock should be considered.
The union would function both as the traditional
collective representative of the workers in daily and contractual relations with the operating company and, through the
ESOP, as a voice in corporate governance. The precise relations
between the ESOP and the union would be defined in practice,
and would be influenced by such considerations as the interaction between the union local and the international or bargaining tactics at contract time.
This sort of enterprise structure clearly contains
elements of political contest as well as common interest: It
would, in the embryonic form of an individual pilot proJect,
embody the dynamic class tensions that w?uld pla? thems~lv~s
out in a fully-implemented, mature Rational Re1ndustr1al1zation plan.
Financing: The financing of ~he enterprise should
be designed to realize substantial capital for startup, to
maximize equity in relation to debt, to reap the maximum tax

/

�-42

Rational Reindustrialization

advantages available to its unusual structure, and -- for pol~tical as well as business and tax reasons -- to allow a rapid
rise to profitability. Money will be necessary at the_l~u~ch
for the acquisition of building and equipment, for initial
operating capital, and to fund the ESOP trust.
In the best possible case, the plant that will
house the new enterprise would be donated by the former corporate owner to the tax-exempt community corporation, which would
then bestow it upon the operating company. The former owner
would realize tax advantages, and might be particularly amenable to this course of action if also engaged in bargaining
with the City Council over permission to receive tax abatement
and/or industrial revenue bonds for new investments elsewhere
in Michigan.
Element3 of the acquisition and alteration of the
facility might also be accomplished with the proceeds of an
Urban Development Action Grant to Detroit passed through to
the Detroit EDC. This would involve a lease-purchase arrangement between the EDC and the operating company. The dedication
of a UDAG to the project would increase private lender confidence, and also raise the limits on the size of an industrial
bond issue for the project, should that device be selected.
The plant might also be purchased with the proceeds of an
industrial revenue bond, also involving a lease-purchase agreement with the EDC. The operating company would be required
to conform to the limits on industrial revenue bond size and
total company investment in the locale imposed by the Internal
Revenue Service, and would, of course, need a purchaser for
the bonds.
A local commercial bank might be convinced to
purchase them in return for the company promising its future
banking business, including the ESOP trust. Finally, the plant
could also simply be purchased with the proceeds of stock sales•
Essentially the same options exist for the purchase of equipment for the new enterprise.
Securing financing for the Employee Stock ownership Plan (ESOP) is essential.
The typical elements of an
ESOP are the company, the ESOP trust and trustee, the initial
lender, and the employees and their ESOP committee. The operating company would establish the plan and the trust and designate the trustee. A lender would make a loan to the trust,
which would use the proceeds to purchase common stock in the
operating company. The company would at the same time agree
~o pay the trust the equivalent of the trust's principal anrl
interest payments to the initial lender. The shares would be
held by the ~ender as security for its loan to the trust; as
the plan_begins to operate and payments are made on the loan,
progressively more stock would be released to the ESOP trustee

&lt;

�Toward Rationality

43

and then distributed to the accounts of the employees on the
terms of the plan.
The benefits to the operating company are substantial. _If an_init~al le~der can be found, the new enterprise
can enJoy an immediate, interested market for its common stock.
Although the company is required to make payments to the trust
in the manner of a loan, the entire payment (both that dedicated
to interest and the principal on the trust's obligation to the
lender) is tax-deductible.
The most desirable lender for our pilot project's
ESOP would be an agency of government such as the U.S. Departrnen t
of Commerce's Economic Development Administration, which has
in the past made several loans to establish highly successful
ESOPs. Unfortunately, the EDA will probably not survive the
attack of Stockman' s longknives; in the real world of the early
1980s, the most likely lender will be a local commercial bank
interested in the full banking business o~the operating company
and that of its workers and supporters.
Beyond the sale of voting common stock to the ESOP,
the company would seek initial capital by offering the same
securities to the community corporation and to local private
investors.
Given political support for the venture and the
possible ideological appeal of its main product (e.g., fuelsaving hardware) and its self-help elan, certain foundations
might give grants to the community corporation for the purpose
of purchasing equity in the operating company.
To seek other equity capital, particularly from
church and other institutional investment trusts, the operating
company could also issue non-voting preferred stock without
diluting worker and community power in company governance.
Since at first the enterprise would presumably seek market
entry with aggressive pricing of its product, initial purchasers of stock should have modest expectations about near-term
dividends.
·
It will be important, however, to show profitability as soon as possible. we think that can occ_ur: given the
substantal investment in new equipment, the special tax status
&lt;:&gt;f the ESOP financing, and the predictable net operatin_g losses
in the early years of the enterprise, the compa?y will have
huge tax benefits to carry forward to future, profitable years.
If potential investors can be convinced of the company's
8. In realizing the benefits of the ESOP, it will be important
to Prevent its substitution for an adequate and indepe nd ent
pension plan for the employees of the operating c~mpany. The
union must guard against an "economy" such as th is.

�44

Rational Reindustrialization

prospect of stable profitability in the future, then the anticipated cash flow from the deductio~s carried fo~ward can be
sold in advance at startup, for precious early capital. Investors might wel{go for such a "tax loss sale": after ~11,_the
new company is not a worker takeover ~fa tr~ubled firm in a
declining industry, but a publicly-assisted mixed venture entering a booming industry.
In light of these possible solutions to the startup
obstacles, it is perfectly reasonable to expect that one or
more of Detroit's major factories could be saved from closing.
A former auto engine plant, for example, might be reopened to
produce a small cogenerator similar to Fiat's TOTEM, which is
based on a four-cylinder auto engine and can deliver substantial
savings in heat and electricity costs for individual residences, small apartment buildings, and stores. Such a product
would have both a local and a national market.
Beyond the
expected tax abatements, the City could assist by requiring
procurement of the cogenerators for publicly-assisted new construction, assuring that some orders would already be in hand
at launch. Further, the City and its EDC could discuss with
potential local vendors to the new enterprise the possible
relationship between their cooperation with the company and
their prosects for future incentives from the City. Even at
the pilot project stage, the advantages of publir,ly-directed
linkages would begin to emerge.

Mixed Enterprise Zone Phase
we foresee a time
when the aggregation of pilot projects, together with certain
legislative and political developments, will make possible a
larger, more coordinated application of our agenda. As auto
disinvestment continues and the limits of the downtown Renaissance become clearer to the electorate, local government may
be compelled to use its available economic development tools
in unprecedented ways in a bold quest for jobs, tax base, and
restored legitimacy. At that point, Rational Reindustrialization ?an be attempted in a single large industrial tract of
Detroit. Local government would nurture the potential linkages
a~ong a s~bstan~ial :iumber of both traditional private and
pilot proJect firms rn the tract.
This assistance will be
most effective if government has the will and skill to preside
o~er a qualitatively new, zone-wide stage of bargained planning.
As auto-dependent suppliers look for replacement
orders! as some plant cl&lt;?sings lead to successful pilot project
reopenings, as t~e earlier new ventures become profitable and
expand, and as private corporations become interested in major
investments in the zone, local government can shape both the
terms and the character of growth in the zone by its aggressive
use of economic development tools. A discussion of these key

�Toward Rationality

45

tools is necessary before we can suggest how their creative
us~ might enable new relations of production in a mixed enterpr 1se zone.
Tax Increment Financing: In this process mandated
by Michigan Public Act 450 of 1980, a Tax Incremen't Finance
Authority (T.I.F.A. -- which may be the City's E.D.C.) is
establi_shed •. The Authority designates one or more development
areas 1n which tax revenue f .rom net increases in property
valuation go not to the City's general fund but to an account
controlled by the Authority, which can use the funds to finance
revenue bonds based on the cash flow of the tax increment.
These resources are applied to the economic development of the
increment district.
The Authority can also acquire, hold,
improve, and lease real and personal property and conduct all
the normal activities of a development agency. If it con trolled
a large and active area from which an ample increment could
be harvested, a Detroit Tax Increment Finance Authority could
wield real public power in a mixed enterprise zone that was
essentially coextensive with its development district(s). A
TIFA could make crucial contributions to the startup of
enterprises based on worker equity, or condition its assistance
to a major private investor on the degree of its cooperation
with the general zone planning effort. Broadly constructed,
Public Act 450 may even allow a TIFA to assume an equity
position in zone enterprises.
Enterprise Zones: The so-called Kemp-Garcia "free
enterprise zone" concept -- currently embodied in H.R. 3824
-- has become the most visible and hotly-debated element in
Reagan's emerging urban policy.
Our purpose here is not a
full consideration of the merits of the concept as practiced
in Great Britain or as discussed in the u.s. Some progressives
have, with reason, been critical of a proposal that might pave
the way for an eventual sweatshop Koreanization of the disinvested urban wasteland. Other progressives have, with equal reason, been drawn to a potential tool that uses federal tax
concessions to target new investment on the most devastated
regions of frostbelt cites. In considering Detroit's future,
we assume passage of a law similar to H.R. 3824.
In the current leg is lat i ve proposal, enterprise
zones may be designated by local governmen~ wit~ the approval
of the Secretary of H.U.D. in consul~ation with Comme 7ce,
Labor, and Treasury. The criteria are quite loose: a1;1y ~ontinuous urban zone characterized by vacant land and buildings, ~n
unemployment rate 1.5 times the national average, most.residents' incomes below the city median, and 4,000-plus resid~nts
despite pervasive depopulation would qualify severa_l times
over. All the significant industrial tracts of Detroit would
thus be candidates for designation.

�46

Rational Reindustrialization

The requirements on local government are similarly
undemanding. The City is required to reduce the_ burden~ borne
by employers or employees in the zone by means _which may include
tax reductions, the provision of better services, and reduced
governmental red tape. Private enti~ies in th~ zone_ are as~ed
to provide jobs, training, and technical and financial assistance to workers and residents in the zone.
Nothing in the current legislation suggests abolition of the minimum wage, elimination of OSHA, or a compensating reduction in other federal aid; indeed, the Secretary
of H.U.D. is required to promote the expeditious coordination
of the zones with other federal programs.
The federal tax advantages to firms in the zone
are substantial. Zone firms that get at least 40% of their
new hires from CETA-eligible workers enjoy a 5% business income
tax credit; capital gains taxes are eliminated; half of zonegenerated business income is excluded from taxation; interest
income on loans to zone businesses is tax-exempt; and net operating losses can be carried forward a full 20 years. workers
in such firms enjoy a 5% federal income tax credit up to $1,500.
Because of contemplated limits on the number of
zones to be designated nationally during the early years of
the program, intense competition among cities is likely. Beyond
political trade-offs, cities that can demonstrate greatest
need, broadest local support, and most potential for job creation will be the winners. If Detroit wants to win, it should
ask: how can a local government supportive of Rational Reindustrialization combine a tax increment development area with an
enterprise zone to create stable industrial employment on a
large scale?
If such a Detroit zone were drawn to include several
vacant and available industrial facilities the federal tax
incentives could be used to attract new, private investors.
If, for example, Schlumberger, Nucorp, or another major energy
hardware producer eager to ride the 1980-2000 drilling surge
grows understandably frustrated with its unfilled orders from
uncoordinated and overextended vendors and if it were cautious
. new construction, ' the in-place ind us trial
o~ the costs of maJor
linkages of southeastern Michigan might prove very attractive,
especially in a Detroit mixed enterprise zone in which innovative public policy had begun to efficiently rationalize the
relations among many separate producers. under such circumstances, the federal incentives offer red in the zone might
induce both the major private investment and the entering corporation's participation in the general~anning process of
the zone.

�Toward Rationality

47

The various tax advantages would also assist
worker/community-owned startup enterprises. The tax-free status of all lending to zone businesses would obviate the limits
and some of the overhead costs of industrial revenue bonds
The other concessions would not only lighten the eventual ta;
load of such enterprises, but would also increase the size and
appeal of the "tax loss sales" that could add to their initial
capital resources.
Finally, workers in the zone would benefit from
the targeted hiring requirements imposed upon zone employers
and from the 5% federal income tax credit. This credit would
be one element in a stabilized social wage enabling the direct
wage/job security trade-off discussed earlier.
Pension Fund Capital: To implement Rational Reindustr iali zation in a major industrial zone of Detroit will
require more development capital than will be available from
worker/community equity, government grants, and conventional
lenders. For the mixed enterprise zone to flourish, access
to pension fund capital will eventually be necessary.
Pension funds in the United States control huge
resources. They hold over $550 billion in assets, equivalent
to 27% of GNP.
Their $100 billion investment in corporate
bonds repesents nearly 15% of all long-term private corporate
debt in the country. A building political contest of great
import is developing around two simple questions: Whose dollars
are in the funds? How should they be invested? In an August
1980 statement, the AFL-CIO Executive Council strongly encouraged affiliates to bargain for joint administration of benefit
funds. The highest priority for redirected investment identified by the council was "a new independent institution, partially supported by pension funds and aimed at promotion of
employment as part of a broad program for the reindustrialization of America" -- in essence, a public development bank in
which workers would have a policy voice.
Major obstacles confront the aggressive pursuit
of such a goal. Most private pension funds are comp?ny-controlled, and de facto authority over investment policy has been
delegated to banker-trustees. Public funds are usually regulated by state constitutions, statutes, and court decisions
that limit permissible fund investments.
Most. startup a nd
smaller enterprises are excluded from investment simply because
t~ey are unproven or too small to merit the_n~cessary_research.
Finally, all pension fund investment policies ~re 1nfl~enced
by the "prudent man" doctrine which, as conven~1onally interpreted, requires trustees to invest conser~~t~ve~y, based.on
the narrowest measures of return to plan benericiaries. Ironically, such caution has often produced poor performance: one

�48

Rational Reindustrialization

study of funds holding nearly 20% of all U.S. fund assets found
an average rate of return of 4.1%.
For workers to gain some influence over their
deferred earnings held in pension trusts, a sustained campaign
will be required. Unions must bargain for joint administration.
Public funds must be freed from socially irrational regulations. A doctrine of "social prudence" must be asserted, one
that charges trustees with an affirmative resfonsibility to
consider social criteria in investment policy.
Vigorous use
of the public balance sheet approach must be used to demonstrate the full economic value of targeting investments
especially from the public employee funds
to the
communities of plan participants. Many regional and national
risk pooling and capital targeting instruments must be
developed, so that workers have the tools to safely direct the
power of their pensions.
As this campaign wins victories, the resources
freed up for economic development in Michigan, in Detroit, and
in our proposed mixed enterprise zone may be substantial.
Michigan-headquartered private pension funds include five of
the largest 100 and 38 of the largest 1000.
They control
nearly $20 billion in assets and include General Motors {$12.9
billion), Ford {$4.9 billion), Chrysler {$1.6 billion), and
Bendix {$1.1 billion).
Public employee pension funds in
Michigan hold over $5 billion in assets, make 65% of their
investment completely outside the state, and place only 12%
in Michigan-based firms.
Unions must win creation of and joint control over
a state or area investment bank that guarantees a minimum rate
of return to pension fund investments and targets a portion
of its resources to zone enterprises.
For example, as the
pilot project building small cogenerators matures to profitability, new equity capital from the regional fund could help
finance its expansion into much larger industrial cogenerator
production.
Eminent Domain:
Only public authority will be
able to accomplish the major spatial rationalizations that may
be required within the zone. A mixed enterprise zone embracing
and over laying a federally-mandated enterprise zone and a citydesignated tax increment finance district should include as
much existing open space as possible to reduce the need for
industrial land assemblage in the future. While Detroit has
very little such space well served by the necessary transport
and utility infrastructure, we have noted the potential cost
9. See especially the groundbreaking essay by Michael Leibig,
Social Investments and the Law {Washington, 1980).

�Toward Rationality

49

advantages of major reinvestment in existing facilities as
compared with entirely new "greenfield" developments. While
greenfield expansion often appears to minimize production
costs, its huge -- and often publicly-assumed -- capital costs
as compared with the "brownfield" or retrofit alternative calls
that appearance into question. 10 We are convinced that when
all costs are fully and properly enumerated, the bottom line
will be urban reinvestment.
Detroit's multi-story factories need not be industrial dinosaurs marked for extinction.
We have noted that
many of the product lines we recommend for Detroit are large,
relatively low-volume-per-week goods suited for fabrication
in rehabilitated multi-story factories. We would also point
out that many of the smaller, startup enterprises that will
bloom in our agenda can share multi-story facilities converted,
through government initiative, into "industrial condominiums."
Nevertheless, the need for land assemblage will
inevitably arise as reindustrialization proceeds. The trauma
of "urban greenfielding" in the interests of unaccountable
private economic development has been harshly demonstrated to
the nation by Detroit's Poletown experience. Without notice
and with only token community consultation, a working class
neighborhood was expropriated and dispersed in one short year
to make way for a General Motors assembly plant, shaking the
lives of and the linkages among thousands of citizens and
hundreds of businesses.
Rational Reindustrialization projects a new
concept ion of the land assemblage process,
in which
public/worker/community authority dominates. The municipal
exercise of eminent domain will not commit such blight-byannouncement but be the outcome of open, protracted discussion
within the planning mechanism. If housing must be taken, relocated residents will move into an already constructed replacement community reflecting their preferences, a community financed by federal and state governments and the bonding power of
the Tax Increment Finance Authority or the Economic Development Corporation. Some homes might even be physically relocated; in any case, neither residents nor businesses will lose
the relationships that are their sustenance.
Humane and democratic reconfiguration of land
usage is possible only if public authority is d?rninant on the
question in the governance of the mixed enterprise zone. The
IO. See U.S. Office of Technology Assessment, Technology and
and
1 ~8 0)
Steel
Industry Cornpeti ti veness
(Washington,
or
Staughton
Lynd,
"Reindustrialization:
Brownfield
Greenfield?," Democracy (July 1981).

�50

Rational Reindustrialization

exercise of eminent domain would still occur, and private
corporations might still be among the beneficiaries; but unli~e
the Pole town experience, it will not be the questionably constitutional exercise of eminent domain for the obviously exclusive
benefit of General Motors that led 2 of 7 Michigan Supreme
Court justices to vote against Detroit's taking of Poletown.
As Associate Justice Ryan, one of the dissenters, wrote: "Justifying condemnation for private corporations [requires] the
retention of some measure of government control over the operation of the enterprise after it has passed into private hands."
Precisely so. Only a reindustrialization that embodies ongoing
public authority in the operation of enterprise preserves the
rationality and cons ti tutionali ty of eminent domain for economic development.
Bargained Zone Planning:
Who should govern the
mixed enterprise zone? Through what structure should decisions
to wield the development tools we have described be made? We
envision an incorporated, democratically-constituted Planning
Authority that brings together (1) representatives of workers
(both unions and boards of worker-owned firms); (2) private
enterprise (big and small manufacturers, banks and other lenders, utilities); (3) communities (e.g., a zone-wide council
of
neighborhood
organizations);
and
(4)
government
(E.D.C./T.I.F.A., the City). Each of these four blocs would
have a set number of members elected or appointed to the Authority board by the entities it represents.
Having recognized common interests in the process
of establishing the zone and the Authority, the representatives
would still necessarily bring contending interests to the
governance of the zone. Open debate at the board table and
in public would test the strength of the blocs represented;
ultimately, each entity has the power to withhold its
participation in the economy of the zone.
These social
contests! sometimes mild and sometimes sharp, would be resolved
by adoption of a zone contract or bargained planning agreement
binding on all participants.
As the political experiment of the mixed enterprise
zon~ matures,. the bargained planning agreement would embrace
a w:der and w:der range of economic activity: wage and hiring
policy; coordinated production of intra-zone orders· development and maintenance of infrastructure· distributi~n of governme~t resources; coordinated targeting of capital; efficient
ma~erials movement~ and even formal merger of some zone enterprises. The Planning Authority would in effect levy a tax
.
,
Or
. "u ser f_ee " on zone enterprises,
at ,first simply
to finance
its overs~ght role but later to enable it to make on-going
targeted investments within the zone.

�Toward Rationality

51

The commitment to a mixed enterprise zone would
obviously constitute a major shift in the priorities of local
government.
Down town commercial interests would be told to
rely mo 7e on market forces and be asked to forego their claim
on public development resources. The citizenry would be asked
to consider surrendering part of its tax resources to targeted
use in the zone. The federal government would have to be won
over to the logic a city using public balance sheet accounting
and be persuaded to cooperate. Such a federally-tolerated
well-developed mixed enterprise zone would be the highest stag~
of Rational Reindustrialization attainable in Detroit without
a major restructuring of American politics. To go further,
large resources are essential.

Mature Plan Phase How large? we can assign rough
round numbers to suggest the resources necessary to fully
reindustrialize Detroit as a model of frostbelt recovery: to
create 100,000 new industrial jobs, close to $4 billion in new
investment would be required over time. In the third section
of the next chapter, we will discuss how the public component
of this investment might be raised. For now, suffice it to
say that, for Rational Reindustrialization to progress to full
form, Reagan and the free market troglodytes who shape his
economic policies must go, to be replaced by a federal
administration whose solution to the crisis of the 1980s is
incipiently state-capitalist. While it does matter whether
this evolution is dominated by anti-democratic pragmatists
such as Felix Rohatyn or by genuine liberals seeking a statecapitalist regeneration of a more redistributively just
society, in either case corporatist ins ti tut ions would be
created. A crucial test of strength for progressives would
be our ability to marshal the forces necessary to condition
these institutions.
If a Rohatynesque national development
bank were founded, would city movements, trade unions, and
other mass organizations of the working class and poor have
sufficient strength in the streets and in Congress -- and
sufficient clarity on what is desirable -- to s~ape part of
the bank's mandate? Could we insure that some of its resources
would be targeted to the Rational Reindustrialization of the
frostbelt?
The fullest implementation of our agenda may v~ry
well depend on the convergence of the left and ~regressive
forces in America into a national social-democratic movement
with clear objectives and political power. T~is national bloc
could influence federal energy, development finance, transportation, housing, and urban policy in ways tha~ would favor a
full capital-conserving, job-creating industrial program for
Detroit.

�52

Rational Reindustrialization

At the local political level, mature Rational Reindustr ializaton requires the advent of a City administration
that shares our agenda's fullest objectives. Its leaders would
represent a mobilized people in negotiat~ons wi~h private &lt;;aJ?ital, with Washington, and with other 1ndustr1a~ commun1t~es
of southeastern Michigan. As the scope of bargained planning
came to encompass a widening range of city life, a popular
movement would emerge, one that could elect and protect a creative leadership and which would provide the training ground
for thousands of resourceful citizens guiding the planning
contest in the factories and neighborhoods of Detroit.

National Policy and Rational
Reindustrialization
The agenda described in this paper would be all
the more feasible if certain national policies begin to be
implemented in the 1980s. First, a national response to the
current automotive sector crisis could slow the loss of key
inter-firm linkages in the Detroit economy. Second, a national
energy policy centered on fuel substitution and coal conversion, rather than on the production of diesel fuel from western
shale, would place Detroit in a better position to capture a
significant share of the U.S. energy hardware sector. Third,
because start-up costs for our "Mature Plan" phase are large,
an approach to national, regional, and urban revitalization
based on an integrated federal capital targeting mechanism,
such as a Reconstruction Finance Corporation with access to
Energy Security Trust Fund monies, would make financing Detroit's future far easier.
turn.

We will examine each of these national areas in

Policy for the Auto Transition
An agenda to
rationally reindustrialize Detroit's economy would be well

�National Policy

53

served by a national policy aimed at slowing the decline of
~he U.S. a~tomotive_sector. The downsizing of the city's main
industry 1s occurr 1ng at a dangerous pace; if the linkages
that bind together the industrial economy are ruptured by too
many sudden jolts -- bankruptcies, lost orders
skilled
workforce migration -- the cost of rebuilding the area~ s economy
will be far greater. A managed approach to the auto crisis
is important in buying time in which to marshal resources for
rational conversion of Detroit's industrial base.
There are two distinct dimensions to the crisis
of auto-dependent Detroit. The first is the decade-long stagnation in Americans' real incomes, which has led to an aging of
the vehicle fleet as consumers postpone new purchases. Stagnant
real incomes tend to induce a shift away from more expensive,
predominantly domestic, larger vehicles toward cheaper, smaller ones. This shift tends to dramatically increase imported
-- and especially Japanese-made -- cars' share of the U.S.
market, as they tend to be smaller, lighter, and (largely as
a result of lower wages despite comparable productivity in
Japan) less expensive relative to their quality.
This income effect has been joined (and was preceded) by a second factor. In 1974-75, and again in 1979-80,
fuel prices doubled. In both cases, the domestic auto makers
were caught flat-footed, their factories geared to produce an
output mix heavily weighted toward larger, high-unit-profit
cars and light trucks. In 1974-75, the government responded
by passing new car fuel economy regulations designed to force
the Big Three to begin an expensive, but orderly, transition
to an output mix favoring smaller vehicles. That transition
has included several rounds of "downsizing," such that the
average domestic 1982 model car is 75 percent more fuel-efficient than its 1974 counterpart.
The 1979-80 fuel er isis proved that even these
fuel economy gains were "too little, too late": larger cars
and trucks piled up in inventory, the imports' market sh~re
zoomed to 27 percent, and the Big Three laid off fully a third
of its U.S. work force through an unprecedented wave of p~ant
closings and capital spending cutbacks. Chrysler Corporation,
the largest employer in Detroit, twice had to be granted a
reprieve from imminent bankruptcy by federal loan guarantees
tied to major wage and benefit concessions by its workers.
Not surprisingly, the crisis in auto has attrac~ed
many proposed "solutions." Some have called for more excl~sive
reliance on the free market: removal of government regulationS,
decontrol of gasoline prices, and a sink-or-swim approach to
Chrysler's plight. Others have urged workers to accept ?ay
and conditions cuts to reduce their employer's coS t s. st111
others have adopted the tack of demanding sta nd ing quotas

�54

Rational Reindustrialization

against foreign cars and trucks. A few have even proposed
military action in the Persian Gulf to secure fuel supplies.

u.s.

Much as these proposals differ from one another,
they all assume that saving the auto-centered?·~· industrial
base means restoring existing corporate en t1 ties to superprofitability with no strings attachE:d· All assume t~at purely
private companies are the only possible source of Jobs.
We dispute the idea that only private investment
can create employment. We see no reason to assume that the
needs of workers for jobs, of the public for mobility, and of
the corporations for profits will somehow all magically coincide. Public policy interventions played a role in the auto
crisis, and must play a role in its resolution.
The gove rnrnen t' s role in the eris is becomes obvious
when one admits the naivete of the view that the domestic auto
companies should have seen 1979-80's frantic switch to small
cars corning. Late in 1975, the Big Three found that small car
demand had collapsed. The public wanted larger cars. Import
sales plunged. The va share of engine output rose, but couldn't
keep pace with market demand. All of this, of course, had to
do with the falling real price of gasoline from rnid-1974 through
early 1979: consumers got the message that things were returning to normal.
This is not to exonerate th auto companies, of
course. Rather, it is to argue that in our economy private
corporations respond to profit signals alone; because "small
cars mean small profits," increased sales of small r, more
fuel-efficient cars could only have been promoted by public
policy. Hence, a viable national strategy to slow the d cline
of the traditional auto sector must include the means to insulate auto and the public policies regulating it from energy
shocks and the associated wide swings in international auto
sector cornpeti tiveness.
Specifically, in order to slow the
decline of the U.S. industry, steps must be taken to retain
North American employment and to narrow the gap between the
pr i~e of the labor-power embodied in u. s. and Japanese nameplate
sol~, here. The key step is enactment of "local conte~t
I1 vehi~les
requirements that would mandate that all vehicles sold in
high_ volumes in the U.S. contain at least 75 percent North
America~ value-added ~Y some future date. Such requirements
would simultaneously induce Japanese investment in the U.S.
and Canada; reduce the downward pressure on u.s. manufacturing
wages (and hence on frostbelt tax bases); speed the integration
of
Japanese
auto
unions
into
the
worldwide
auto
productivity/labor rate norm; and slow the out-sourcing of
work by the Big Three to off-shore shops. For those who argue
that local content mandates would raise car and truck prices, we

�National Policy

55

respond that the U.S. government can and should dema d auto
price restraint as a quid pro quo for reducing the threat to
the Big Three's market share from low-wage foreign producers.

Policy for the Energy Transition
Rational Reindustr iali zation in Detroit is not strictly dependent on which
policies are adopted to deal with U.S. over-dependence on
scarce petroleum-based fuels.
The least cost energy future
for the nation, which we describe below, is also the one most
conducive to Detroit's role as an energy hardware producer.
Only one policy emphasis in the energy field -- massive
subsidization of the synthesis of diesel fuel feedstocks from
western oil shale -- could sabotage the planning process we
have described. Any other policy direction, including a nonpolicy of letting "the market" determine fuel mix, will favor
the substitution of gas for oil and the emergence of coal as
the prime synthetic gas feedstock.
Detroit's future will continue to depend on the
health of the auto industry for at least the next 30-50 years.
That fact dictates our strong interest in the u.s. having adequate supplies of high-heat content liquid fuels for the transportations ctor. That interest, in turn, leads us to advocate
a 1980-2020 energy policy that frees up high-quality liquid
fu ls from sectors that can easily be switched to gas. Basically, the so-called energy crisis is rooted in the absence of
such fuel-switching: scare petroleum-based fuels for which
there are no affordable substitutes available to the transportation sector are being wasted on stationary uses that can be
cheaply nd quickly switch d.
What should be done? First, large industrial and
el ctric utlity boilers should be, and are being, s~itc~ed
over to coal. Second, the possibility of interfuel subst1tut1on
should be m ximiz d by policies encouraging large-scale production of low- and medium-BTU gas from coal. Such coal-based
syngas once enjoyed a significant industrial market, and is
being produced today -- at half the cost of ne~ ~atura~ gas
-- without subsidy and d spite the lack of an expl1c1 t national
Policy favoring it; conscious policy, however, could accelerate
the return of this proven industrial gas supply technology.
As more and more coal-based gas becomes available
to industries that have not been able to switch from ~il or
natural gas to coal, thy will switch to coal gas, freein~ up
Oil for transportation fuels and natural gas for home heating.
To make this thoroughly rational redistribution of fuels among
sectors feasible, a third step is already underway: t~e upg1;ading of U.S. refineries to crack almost all crude oil into light
fuels suitable for transportation.

a

�56

Rational Reindustrialization

These three steps would mean that by the end of
this century, about 70, rather than to~ay's 50, percent.of
u.s. oil use would be in the transportation sector. Assuming
an on-road vehicle fleet of 160 million units averaging 28
miles per gallon, and adding about 800,000 barrels a day (B/D)
for aircraft, by 2000 the U.S. transportation sector can get
by on about 7.5 million barrels a day (MBD) of petroleum products.
Based on the consensus forecast that U.S. crude oil
production in 2000 through 2020 will be about 7.0 MBD, at 70
percent transport fuels per barrel, the sector's domestic
shortfall is only 2.6 MBD of product, less than half what the
U.S. now imports.
Unless too many of the resources needed to finance
fuel switching and refinery upgrade flow instead into unnecessarily expensive, long lead-time shale and direct coal liquefaction projects, the coal gas-based energy transition can and
will occur. Liquid fuels will be directed where their use is
most efficient, and gasoline will be supplemented more and
more by synthetic liquid fuel made from coal gas.II
This is the rational 1980-2020 energy and transportation fuels strategy, and the stable, secure industrial jobs
lie in the production of the hardware for energy production,
storage, upgrading, and (coal) gasification. Moreover, because
of the affordability of the low- and medium-BTU gas from coal
that underpins this energy path, policies that contribute to
its development should have great appeal to non-energy capitalists who, like consumers, must treat energy as a cost.
We
argue that this common interest creates the basis for an alliance of the public sector, the citizenry, and elements of the
non-energy business community to preserve, and win a share of,
the Energy Security Trust Fund financed by the tax on the windfall profits of oil companies due to price decontrol.

Policy for Capital Targeting
At some point in
the 1980s, the nation will confront the failure of Reagan's
laissez-faire, supply-side stewardship of economic policy.
Despite continued stagnation and Reagan's abuse of the working
11.
That synthetic liquid should be methanol because: (1)
Methanol is an acceptable multi-purpose engin~ fuel for use
in everything from the peaking turbines that now waste 400,000
B/D of_ oil to high compression car engines; (2) Methanol is
producible as part of the coal-to-syngas-to-methanol cycle
that _we've described~ and which is already yielding coal gas at
a price below what industry pays for either oil or natural
gas; ( 3). Me1thanol is already inexpensive, yielding a gallon
of gasolines energy for $1.48, compared to gasoline from coal
at $2.93, diesel fuel from shale at $2.60, and ethanol from
corn or sugar cane at $2.99; and (4) Methanol is cleaner to
make and cleaner to burn than any other synthetic liquid.

�National Policy

57

class and poor, welfare-warfare liberalism will not recover·
its demise was the predictable result of its ideological bank:
ruptcy and programatic disarray. With the legitimacy of government a~ a source of security and an engine of growth in question,
a period of danger and opportunity will arrive in American
politics. With laissez-faire discredited no less than redistr ibuti ve liberalism, the debate will center on the objectives,
forms, and costs of qualitatively new state interventions in
the economy.
Contending champions of the restructuring of the
accumulation process will advance industrial policies that
speak to debates over regional competition, energy sources and
costs, urban recovery, and the renewal of basic infrastructure.
Despite their differences on these matters, all serious participants in the contest will assume the necessity of major state
spending.
Vulgar critiques of "big government" will wilt
before the hard fact of social decay. One example: a recent
estimate of the cost of merely maintaining and renewing the
existing U.S. highway, mass transit, railroad, water and sewer,
and harbor systems during the next twa decades presents a staggering $1,225 billion bill. Some of these costs will be assumed
locally, but the figure suggests the scale of federal intervention that will be required just to maintain the possibility of
an industrial economy, let alone to achieve steady growth.
In this context, what is the approximate magnitude
of the capital needed to establish the Mature Plan version of
Rational Reindustr ialization in Detroit? What does the capital
stock required to equip 100,000 well-paid workers cost? This
is not an easy question. we~ determine an uppe: bo~nd on
the funds required by examining capital-output ratios in the
firms producing goods similar to those we propose fo~ a new
sector in Detroit. This method tells us that approximately
$60,000 in annual sales are associated with each job, and that
a capital investment of about $0.75 is re~uired to yiel~ e~ch
$1.00 in annual sales. 12 By this reasoning, the $6 billion
in annual sales required to employ 100,000 workers would entail
capital requirements of some $4.5 billion.
that

B.ut this is only an upper limit, because it assumes
the new Detroit energy hardware sector would be put

12 • As with jobs per dollar of sales, the finding of an energ?hardware capital-output ratio of 0.75 has a clo~e analogy in
the auto sector. There, $600 million invested 1n a. 30?,00?unit per year assembly plant allows about $2. 7 billi_on in
vehicle sales to be generated.
Since assembly ~ontributes
about 30% of total value-added per vehicle, the capi ta_l-outp~t
ratio is l.8-to-2.7, or o.67. This accords c~osely with a Big
Three 1978-80 assets-to-automotive sales ratio of 0 - 686 ·

a

�58

Rational Reindustrialization

together the way its capital-~asting prjvate secto~ counterparts were: in new plants, with rel~tive~y untrained la~or
pools, and forced to procure interme?1ate 1~puts from pro~1tmaximizing market suppliers. There is, admittedly, no scientific way to quantify the savings that might accrue to Detroit's
attempts to maximize the use of existing and potential linkages
and wo r k forces , but rough estimates are poss i b 1 e • First , based
on U.S. Department of Transportation analyses of the cost
advantage that Japanese automakers reap due to industrial
complexes -- as opposed to isolated plants -- it would not be
unreasonable to reduce our capital needs figure by 10%, to
$4. 05 billion. Second, assuming conservatively that one-third
of new sector operations could be housed in existing, older
facilities, the Office of Technology Assessment's spring 1980
study that found a 30% savings to "rounding out" existing steel
plants versus building new ones suggests an additional
reduction, to $3.65 billion {i.e., $4.05 billion reduced by
one-third of 30%).
This large sum seems modest when compared with the
hundreds of billions of public and private dollars that will
be required to restructure the national economy. However, we
are still left with the basic question: where will the money
come from to rationally reindustrialize Detroit? Part of the
necessary $3.65-billion investment will be made by traditional
private enterprise seeking the long-term benefits of the Detroit approach. Part will be raised by worker-owned enterprise
from local and reg ion al investors and lenders, especially those
with access to pension fund resources. Part will be provided
from the revenues of local and state government. Part must
come from a federal capital targeting mechanism.
The federal government has, of course, always targeted capital in one way or another, and the history of more
formalized national development banking reache back at least
to Hoover's Reconstruction Finance Corporation. 1 3 As corporatism advances, the confusion and parochial infighting that
surrounded Carter's National Development Bank proposal will
abate; it will be time to seriously debate capital targeting.
The severity of the situation presented by Reagan's denouement,
and the broad political base required to legitimate the bold
swing to major new state intervention, will compel a resolution
of differences.
But the national development bank that emerges
from the push and pull of reg ion al and class interests refracted
i~ the federal ~ove~nment will almost certainly be an institution shaped pr1mar1ly by corporatist forces. However, those
13.
For an excellent historical account, see a soon-to-bepublished essay by David Wilmoth, "National Development Banking
and the New Corporatism" {mimeo, U.C.-Berkeley, 1981).

�National Policy

59

forces wi~l need allies ag~inst the ideological right, and to
get them will have to make important -- if reluctant -- concessions to a progressive bloc in Congress.
For what should that bloc fight?
Corporatists such as Felix Rohatyn will conceive
of the bank as an investor in infrastructure renewal, a stabilizer of municipal finances, and a source of equity capital for
essential but troubled ind us tries in need of a corporate safety
net. For them, the bank would be an institution "beyond politics" and thus more able to extract intensely political concessions from cities and unions while disciplining less
corporatist lenders and companies.
The progressive bloc would concur with the general
proposition of investment in infrastructure and agree that the
bank should have a municipal window.
When cities come to
borrow at that window, however, the terms of the loan will be
a matter of intense debate. On the crucial issue of the bank's
industrial investment policy, the progressive bloc and the
forces it represents must advocate a "buy-in" complement to
the corporatist "bail-out" strategy: there should be a
requirement that failing firms falling into the corporate
safety net bounce out with the added vigor of worker equity,
financed perhaps by the development bank's guarantee of a loan
to an E.S.O.P. trust. On the basis of such equity, a recovering
auto parts supplier in Detroit might diversify and be brought
into cooperation with the Mature Plan for reindustrialization
of Detroit.
The decisive issue for our Detroit agenda would
be the bank's capacity and willingness to take a minority
equity position in the fully or partially worker-owned
enterprises that were born in the mixed enterprise zone phase
of Rational Reindustrialization and that would now be seeking
new capital for expansion. Progressives should fight to require
that a certain percentage of the bank's loans, loan guara~tees,
and especially equity purchases are targeted_ to the ~ind of
enterprises that underlie our agenda in Detroit. In li~ht of
the industrial dimensions of the energy path previously
described, its obvious contribution to a secure and affordable
energy future and its broad appeal to all energy consumers
in all social ~lasses, we can even envision the new de~elopm~n t
bank drawing from the Energy Security Trust Fund and rnveS t rng
in the expanding worker/public firms in Detroit.
Finally, such an RFC-like bank t~at targets a
portion of its capital to the kind of urban economic development
Program we advocate for Detroit should be made to gradually
separate these investment demands from block grant-fu nd ed

t

1

�60

Rational Reindustrialization

cornmun i ty development. The necessary work of comrnun i ty renewal
would then not be slowed by the funding needs of large-scale
development, while the capital requirement_s of Rational
Reindustrialization would not be constantly subJected to debate
among parochial neighborhood interests.

Our Agenda Can Work
The foregoing is not merely wishful thinking unrelated to an assessment of what is possible. The large-scale
energy hardware sector we have sketched uniquely satisfies
three central requirements:
1. Properly managed, such a sector can unfetter the city's
industrial engine and provide a socially-controlled source
of investible surplus, while maintaining secure, well-paid
employment.
2 • Only such a sector , g rounded in the existing pl ants and
-- where possible -- equipment of the city and region, can
maintain living standards during the transition process.
That is, only such a plan preserves capital from the incomplete accounting of private capitalists.
3. Only public management can effect the conversion from auto
industry dependence to planned energy hardware development.
This is because only an integrated program of land assemblage, affordable replacement housing, intra-sectoral input
procurement, and rational tax policy can overcome the parochial conflicts among developers, communities, creditors,
and service deliverers that large-scale redevelopment inevitably entails.
Some may object that a revitalization plan that
gives such heavy emphasis to public investment is utopian in
the United States of the early 1980s.
we would agree, of
course, that for the foreseeable future most productive
activity in Detroit will be organized by private capital. It

�It Can work

is not inevitable, however, that
will be in purely private hands.
reas~ns why it pro?ably will not
provides the dynamic push to the
push occurs at all.

61

the leading growth sectors
In fact, there are several
be the private sector that
regional economy, if such a

For the very reasons that explain our tentative
choice of public projects, the activities around which any
recovery will be centered will require massive scale. It is
extremely unlikely that private capital would take the risk
of betting large chunks on what will obviously look to less
venturesome minds on Wall Street like the longest of long
shots.
Unlikely, yes; absurb, no: the more farsighted may
understand the power of a well-linkaged set of new enterprises;
the capitalist class is not a monolith.
There are Walter
Wristons, but there are also Armand Hammers; there are Citibank
traditionalists, but there are also the foreign loan
departments of the central banks of social-democratic nations
involved in North American energy joint ventures. Nor need
government always remain a passive junior partner in a narrow,
business-dominated agenda.
In fact, as the fiscal crisis
inevitably deepens, the public sector will realize that a
strong role in production is its only insurance against unending
private disinvestment.
The market alone will never save the economies of
cities such as Detroit. Even though disinvestment has eroded
the cost of land, it cannot drive down the cost of either
labor-power or capital fast enough or far enough to recreate
the conditions for expanded reinvestment.
Most important,
even if private investors were inclined to take the gamble,
they would lack the tradition, skill, experience, and resources
to do the one thing that could radically ~ewer.their overa~l
costs: the coordination of core and supplier firms and their
workforces in the new ind us tries. If Westinghouse, for example,
were to establish a coal gasifier operation in Detroit, ~t
would tend to order components from it~ ~urrent, no~-Detroit
suppliers. Given the excess demand position of the 1ndust:y,
it might have to wait months for delivery. A public ent~rprise
sector, however, could decide that, simultaneou~ly with ~he
~onversion of idle auto capacity, excess product~on capacity
in ~he auto parts/tool and die sector should ?e given over to
making gasifier components that would otherwise be scarce.
.
The experiences of the city of Bologna, Ital¥ ~re
instructive in this regard. There, as here, government activity
· production is surrounded by hostile
·
· t e ca pi tal
in
priva
. ' ever
.
~atchful for ways to discredit public activity. • ~he City g~vef
its public production sector advantages over private capita
in the following ways:

I

�62

Rational Reindustrialization

a. public producers are clustered geographically to minimize
transport costs, and sales of intermediate goods within the
public sector are not subject to the equivalent of state
sales taxes;
b. public production is organized in enterprises similar to
the public/worker firms we have described and tax policy
is carefully, if somewhat clandestinely, used to reward
private and public entities that purchase preferentially
from these coops; and
c. such enterprises themselves are taxed at more favorable
property tax rates than private firms, the argument being
that, as property, they are worth less than comparable
buildings and machines in the hands of capitalists.
Quite clearly, there are some fairly simple steps that an enlightened -- or desperate -- local government could take to
allow a new productive sector to take hold.
Still other skeptics will argue that we have delusions of grandeur.
Even if there are ways to foster the
development of a small public or mixed public/private
production sector, some may call it folly to think of a new
sector that could employ 100,000 workers. We disagree, though
obviously we do not imagine immediate implementation of the
Mature Plan version of Rational Reindustrialization.
It is
our view, however, that the hurdles to be overcome in bringing
this agenda into being are, in some important ways, independent
of the scale of the proposed activity. Many of the legal,
financial, regulatory, political, and ideological obstacles
that attach to a fairly grandiose conception of a new sector
apply with equal force to a small version. Moreover, unless
our agenda speaks to the core need of the disinvested local
economy for a large number of stable, well-paid, metal-working
jobs, it will at best operate at the margins of reform.
Detroit is too far gone to be salvaged by even the
best decentralized, neighborhood-based projects often advocated by adherents of the small-scale entrepreneurial model
of revitalization. Many of those projects have a role to play
in Detroit, as we noted earlier in distinguishing national
capital targeting from community development funding.
But
they cannot form the core of a rational plan for rebuilding
an industrial economy.
The best available writing on what we call the
"localist/communitarian" alternative, Martin Carnoy and Derek
Shearer's Economic Democracy, argues that a needs-oriented
sector ~ased on small businesses can be built on a big enough
scale, 1.e., small, but repetitively, to "make ••• fights
against [service and employment] cutbacks unnecessary by substantially reducing ••• economic distress." we have tried to

�It Can Work

63

test that hypothesis for Detroit by seeing how much a lowprofit, needs-oriented sector could reduce living costs in the
city.
In the • most charitable case imaginable I some 3 5 % of
local consumption could be locally produced in such a small
business sector. Even if that sector could sell output at 15%
below its current prices -- which we doubt -- living costs
would be reduced only 5%.
Such a reduction in what we earlier term~d "the
cost of reproduction of labor-power" could, of course, help
maintain the "social wage" associated with a given direct wage.
But producing basic necessities for local consumption cannot
rebuild the economy, and so cannot justify any substantial
claim on the resources that could become available for basic
reindustrialization. Moreover, while an agenda such as ours,
that aims directly at the creation of a new emphasis for the
manufacturing base, can sustain the small business sector so
critical to the decentralized vision, the small business sector
cannot restore industrial vitality.
We share with Carney, Shearer, and other progressive redevelopment activists a commitment to the notion that
only a new political culture can sustain the movement necessary
to build a new urban economy. In the Detroit case, we believe
that Rational Reindustrialization is a workable agenda which,
if implemented, could initiate the process of a steadily-growing planned, semi-public sector, the management of which would
create the possibility of a mass political culture of involvement, competence, and productivity. Such a culture could lift
the transition toward real public/worker governance out of the
realm of theory and into the real world of industrial and
community planning.
we foresee a future Detroit in which the hours of
work per job could be progressively reduced. in favor .of increased employment throngh worker and commun 1 ty power 1n econ&lt;?mic planning. we foresee a Detroit in_ which worke 7s, collectively, can become managers, and in which the tension between
increased current benefits and increased investment for growth
can be openly debated and resolved. In the pla_ce. of a Detroit
whose factories are vacant monuments to the l1m1ts of purely
Private economic power, we want a Detroit whose f~ctories are
open and alive with constructive debate over conflicts between
the full development of new work relations and the needs of a
democratically-determined general development plan.
This future Detroit is possible.

______....____

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                    <text>ORAL HISTORY INTERVIEW
MICHAEL RAUDENBUSH

Born: Harvey, Illinois
Resides: Rockford, Michigan
Interviewed by: James Smither PhD, GVSU Veterans History Project,
Transcribed by: Joan Raymer, January 21, 2013
Interviewer: Mike can you start us off with some background on yourself and to
begin with, where and when were you born?
I was born in Harvey, Illinois on August 5, 1944.
Interviewer: Now did you grow up in that area or did you move around?
We moved around, my mom moved to Philadelphia for a job in 1945, and we lived in
that area for four years. My mom was--well very honestly, my dad took off and my
biological dad, they were married, but I don‘t consider him my dad. 1:07 I never saw
him and my mom got divorced and she met my dad who adopted me. They got married
and we came—my dad worked for the Railway Express in shipping. They shipped mail
and everything, but that was starting to go out back in 1949 and he got laid off. They
talked it over and they decided they were going to go to the Chicago area, where my
mom was born and I was born and she grew up there, and see if he could find a job. 2:00
On the way there I had an uncle and his family in Grand Rapids and we stopped for a
three day visit. That was in august of 1950 and my uncle said to my dad, ―You know
they‘re hiring like crazy for jobs right now‖ because the Korean War had started and they
were taking healthy young men out, so my dad went out with him for a day and came
back with a job working for a bakery. From then on we lived here. Both of my parents
have passed away, but we lived here the rest of the time.

1

�Interviewer: Now, were you in the city of Grand Rapids when you were growing
up?
Yes
Interviewer: What high school did you go to? 3:03
Well, I wasn‘t in the city for the whole time growing up. For the first three years we
were and then we moved, which is well part of the city now, we moved by—not far from
the—just off Ball Avenue from the Kent county Jail, which wasn‘t there when we first
moved over there. It was a new housing project at that time and my parents got a home.
I went to a very small school, a grade school, five class room, the only—the
Kindergarteners and the eighth grade were the only ones that got their own room. The
others were in two classes, and we were not in any school district then, we were just
outside of the city limits. 4:02 My parents--we had been going to the Trinity Methodist
Church all the years we lived there and my parents knew a lot of people‘s kids went to
East Grand Rapids High School and I could go anywhere, so they decided I was going to
go to East. I went to East for two years and then we got annexed to the city and I ended
up two years at Central High School, so I graduated from Central in 1963.
Interviewer: All right, now what did you do at that point?
I lettered in football in—and I ran track, but I didn‘t run track in my senior year because I
got a job at downtown Grand Rapids, was downtown Grand Rapids where everybody
shopped. 5:00 I got a job working in a meat market down there, Beazley‘s Meat
market, so I was working at the meat market and I don‘t know what to say after that.
Interviewer: Well, you wind up in the army at some point, how did that happen?

2

�Well, it had to do with the meat market. I had no intentions of going in the service, it
wasn‘t even on my mind, and at that time there was, except for the cold war, there wasn‘t
a lot going on. Vietnam was a little thing once and a while in the paper, and I became
friends with this one other guy that worked. He was going to Creston High School and
had just graduated and wanted to go into the army because he had been in high school
ROTC. 6:05 Where Beazley‘s was in town, there was a little—between us and Sears
next door was a little alley. If you went out the back of our meat market and down the
alley and came out, they had the army recruiting right there. He was talking to me and he
said, ―You know, I‘m going to go over there and see about enlisting. Could you just
come, I‘m nervous, and just help me?‖ I said, ―Sure‖, so we went over there and I just
sat down away from him talking to the recruiter and he‘s talking to the recruiter about
this and that and I‘m just looking at things. 7:02 The recruiter turns to me and the
recruiter says, ―What do you want to enlist in?‖ I said, ―Nothing, I‘m not here to enlist.
I‘m just here because he asked me to be moral support‖, and the recruiter says, ―Well,
what are you going to do?‖ Like I said, I had already been accepted at JC, which is now
Community College, but I said that I really wanted to be a minister at that time. He said,
―What if I send you some material?‖ Well, he said, ―Did you ever think about going into
the service?‖ I said, ―No, I want to be a minister‖, and he said, ―Well, you know we have
a thing called Chaplain‘s Assistant. You could go in the service and be a Chaplain‘s
Assistant and see if you like it?‖ I said one more time, ―No, I‘m not going in the
service‖, and he said, ―What if I just send you some literature on it?‖ To get him off my
back I said, ―Fine‖. 8:03 Two weeks later, it was summertime, and I came home from
working and I walked in and my parents were just sitting there and my mom said, ―You

3

�didn‘t tell us you joined the army‖, and I went, ―What?‖ She said, ―We got a phone call
from the army recruiter said that he‘s got you all set up and you leave August 15th. They
got the bus ticket for Wayne, Detroit where they check people in and that‖, and I started
to say, ―I didn‘t sign anything and I‘m not going‖, and they said, ―You will not go in the
service‖. 9:01 Unfortunately, I was a just turned, just turned nineteen year old, and I
went, they couldn‘t tell me what to do, so like an idiot I went. There were a lot of nights
there that I went, ―What did I do?‖ But that‘s how I ended up in the service.
Interviewer: Okay
The whole thing was, being a volunteer you could—you went through all the physicals
and everything and then the Captain came in to swear us in and he said, ―All of you that
are volunteers, at this time, have the right to walk out that door, we‘ll give you a bus
ticket home, but if you‘re drafted you have to take the oath‖. 10:03 I‘m looking around
and thinking, ―One person, one person walk out and I‘m gone‖, well, nobody did, so I
ended up in the service.
Interviewer: Did you have any sense of what portion of them were draftees or were
they not talking about that?
Oh yeah, the draftees, they wanted all the persons that were volunteers to know that
they‘re stupid, they‘re volunteering, you know.
Interviewer: Were there a lot of draftees there when you were doing the physical or
just a few of them?
I would say two thirds were draftees.
Interviewer: Had you had any expectation, before you wound up accidentally
enlisting, that you might get drafted?

4

�No, it wasn‘t even on my mind, you know. At that time, again, it was just the cold war
and I didn‘t really know that many people that got drafted. 11:00
Interviewer: There was a draft, but it wasn’t taking huge numbers of men at that
time.
No
Interviewer: So you might well not have to worry about it anyway, and planning to
go on to college and so forth.
If you were in college you were exempt anyway, while you were in college.
Interviewer: So there you are—did the draftees make an effort to find a way to get
out of it at that point? Were they trying to fool the recruiters or mess with the
physical or anything like that?
Not that I saw, no, they were understanding that they were drafted and I think, from what
I saw, they must have been pretty patriotic, you know. They just took their fate. They
did talk about, ―Just two years and I‘ll be out of it‖.
Interviewer: Now, when you went in, had he, had the recruiter set things up so you
would get a particular variety of training or did you get option for what kind of
training you would get going in? 12:05
Well, he kind of set me up for—to see if I could get in Chaplain‘s Assistant—kind of ,
and in my eight weeks of basic, I think it was the sixth week, they called out all those
that—there were four companies, I think, of trainees going on at the same time, and we
were sent down to be interviewed by the base Chaplain. 13:00 I walked down there and
there was just a whole bunch of—and I realized talking to these people that, I‘m just a

5

�high school graduate, and the next person had two years of college and the rest were three
years graduated, you know, so, needless to say that I didn‘t make the cut.
Interviewer: Did you talk to the Chaplain or did you just turn around and leave?
I talked to him and you know hope springs eternal and somewhere there was this little
maybe, but I didn‘t get it and again, there was only a couple, even with all these people
there was only a couple of vacancies. So, I went back and I was going to go to clerks‘
school because my mom made sure I took typing in high school and all that besides my
other classes. 14:08 I was going to be a clerk and when you go in the service you take a
battery of tests, at least back then a battery of tests. It turns out I scored, I couldn‘t
believe it, but I scored pretty high on leadership and all these other things, so I got
interviewed for possibly going into the ―ninety day wonder‖ group, you know, and take
the ninety days of Officers Candidate School. Here I am a nineteen year old and I passed
the first round of questioning. 15:05 I passed the second round and I was getting to
the—pretty close into the group, and then they sent in the ―who can we scare guy‖, you
know. Again I‘m just nineteen and these other guys are twenty one, twenty two, and
have been around a little bit. He started talking about all the harassment and that, and he
said, ―You know, if you want to think about it you can sign this paper and at any time
you can say, ―you know, I‘d like to take a crack at it‖‖. That wasn‘t really the truth, and
once you signed that paper you pretty much were not in it anymore, so I ended up being
sent to Fort Polk, Louisiana as a heavy weapon [specialist], mortars and the 106 recoilless
rifle. 16:05
Interviewer: Let’s back up a little bit to your arrival at boot camp. They send you
to Fort Knox.

6

�Right
Interviewer: What sort of a reception do you get when you get down there?
This was still the old army and you took this bus all the way straight to Knox from
Detroit. They get you off at—early in the morning and to kind of set this up, Bobby
Bare--I don‘t know if you know who Bobby Bare is, but he‘s a singer and he had several
hits back in the early sixties and one was ―Detroit City‖, ―I want to go home‖, you know
and just as—they had a radio that played music, you know, a radio station on the bus and
just as we‘re getting in, driving into Knox, that‘s what they played. 17:04 I said, ―This
is some kind of a thing telling me, ―you shouldn‘t be here‖‖, but as soon as that bus hit,
the training sergeants were out there, ―boom‖ you‘re here. Not being too nice for a
training site, and I don‘t understand that, but they put you to your company and off you
went.
Interviewer: Are they shouting orders at you as you arrive?
Oh yeah, oh yeah—the first thing they did once they got you, they marched you right
over to the barber. 18:00

And we had this guy from Detroit on our bus that had long

curly red hair and that was his pride and joy. When we got to the barber shop guess who
they took first? The barber went, you know, ―How would you like this?‖ He goes, ―A
little here‖, and the barber goes whish, whish, all gone. He got up and he looked in the
mirror and he cried, you know, and I went, ―Oh, man‖, but I kind of knew this was going
to happen. My uncle, my mom‘s youngest brother, had served in the army in the Korean
War and that and he said, ―Just know that these things are going to happen and just take it
in your stride. They‘re just trying to break you in so you take orders and that‖. 19:00
Then we went to basics.

7

�Interviewer: What did they have you spending most of your time doing in basic?
What kind of training were you getting there?
Pretty much marching, close order drill, learning how to use—at that time it was the M-1,
a lot of military classes on proper military etiquette and a lot of PT, a lot of PT.
Interviewer: How much emphasis was there on discipline?
A lot, which brings me to a little story--we were out learning close, learning close
drilling, marching, and I‘m out there and I‘m sneaking a peek at the guy ahead of me.
20:03 Trying to make sure I stayed in step because the first sergeant was leading the
drill and he‘d change directions, you know, so I‘m glancing down and he catches me. He
decides this is a good time to have a little lesson learned for everybody, so he pulls me
out and he says, ―Soldier, you‘re standing—you‘re marching looking at the guy's feet.
You can‘t march and look at the guy‘s feet, it doesn‘t work. You get behind me and I‘m
not giving any orders, I‘m just going to change and you‘ve got to change too‖, and I
made the mistake of keeping up with him. 21:00 And that night we were up in the
barracks and we had an inspection the next day, and I‘m in there, and I got my foot locker
and your underwear has to be rolled just the right way and I get it all done and it‘s
looking good. He comes walking in, he‘s usually home, but he comes walking in and it‘s
about nine at night, he‘s looking around and he gets to mine and says, ―I‘ve never seen
such*#! looking locker in my life‖, and he took it and threw it. My clothes, and just
everything, went all over, and he said, ―Soldier, redo that locker‖, and I learned a lesson
right then. Never show up a higher ranking person. But it was—of course everybody
else was gaping and they learned a lesson too.

8

�Interviewer: Aside from that particular incident, how easy or had was it for you to
adjust to life in the army there? 22:06
To me it was easy and I don‘t know why.
Interviewer: You were in pretty good shape when you went in though.
Yeah, I played sports in high school and not like I am now. Of course I‘m much older,
but I—we actually, we had to run and make at the end, and if you didn‘t pass all of your
things you were recycled, in other words you had to redo the whole thing. We had this
guy from New York, he was more than slightly overweight and he tried like crazy, but he
was not really going to make a good soldier. He had joined the National Guard there in
New York to keep from having to serve the two years. 23:04 He was a drummer in a
popular singer‘s, in his band we, another guy and I on the run, we almost helped carry
him to get him under the time and he just got under the time. I didn‘t want to see the guy
fail, you know. But, that kind of stuff—my dad was a strict person, so I was use to rules
and that, and you know, I didn‘t grow up doing whatever I wanted to do, so I didn‘t have
that big of a problem.
Interviewer: Within your company there, were the soldiers all white or did you
have some black guys in there?
Oh yeah, we had a mixture. We had a group, two white guys from New York and two
colored from New York, and they could all harmonize well, and they did. 24:16 they
drove me crazy because there was this one song, something about ―Don‘t let your mama
come knocking on my door‖, it was a song that was popular back then and I got—I listen
to the oldies once and a while on the radio and that, and when that comes on I say, ―Oh

9

�no, they‘re trying to torture me‖. We pretty much—I don‘t remember any racial
problems in our company. 25:00 I never heard a slur.
Interviewer: So, the drill sergeants didn’t use them or anything like that?
No, no, you got to remember Kennedy was in office and he was pushing civil rights
pretty good, so it got pushed pretty good in the service.
Interviewer: In the military, yeah, they had been a little bit ahead of that game, in
terms of desegregation anyway. There were blacks in the regular army units since
the 40’s.
Yeah
Interviewer: You get to the end of basic training, they send you down to Fort Polk,
and how do you get down there?
Train
Interviewer: What do you remember about that trip?
That we were not allowed in the cars that had the general public, and that‘s one thing I
remember. 26:03 Well, we—I had several guys that I went to basic with, they were my
basic platoon and they were gone to the same place, so I had people to talk to.
Interviewer: How long did it take, do you think?
I‘m saying two days, I think one night.
Interviewer: Did you ever get out of the car? Did it stop places or do you think you
were in there most of the time.
It stopped in a couple of places, let off people and picked up people, and no, we weren‘t
allowed off the car.
Interviewer: Physically, what was Fort Polk like?

10

�A lot of people hate Fort Polk. 27:04 I don‘t, I had a pretty good time there. There was
no big buildup at the time I was there.
Interviewer: At this point, this is a little bit before the big Vietnam buildup. There
was a point where an awful lot of guys who went in, went in after you went through
Fort Polk for AIT, and it had all kinds of reference to Vietnam simulation and that
kind of stuff. For you, what was it about fort Polk that you liked? Why did you
have a good time there?
Well, after AIT I was sent two blocks, like I talked earlier to you, two blocks to the
assistant instructor of the 106 recoilless rifle, anti-tank weapon, and I got treated like I
was a regular higher rank because I was a trainer. 28:03
Interviewer: So, you went from trainee to trainer almost overnight?
In a couple days—it was unbelievable, you know. I had one thing a lot of people did, I
still had to pull KP, but I also had several people from my heavy weapons platoon in AIT
that went with me, so I had a built in friendship too, and I was lucky enough to—our
sergeant, our barracks sergeant, he was from Detroit and he had only been in the service a
couple years, but he was fantastic in sports and he won the base several titles. 29:00
Baseball, football, football back when they had rivalries with other bases and that, so his
rank went up every time they won another championship, he got another stripe, you
know. But, he took me under his wing and he went—he explained thing to me, he went,
―Michael, you don‘t just want to spend time going into Leesville‖, which is the town
right outside of—he said, ―Find a way to get away, get twenty, thirty, forty, fifty miles
away, and when you do that don‘t act like some stupid idiot, and don‘t put down the
people because they talk different from you or do different things‖. And I took that

11

�into—I believe that today and it happened that one of the guys that was in basic and AIT
with me, he was a draftee, and he went home and got his car because he could then, he
was permanent party. 30:07 And we‘d go on weekends to a place called Ville Platte,
about forty miles from the base. They had a bar with a band and that, and the thing was
nineteen year olds could drink down there, and I met a girl there and at the same time, my
buddy with the car met the girl's girlfriend, and we‘d go up on a Saturday night and the
parents—were kind of leery of me at first, but they decided they liked me and allowed
me, him and I, to sleep on their couch and that. 31:05 Making sure that the daughter
was---which I would have done too as a father. We had a good time it was just—I
enjoyed my work, I enjoyed teaching the 106, I enjoyed the life, I loved the live fire we
did. At the end of training, what we did was, we had a range out, I guess its called North
Fort now, but it was just out, and we‘d fire live rounds and the 106, I don‘t know if
you‘re familiar with it, but it‘s got two different types of rounds and they‘re twenty one
and twenty three, if I remember right, it‘s been a long time, but in weight, pounds and
weight. 32:07 Its got a modified M-50 machine gun, so it only fires one time, and it‘s
got a back blast because you put these charges in and it‘s got a back blast that will go
back to about up to twenty feet, depending on what you got, and you know the sits on, the
gunner sits on the mount and he looks through this scope and then he pushes in and the
machine gun bullet goes out and its phosphorus and if it hits the tank then he knows he‘s
in and he fires the real round. 33:02 But I had to grab a whole bunch of guys that were
the loaders—we spent time, we‘d show them, we‘d fire a round and show them the back
blast and then they would get—they were standing right behind me and you had to go,
‗Don‘t shoot, don‘t fire yet‖ and pull them off.

12

�Interviewer: They directly behind the barrel of the gun, right where the back blast
would hit them.
Oh, it would kill them, kill them in a minute.
Interviewer: Do you have any idea how you wound up becoming an instructor out
of that? Were you just good with the weapon when you were training on it?
Well, I got good grades and everything, as far as the training, but it was the luck of the
draw in some way, it really was, it was just kind of the luck of the draw.
Interviewer: When you were growing up, had you done any hunting or shooting, or
things like that or were you new to guns when you went into the army?
No, back in 1955, at the age of eleven, you could go hunting, at that time, with hunting
licenses if a parent was with you. 34:10 Where we lived, now it‘s all kinds of buildings
and everything else, condos and you name it, but at that time, we walked down to the end
of our street, across Plymouth, which was a road that went this way, and it was all woods.
We would go pheasant hunting, my dad and I went two years and my dad got mad
because we never shot any and we never went hunting again. I had nothing against
weapons, except that I don‘t think weapons should be around where little kids are.
Interviewer: But you didn’t have a lot of experience with them before you went in
the army. 35:06
A couple of years of hunting with my dad and that was it.
Interviewer: But without much to shoot at.
Well yeah, but you know, we did some target practice. You have to learn to shoot before
you can go out there and try hunting, so we did target practicing and that, but I just liked
firing a weapon, I don‘t like firing at people.

13

�Interviewer: How long did your assignment at Fort Polk last?
Let‘s see, I graduated the week before Christmas, and I went to Berlin in August. 36:08
Interviewer: So, about eight months or so?
Yeah
Interviewer: Did you just—was it normal for them to take people who were
assigned to things on the base and then just give them orders to go somewhere else?
Oh yeah, it was the army and whatever their need is, you know. I just thought I was
blessed getting that time there and the people I met.
Interviewer: Had you—did they ask you if there were places you wanted to go, or if
you had preference for overseas assignment?
Not back then
Interviewer: So, basically one day you come in and you have orders to go to Berlin?
I had orders to go to Germany, and I had a thirty day leave and I had to go to Fort Dix,
New Jersey and we were going over by boat, or ship, excuse me. 37:11 I just had orders
for that and I got to have my leave and got to Dix and I got orders for Europe and we
sailed to Bremerhaven and they lined us up, and actually, I got a group number on the
boat the day before. These are the people you‘re going to be with. We got off and some
went to, you name it, in Germany and my orders said Berlin.
Interviewer: Okay, what kind of boat did you go over on? 38:02
We went over on a liberty ship.
Interviewer: Did you have an easy ride or a rough one?
Oh, it was August and I slept on the deck most of the time. Seriously, it was great going
over, however, coming back.

14

�Interviewer: So, you get to Bremerhaven okay, and you go to Berlin.
Yes
Interviewer: do you remember, did they fly you out or put you on a train, how did
they get you there?
No, there wasn‘t any flying at that time--by train through East Berlin [East Germany],
which I found very interesting. Of course, they pulled down the shades and they‘d come
in and check everybody‘s ID.
Interviewer: East Germans?
Yeah, it‘s their territory
Interviewer: Because you had to cross through East Germany to get to West Berlin.
Yeah, yeah
Interviewer: So, when you hit the boarder they stop the train and they come in and
they check everything.
Yeah 39:05
Interviewer: All right, then what kind of an assignment did you have when you got
to Berlin?
I ended up in a 106 squad in—I‘m trying to remember.
Interviewer: Was that when you were with the 1st Armored Division, was that the
parent unit?
No, Berlin Brigade is a unit itself, yeah; it‘s a unit by its self.
Interviewer: So, you were basically an anti-tank guy?
I was, I was that for a while and then they needed mortar men and I was in mortars, and
then one day I get called to see the company commander. 40:03 He said, ―I got orders

15

�to send you to headquarters in Headquarters Company for an interview for the room to be
an honor guard, I got accepted and my job was to guard the Allied Kommandantur,
which was the old Gestapo headquarters and they had three guards. The French had a
unit of offices, you had your British and you had your Americans, and we had a place set
up and cleaned every day, and set up every day, for the Russians if they decided to come
back. 41:05 In there we had an armed French, a British MP, and us, and it was twelve
on and twenty four off.
Interviewer: Were you just standing guard basically?
Well, we had two rooms, one on this side of the steps, big steps, you go up, big Oak door,
and then you went up another set of steps, then you came in and they had, it looked like
mirrors, but they couldn‘t see us, but we could see them. Then whoever‘s month it was
on the desk would check ID‘s and that. 42:03 One time I went--we got three pistols
here, pistols—we got the army--anyway, their pistol 1914 was it? Anyway, and that fired
a total of nine rounds, the British had a pistol and I think his shot six rounds, and the
French had one and it fired somewhere around six. I‘m thinking, ―We‘re gone‖, you
know, but in the back they had a full tactical squad of German police heavily armed,
heavily armed, so that was good duty. 43:13
Interviewer: Did you have a lot of high ranking officers or VIP’s going through
there?
Oh yeah, that job was to control the airways, the land, and the sea. Yeah, we had a lot of
diplomats because it was basically where most of the diplomats were.
Interviewer: Now, did you see anybody that was famous or heard of at the time?

16

�It wasn‘t there, but I got to meet Natalie Wood. 44:07 You know, we were on
headquarters grounds and across the street was the base theater where all the high ranking
people went, so they had ―Sex and The Single Girl‖ with her and Tony Curtis in that, and
I got to escort her in, which was the highlight of my military career. I grew up idolizing
Natalie Wood.
Interviewer: What kind of accommodations do they give you when you’re in the
Berlin Brigade?
We had rooms; we had three-man rooms, which is much better than the base. 45:06
Interviewer: In general, how did the people in West Berlin treat the American
soldiers?
Excellent, I never ever had a fight; I never ever had a problem. The only funny thing
was, I never met a German guy that fought in WWII that fought against the allies, except
they all fought the Russians.
Interviewer: An awful lot of them did.
I know, I just thought it was funny, there had to be one, but we also, on holidays, because
the Allied Kommandantur would be closed, I would guard the headquarters there. I saw
a lot of high ranking Generals in my time there. 46:02
Interviewer: Did you ever go into East Berlin itself?
Yes
Interviewer: What was that like?
Night and day, night and day—you had to get a security clearance to do, but that was
easy because I was doing security stuff. So, you go in and they check you at the border
and the East Germans made sure that you—you had to buy their exchange for their marks

17

�and that, and they checked you all out. Then you go in, you go in uniform, and there was
always somebody right close to you because they didn‘t want their citizens to be talking
to you. 47:08 I went twice and that was more than my fill.
Interviewer: what condition was East Berlin in physically? How did it compare to
West Berlin?
Again, night and day—they still had ruins that they hadn‘t cleaned up and we were a
modern new city. What worried me was, between us, the allies; we had three tank
companies, one American, one French, and one British. They had thirty tank divisions
between us and West Germany.48:00 We were given three minutes to live if they
decided to attack us. One night—our barracks were kind of like this (in a circle), and in
the middle we had a track and a football field, and they dropped a dud mortar round right
in the middle of that field one night. Diplomatically they apologized, but they were
sending a message that ―we gotcha‖, but luckily nothing ever happened.
Interviewer: How long did you spend in Berlin?
Eighteen months
Interviewer: Was sort of that a normal length for a stay at that time as far as you
can tell? Were guys rotating in and out at about that pace?
Most were
Interviewer: When did you leave Berlin then?
I left two days—the 26th, 27th of February. 49:09 I didn‘t get on the USS Patch until the
first day of March.
Interviewer: In what year?
1966

18

�Interviewer: The USS Patch, was that a naval ship or another troop transport?
Another old liberty ship
Interviewer: What was that trip like?
Awful, again I was on the last floor, or the first floor, whichever way they count a deck,
and right at the front of the ship, and going through the North Atlantic at that time of year
was awful. 50:07 You had to climb up all these steps to get-- and, of course, all these
waves were coming over, so they ropes and you had to hold on to the rope, and I‘d get to
the mess hall and I‘d smell it and It‘s not that anything was wrong with the mess, I was
just so sea sick that I‘d get there and say, ―I can‘t eat‖, so I lost a few pounds on the way
back.
Interviewer: How long did the trip take?
Thirteen days
Interviewer: Was it stormy the whole time, or rough seas?
Up until we got close to New York, the old Brooklyn naval yard.
Interviewer: From there did you get to go home for a while?
I did, I got thirty days
Interviewer: Then what’s your next assignment after that?
Fort Hood, Texas
Interviewer: What unit was based down there, who did you join? 51:06
I was, I don‘t remember the name of the unit now, but I got it in my paperwork there, but
it was a—they were just starting a—go back to training a whole companies for--it was a
training unit, for sending over to Vietnam all together one unit. I got there and because I
could type--was the company commanders‘ driver, part time clerk, you know, that kind

19

�of stuff. Once in a while I‘d actually give a training thing to the recruits on Molotov
cocktails and how to do that if you had to, you know. 52:03 I had a good time at that
time.
Interviewer: You were—you did fairly well there at Fort Hood, right? You got
some special recognition.
Yeah, I was there over a month and I got called into the company commanders‘ office
and the first sergeant was there and they said my platoon sergeant had put me up for
―company soldier of the quarter‖, and I said, ―What‘s that?‖ Seriously, I didn‘t know and
he said, ―Well, all four platoons put up there candidate and we select one as the best
soldier for that quarter in our company‖, and I went, ―Okay‖, so I said, ―What kind of
questions di you ask?‖ 53:07 He said, ―All military, it could be weapons, it could be
etiquette, document, what‘s going on in the news about the military‖, so I went, ―Okay‖,
and one day, it was just a couple days before we had the interviews, I was walking by the,
not trying to listen, but we didn‘t have air conditioning, so they had the window up in
the—and the first sergeant and the company commander were talking about what is
coming up and the company commander asked the first sergeant if he‘s got any real
tough ones and he said, ―I always ask the same ones‖. 54:06 I always ask, ―What army
document is A-2?‖ the company commander said, ―I never heard of it‖, and he said,
―That‘s because nobody ever looks at their military ID‖, and I went, ―Okay‖, and of
course he asked that and I came up with the answer and I think that got me it right there,
because he kind of looked at me like, ―Nobody‘s ever answered that before‖, but I was
told that I got two weeks of battalion rights, so I—but he said, ―You have a partner now‖,
because the NCO for the quarter for the company they select too, and we studied

20

�together, you know. He was really sharp. 55:03 I hope I was pretty helpful to him too,
but we both went up and guess what? We both made it, so now we went to battalion.
Interviewer: Brigade
Brigade, I get these things mixed up anymore, but anyway, I made it again , and so far
I‘m—I get a little thing in the ―Daily Orders‖ thing saying that, but what am I getting out
of it? Not anything that I see, but I went up then for division level and I‘ll be darn if I
didn‘t get that one too. For Division soldier of the Quarter I at least got-- in the Killeen
paper I got an article and I finally got a twenty-five dollar bond, which is only twelve
fifty. 56:12 I did get a chance to become the brigade commander driver and that was a
good duty. Wherever he went and whatever he did, he was a full bird Colonel, I got to go
along If he had a meeting with a luncheon, I got to sit and eat what everybody else did,
you know. It was a good job, but it also led me into Vietnam.
Interviewer: What’s the connection there?
I got close to my ETS, you know, end time service, and I had to see a recruiter. 57:07
Well, I saw the recruiter and the recruiter was trying to get me to –and I went, ―No‘, and
he said, ―How do you like your job?‖ Knowing how I like my job, and he also knew that
I was dating a girl not far from there, and he said, ―Do you ever think about extending for
a year? The Colonel likes you and you got your job and you see a girl.‖, and I went,
―Mmm, I don‘t think so‖, and the next thing you know I‘m thinking, ―Well‖, and he said,
―It‘s guaranteed in writing, in writing, that you will stay here‖. 58:00 I went and talked
to the Major and the Colonel and the colonel swore me in and I took an extra year and
things were going good. One day I had a friend that had a 1956 T-bird, something I had
always wanted to have as a kid growing up and he got orders for Vietnam and he talked

21

�to me and said, ―Mike, I don‘t think I‘m coming back and I know you like my car and I
want somebody to have it that will enjoy it‖. We talked it over what it would cost me and
I needed two hundred more, so I went to see a bank loan officer and he told me, he said,
―You know, you‘ll get this money today if this is right‖. 59:00 He calls the personnel
office and said, ―I can‘t give it to you‖, and I said, ―Why?‖ He said, ―You‘re going to
Vietnam‖. I went, ―No I‘m not‖, and he said, ―Yes you are‖, and I said, ―There has got to
be a mistake‖. He told me, ―If you can clear it up, if it‘s today, come back and you‘ll get
the money, but I have to have proof‖, so I got into the orderly room, the brigade orderly
room, and the Sergeant Major‘s there and he looks up and says, ―What‘s up Mike?‖ I
told him, I said, ―I got a problem. I went to get this load and the loan officer called up
personnel and they said I‘m going to Vietnam‖. The first sergeant said, ―That‘s got to be
a mistake‖, not the first sergeant, the Major, and he gets on the phone and when he gets
off he looks up and he said, ―Raudenbush, you‘re going to Vietnam‖. I was very lucky
that he was a tolerant man because to a higher ranking personnel I blew my stack. 00:04
he just kind of sat there with me calmed down and he said, ―Son, this is the army and no
matter what you sign, if they need you someplace, your MOS, you‘re gone‖, so I went.
Interviewer: At this point in time, what did you know about what was going on over
in Vietnam?
I knew—I knew fairly a lot, and I‘m a paper reader, even to this day I‘m a paper reader. I
read from the front to the back of newspapers and my mom got me in that habit when I
was young. I remember, in Berlin, reading when the president, whatever his title was,
was killed. 1:10
Interviewer: President Diem, yeah

22

�I remember reading that, but it didn‘t mean anything to me, and to be honest with you,
most of the Stars and Stripes, which was the military paper, at that time—of course then I
kind of started following it. I knew that it where the French and Dien Bien Phu got
massacred and that, so I never thought I‘d go. After a while you couldn‘t help, it was in
the news, it was all over, you know.
Interviewer: So when do you get—now, before you go to Vietnam do you get a leave
or what happened?
Thirty days, a thirty day leave, and something that surprised me, my parents said, ―If you
want to go to Canada we‘ll understand‖. 2:06 I went, ―You know, I can‘t do that, I
raised my hand and said, I‘ll go wherever the United States military needs you the most‖.
That shocked me because I never thought they would do that, you know.
Interviewer: Physically then, how do they get you out to Vietnam?
I flew, when I finished my leave I took a plane to Oakland and they had a bus at the
airport that would pick up any that were going to the Oakland army base. I got there and
I wasn‘t supposed to go for four or five days, so I was going to go and spend a few
evenings enjoying the local culture. 3:17 They had their formation and I was put into
quarantine. The quarantine was all those going on the next day to Vietnam was put in
this and locked and that‘s how it was that they locked the doors, so people couldn‘t desert
during the night. The next day we got on the bus and went to the plane, which was—the
United States rented regular planes. 4:09
Interviewer: Regular civilian aircraft.
Yeah, and with the stewardess and all, you know. We flew to Hawaii first. Hawaii,
Guam, Okinawa and then into Saigon

23

�Interviewer: What was the mood like on the plane going over?
It was—the first—until we got to the last one and we knew we were coming into--the
next landing would be Vietnam, there was joking and normal army people stuff, you
know, card playing and just the normal stuff. 5:02 When he came over the loud
speakers, the Captain said, ―We have now entered into the flight pattern of the Republic
of Vietnam‖, it changed. I‘m sitting at a window and I see illumination flares, you know,
and it seemed like all the time, but it probably wasn‘t, but I‘m thinking, ―What‘s going on
down there, are they fighting somebody?‖ 6:00

Then we landed at three in the

morning and they opened the plane door and this was in Tan Son Nhut and they had,
from the plane to the building we would be brought to, lined with APC‘s with machine
guns and guys in flak jackets and in between these were more guys with flak jackets with
heavy weapons, and the said, ―Run‖, and I went, ―Oh, darn‖. I used stronger words than
that, but that was our welcome to Vietnam.
Interviewer: What did they do with you then? You ran off the tarmac.
We got into the terminal and they started calling off names. 7:03 They put us in busses
and we went to Camp Alpha, which is where they processed you. I got to Camp Alpha
and lucky me, I pull guard duty at one of the gates. No weapon and not even knowing
who‘s the good guy and who‘s the bad guy, but then the next day we went through the
assignment and I got the 1st Infantry Division, and that‘s all I knew at that time. Then
they sent me to the group that was going to the 1st Infantry Division, loaded on a truck
and they drove us to Long Binh, which was the headquarters at that time for the 1st
Infantry. 8:17
Interviewer: So the divisional headquarters was based there?

24

�Right, and we got there and it was just getting lunch time and they said, ―Okay, there‘s
the chow hall, go in and get your lunch and stay in there and we‘ll come and get you‖.
We just walked in and all of a sudden I heard this ―Bing Bing‖, and everybody‘s
dropping to the floor. They‘re taking shots outside of the—outside of Long Binh, and
that‘s when you knew it was the real thing, you know, because I‘m standing there and
everybody else is—and I went, ―Oh‖. 9:00 Then I was down, and after a few minutes
they got up and I guess this was kind of a daily thing, I don‘t know, but it was a
welcoming. Then they put us on a truck and those that were going to Phuoc Vinh, which
is where I had my—the next day we got on a truck, we got weapons, but no bullets and
there we go down and all of us were just thinking, ―If they attack us what are we going to
do, Bang, Bang, you‘re dead?
Interviewer: Were you just on one truck, or was there a convoy?
This was—we might have had one Jeep with a 60 mounted on it behind us because we
didn‘t have any weapons, none, well, bullets.
Interviewer: Right
I understand that, later when I thought about it, because we‘d be taking pot shots at
everything. 10:01 Anything that moved, but we got to Phuoc Vinh and the company
was out, we got put in our company, our platoons not company, and I got called up and
they said, the lieutenant that was staying back as an officer said, ―I see you can type‖, and
I said, ―Yeah‖, and he said, ―Good, we need a clerk, ours is getting ready to rotate, get
your stuff and come on back up‖. I get back down there and I wasn‘t even—and I‘m
gone, ―Hey you guys enjoy yourself‖, you know, I‘m going up and be company clerk,
and down comes the company clerk saying, ―Who‘s Raudenbush?‖ 11:05 I said, ―I am‖,

25

�and he said, the company commander, the acting company commander, wanted to see if I
went back up there and he said, ―You‘re not going to be the clerk, you‘re a mortar man
and we need you‖, so not only didn‘t I get that, but they just had a couple wounded
mortar men. So, there‘s a three day jungle school you got to go through there, at that
time, and I got to go right then, pack your stuff. The rest of the guys were not going for
another few weeks.
Interviewer: What was the jungle school like?
It was three days of trying to learn how to go through. 12:02 And one night where you
go out and set up a perimeter and do the two man fox hole, and the one hour on and one
hour off all night.
Interviewer: Do they teach you about booby traps and things like that?
Oh yes, you get a fast thing on everything. That one night when we were out, I didn‘t
sleep. I‘d take my hour on, or off, but I couldn‘t sleep.
Interviewer: Now by this time you have weapons and live ammunition and
everything. You got your full kit now? 13:00
Yeah, well we got the 16 and that was just really coming in then, the 16, and we went
back and they buy you free-- we had a little EM club, which was hooch with beer. You
had to be an E5 or above to get hard liquor, but the group that I was with at the jungle
school, we did well for the beer, we had a good, good time and then I got sent out on a
chopper, which was interesting because it was the first ride I‘d had. 14:03 I got in a
love hate relationship with that, I loved it when it came in and hated it when it went out.
I got in and they flew us and dropped us off with a hot meal for the hot meals. Our
division was good, if they could fly in a hot meal, they did, you know.

26

�Interviewer: What company were you assigned to?
B-1st of the 26th Infantry, 1st Infantry Division
Interviewer: And you were a mortar man in the company?
Yes
Interviewer: Now, was there a sort of—were there mortars attached to platoons?
Does the company have a mortar section, how does that work?
The company has a mortar section. There can be at times, and it all depends, again, on
what‘s going on. You could be with a platoon or you could be—most of the time we
were right in the middle of the company when we dug in and that for the night, or
whatever. 15:09
Interviewer: So you’d be somewhere around where the company CP was?
Yeah
Interviewer: Now, what kind of reception did you get? You arrive, a helicopter
brings you into the company, and what did they do with you once you get there?
One of the older guys took me under his wing. I don‘t know if he decided he liked me or
what, but he took me under his wing and showed me the right things to do and the wrong
things to do. How to make a covering from the sun if you‘re going to be in a place for
several days, you know, so you don‘t fry. 16:02 We had a very close company in my
opinion. I had friends, all the rifle platoon, you know, and that was, and still is, for those
of us that are still—we have a reunion every year.
Interviewer: Now, what was the company doing at the time you joined it?
They were in a perimeter for—I think they were there three days, and honestly, I‘m not
sure because I‘m just trying to—I don‘t know what their exact mission was there, but

27

�whatever it was, it was finishing up. But Charlie was nice, the first night he sent in one
mortar round just to welcome me there. 17:05 I thought that was very nice of them. I
was lucky; I got accepted, pretty much, right away.
Interviewer: They take you in and they’re looking after you to some extent. You’re
not just left to your own devices.
Yea, which taught me and I did it to others as they came in.
Interviewer: Which is how the rotation system is supposed to work, and it doesn’t
in all situations, but for you it did work the way it was supposed to.
But still it‘s hard—I don‘t, you know, not knowing the people, but our company was, like
I said, they looked after each other and I‘m sure all companies did, or most.
Interviewer: So, you’re out of the field, and do you go back into a larger base camp
perimeter?
Yes, Phuoc Vinh
Interviewer: What happens from there? 18:06
You clean you weapons, you get a shower, which is fifty-five gallon drums of cold water
and you get three people for each shower head, seriously. You run in, get wet, soap up
out, and then your turn, because water was precious, and they had a really good meal for
coming back in.
Interviewer: How long would you stay in?
It wasn‘t long, it wasn‘t long because they had lost some guys the day before I got there
and they had a memorial service for them. 19:03 You don‘t have to know somebody to
be deeply affected. Cleaned up weapons and got ready to go out again.

28

�Interviewer: Now when you go out again do you go in helicopters or on foot, or in
trucks?
We went out on a battalion move and that‘s the first full one I went to. I was there on the
landing pad there for the helicopters and you got—were B Company and you had C
Company over here and A Company, and I‘m just kind of standing there and all of the
sudden I get a pat on the shoulder and it was a guy that I served in Berlin with. 20:04
He had volunteered for Vietnam and his name was Samuelson. He was from Michigan
and he went, ―What the hell are you doing here? I thought you were out of the service‖, I
was the only one, but it was nice to see somebody you knew. Unfortunately on
Thanksgiving Day we were out with another full battalion and we set up the perimeter
and it was C, B, A, and kind of this way, we were the, whatever, out front, and I know
because I was there. 21:09

My mortar platoon sergeant had his wife leave him and left

his kids, so he got an emergency leave to go back. I was there kind of in his place and
going over where everybody was and I know because they pounded that in everybody‘s
head, ―this is where these coordinates‖, and we send out ambush patrols, you know, kind
of guard our flanks and that. There was this Lieutenant from C Company and he was
sent there by the company commander because he was going to lead the ambush.
They‘re down and the battalion commander says, ―Now, has everybody got where
everybody is?‖ 22:05 ―Yes sir‖, and it was right at dusk and we had just set up out trip
flares and our claymores for the night. Our trip flare goes off, of course somebody blew
the claymore, which you‘re supposed to, and all of a sudden we hear, ―We‘re Americans,
We‘re Americans, stop shooting, we‘re Americans‖. The Lieutenant had put that up right

29

�in the middle of our company. He was set up, he had the ambush set up for right in the
middle of our company and Samuelson lost his eye, a bullet got his eye.
Interviewer: That was friendly fire in effect.
Yeah, Of course, and I don‘t know if I want this on the—because he got a Bronze Star
and a Purple Heart and they said it was enemy fire. 23:14
Interviewer: It’s almost an apology.
It was an apology, it was.
Interviewer: Was the Lieutenant inexperienced or do you think the Lieutenant was
a new guy or someone that didn’t know what he was doing?
I don‘t think he was paying attention. I just don‘t think he had his mind on that. It could
have been who knows where, but you got to have your mind on it when you‘re doing a
full battalion meeting. 24:06
Interviewer: Describe a little bit what happens when a battalion goes out as a unit.
What goes on, you load up in the helicopters, or whatever, and then what?
You go out and you start landing and it depends on what you‘re going to do. You could
be, the helicopters for A company could be two hundred meters that way, and you‘re in
the middle, or it could be your full—companies are still together, and you just—and they
always have their meetings, which is good, because everybody knows where everybody
else is and doing. 25:01 You go about making your foxhole and pits and loading up
ammo and pit behind the mortars.
Interviewer: Now, would you normally stay within a perimeter with the mortars, or
would you go out in the field with the rest?

30

�I‘ve done both. I‘ve done with the mortars and if they don‘t use mine, I‘ve gone out as
a—I‘m trying to think of the word—as the guy that would call in the mortars.
Interviewer: Forward observer?
Yes, thank you, it was on the tip of my tongue and it just would not come out, but I‘ve
gone out that way too.
Interviewer: When you had that duty did you have a radio, or would you call in
with somebody else?
I had my own radio. 26:00
Interviewer: Okay, what kind of terrain were you in? What was the country like
you were operating in at that time?
Actually it was one of two things. It was dense second growth forest, or it was the rice
paddies, lots of rice paddies, lots of dense forest.
Interviewer: Now, when you were going through the forest did you stay on trails, or
did you cut your own?
We tried to do our own, because if you follow a path that‘s already there, too many bad
things can happen. Claymores, what was the mine they had? ―Bouncing Betty‖, step on
it and ―poom‖, so we tried to do our own.
Interviewer: With the paddies, would you just slog across the paddies, or use the
dykes? 27:06
It depends, we‘ve done both—walk in some excrements, but it depended on what was
going on, or how you were trying to get somewhere. If you think you got NVA around
you‘re not going to walk on top of those, you know.
Interviewer: You’re a good target.

31

�Yeah, but I think I saw about every terrain in that area.
Interviewer: How much enemy activity was there at the time? Were you making a
lot of contact?
Sometimes, a lot of times they‘d skip out before we get there. 28:01 It turns out from
reading history and everything else, they had a tunnel system that we had no idea we
were walking right on top of. Thinking that these little holes that are holes that guys
would go down in, tunnel rats would go down, there‘s brave men, but they were just
decoys, a lot of them. We went pretty much anywhere.
Interviewer: You were ultimately involved in some of the larger operations in the
field. There was one called “Cedar Falls”.
Yes, Cedar Falls was working when I got there, and then Junction City was one too.
29:03
Interviewer: As far as you can tell, what was the purpose of those operations?
Search and destroy, all of it, that‘s what I can see the whole thing was. Go out and hope
they attack us, so we can destroy them.
Interviewer: How often would that happen? Did these operations have a certain
amount of success as far as you can tell?
Somewhat—obviously not enough, but they knew who we were. I mean, we stood out,
but we didn‘t know who they were, you know. We‘d go through a village in the morning
and give C-rations and candy to the kids and that. 30:04 They‘d say, ―Oh, number one,
number one‖—come back and they‘d blow claymores at you, you know, their own. So
it‘s like you didn‘t know who was what.
Interviewer: The NVA though, would normally fight in uniform.

32

�Oh, no
Interviewer: Or would they also wear civilian clothes? The NVA and Vietcong, but
were they interchangeable in your experience, or were they both active?
The one big battle I had with the NVA was at Ap Gu, which was our 1st Infantry's biggest
battle of the war, and they were in uniform. 31:00 The rest of the time I didn‘t know if
they were NVA or not, and in uniform, NVA or Vietcong, because they wouldn‘t be in
uniform. Probably both, I probably saw them both.
Interviewer: Now, would you actually see much of the enemy or would you just get
fired on from somewhere?
No, we didn‘t see much of the enemy, a lot of hit and run.
Interviewer: When you were camping out at night and so forth, would the
perimeters get hit by these mortars, or snipers, or zappers/
Very seldom, very seldom, and I can only remember mortars coming in, maybe, four
times at night. 32:02

Of course, I wasn‘t there for that second day of Ap Gu, but they

were coming in hot and heavy.
Interviewer: Would you get sniper fire? Was sniper fire more common?
Yeah, if they fired mortars it was only one or two and they were gone.
Interviewer: Now, if your company made contact, or whatever, and you were with
the mortars then, would they call in support from you, or how would that work?
Yeah, we charted every inch of where the guys would go, and they always had one guy
out there from the mortar platoon to do the coordinates. You have to or you‘d be killing
your own guys left and right. 33:04

33

�Interviewer: You’d have the quickest response time, wouldn’t you? You’d get the
call and do something right away as opposed to calling in for artillery from
somewhere else?
It all depends, if we‘re going into someplace, we call the artillery because we‘re just
setting up, but the artillery is what—artillery and bombers are what saved Ap Gu , so
we‘re kind of the back up to the artillery, I really have to say, because they can do much
more damage.
Interviewer: Were you firing 81mm mortars?
Yes
Interviewer: So they’re much smaller than a 105.
The four deuces were so big you couldn‘t carry them out in the field. You would have to
be provided some kind of transportation set up, so yeah, it was all 81‘s.
Interviewer: Did you have, in these operations you conducted, would you have any
kind of mechanized support, APC’s or tanks, or things like that? 34:05
We had a couple times and it depended on where we were and if they could be there,
number one. We had the artillery once and we got—they had the bee hive rounds—took
out everything, the trees and when they fired those it didn‘t last long, the battle didn‘t last
long, but then I dreamed about that too. People getting sliced up, but of course they were
saving our lives, so it‘s a two way street, but most of the time we were on—we always
had birddogs and this guy that flew in a Piper Cub. 35:01 He had more guts than
anybody I know, I think. That‘s all wood and could be shot down easily.
Interviewer: Was he flying low looking for targets?
Yeah, looking for—call in the artillery or whatever.

34

�Interviewer: Did you get helicopter gunship support too?
Oh yeah, oh yeah, and the—oh, what was the name of the Gatling gun? The plane,
dragon, something dragon
Interviewer: Puff the Magic Dragon that was one label.
We had that one night--the
Interviewer: Gatling gun?
Yeah, but I‘m trying to think of the bullet, the one that has the red
Interviewer: Tracer? 36:05
Yeah, one every five it looked they were hailing nothing but tracers, oh, man that tore up.
Interviewer: How long, basically did you spend in the field before you got hurt?
Seven months
Interviewer: Over the course of that time, how much turnover was there in your
company?
The first month a lot, because there were all the replacements coming in and after that,
not much
Interviewer: Did you take many casualties at Cedar Falls or Junction City, or was
that fairly light?
We had some casualties, but not a great amount of casualties. 37:04
Interviewer: So you spent a lot of those seven months, pretty much, with the same
group of guys, or there were a fair number of them you were there with together?
Yes
Interviewer: what did you think of your commanders, the sergeants, Lieutenants
and commanders you had to work with?

35

�All but one, it was a Lieutenant, all but one were great. Our company commander was
Jouwin [?], who returned and became head of NATO, but the battalion commander was
Hage, Hagen Lincoln was our—we had good officers.
Interviewer: You had good officers.
Some of the younger officers, not so much, and I had one that when I was down at Fort
Hood. 38:06 This ROTC--2nd Lieutenant comes in and he just graduated from Notre
Dame. A little guy, but thought he was— that he knew everything. The commander one
time-- we had full—we were going on a march, the whole company, and he went over to
the Lieutenant and went, ―That‘s a trenching tool and you‘re going to have to use it to
make a trench so the handle won‘t come off‖, but he ended up in my company over in
Vietnam. 39:10 You couldn‘t tell him anything or advise him. We hit a Vietcong
village, and of course, they were gone, and right in the middle, in the middle was a big
clay pot, huge, and right in there was GI equipment, and he said, ―Raudenbush, take that
stuff out of there‖, and I said, ―No sir‖, and he said, ―That‘s an order‖, and I said, ―No sir,
not until we know that it doesn‘t have a booby trap ―. So, I got a rock and that and he‘s
still telling me, ―You don‘t have to do this‖, and I threw the rock and it cracked the clay.
40:04 And they had a cylinder that exploded, it popped and exploded if we just reached
in there and got it. I did report that to the company commander. When it‘s obvious,
when it‘s the centerpiece of everything, but that‘s the only officer I could never [not]
warm up to.
Interviewer: Did you spend pretty much all your time in Vietnam either in the field
or in base camps, or did you go anywhere else?
Yes, in the field or in base camps.

36

�Interviewer: How much contact did you have with the Vietnamese themselves,
either civilian or military?
Except for those we hired to do things around the base, and the local village of Phuoc
Vinh, not a great deal because we were on the move all the time. 41:10 of course when
you go through—like I said, we carried candy with us and stuff that and we‘d give it to
kids when we went through a village.
Interviewer: What kind of impression did you form of the Vietnamese at the time?
You just couldn’t be sure who to trust or did it go farther than that?
Yeah, but I also thought most aren‘t on one side or the other, all they want to do is work
their rice or buffalo or whatever just like anybody else, and to this day I don‘t have
anything against the Vietnamese people.
Interviewer: Did you ever see much of the Vietnamese military or police forces or
things like that?
We had an interpreter, Vietnamese, with us, a great guy, great guy. 42:08

One day we

had been out in the field and we came back and we were going to get hot chow in the
mess hall and he was right in front of me and all of a sudden he dropped his—you know
where they put the food, his tray, and jumped over and just started berating this guy. It
turns out he knew he was a VC, you know. He was a great guy, except one time he
wanted me—one of their delicacies is to take an unhatched egg, boil it, put a little hole in
it, suck it out and eat the whole thing, and he kept wanting me to have one. 43:01 I said,
―No sir, I don‘t think so, but thank you anyway‖.
Interviewer: You have to draw the line somewhere. How do you characterize
morale in the company when you were with it?

37

�Pretty good, pretty good—again we were a fairly close company. You can‘t spend a lot
of, well you can I guess—the war hadn‘t go to a point that it did in the late 1969-70
where people—we still had a lot of volunteers and ―one for all and all for one‖, don‘t
leave your buddy behind.
Interviewer: All right, now what kind of ethnic mix did you have in the company?
44:00
We had everything, we had Hispanics, we had colored, we had Indians, Caucasians and
I‘m sure I‘m missing a couple, but it was a mixture.
Interviewer: How did they work together?
As far as I saw, good-- I never saw any kind of racial, or any kind of remark about racial.
I‘ve seen people risk their lives for other people that weren‘t the same ethnic group and
that. Our medic was colored and from Detroit and I‘ve been trying to find him ever
since. When he got out he just disappeared from the radar. 45:03
Interviewer: At this stage was there anybody using drugs or things like that on the
base camp?
One person I knew, one person I knew and I had to do an ammo count and he was in our
platoon one time and he had a total of three bullets and I had to report him and they took
him out of the field. He ended up at base camp doing guard duty there. I thought, ―Still
got the same problem up there‖.
Interviewer: Maybe less dangerous there than he would be in the field.
We didn‘t get too many problems there at base camp. I think because of what all the
helicopters we had there could do with their machine guns firing. 46:04 That‘s the only
one that I personally saw.

38

�Interviewer: But, basically as far as you’re concerned your unit was a pretty
effective one and could do its job well?
I think our unit was one of the best. I think our battalion was one of the best.
Interviewer: Tell me a little bit about Ap Gu because that’s sort of you last day.
What happened then?
Okay, we‘d been building, guarding a bridge that had been blow up by the VC and had to
be replaced and that was—we got there the last of February, the beginning of March and
I had R&amp;R coming, coming up. 47:02 We called this the dust bowl because it was
pretty much dust. Every time they would ship out a hot meal to you and the helicopter
would take off you had do this because it would be all over your meal. We spent almost
a month there and probably a month. I‘d gone on R&amp;R and I came back and we had one
more week and then we had three battalions move and I never saw as many helicopters at
one time as when I was over there. That‘s when we went into—landed at Ap Gu and the
thing that got me right away was the number of helicopters. 48:03 We were being told,
―This is nothing. We‘re just going to be out a few more days and we‘re going back to
base camp because we‘ve been out for over a month‖. We only had one shot at us, one
shot, which is nothing, it‘s VC, bang, get the hell—only once. And digging in where we
were digging in, you got stones; you got everything, so it‘s hard digging in your foxhole.
This was a dream, boom, boom, boom, and that night, the first night, which had been the
30th we didn‘t have any—except for that one shot. 49:02 The next morning we get up
and the company recon troop was going to do their usual recon and one of my buddies,
probably one of my best friends during my time there was in that group. He was a radio
operator for the Lieutenant, the platoon leader, and they went by and made a comment to

39

�me that, this was the 31st, ―Some people are lucky‖, and I said, ―‖No some people have
brains and know not what to get into‖, and he goes on by and it wasn‘t—see take this rug
here and it‘s almost a box, trees all over here, landing here and we‘re here and I‘m
watching them. 50:11 They get into the tree line and all hell breaks loose. I‘ve got the
radio for the mortars and I‘m hearing my buddy, ―Lieutenants been hit, I‘ve been hit, we
need help, we‘re under heavy attack‖. He didn‘t make it, he passed away later. They
started sending in a whole platoon, of course I‘ve still got to stay there with the gun, and
what happened is we only had one gun up at that time because they didn‘t think we
needed it, the other one, so my platoon sergeant, Dave, he said, ―Go help bring in the
wounded‖. 51:11 They‘ve been ready for us a couple of days and they got snipers in all
the trees no matter where you went and that‘s where I got hit, out trying to bring back the
wounded.
Interviewer: Was that the first time you’d gone out or had you gone out and
brought some back and gone out again?
Not the first time out
Interviewer: Was this the action that got you the Bronze Star citation?
Yes
Interviewer: So, you’re going in under enemy fire and pulling guys out and you
keep doing it and you get hit in the process. Where were you hit or how badly were
you hurt?
Actually right there and it did a good job on my artery and I got the last rites on the field.
52:02 I‘m a Methodist, but our Chaplain was Catholic, but I didn‘t know it because I
was under morphine, but I kind of came to for a minute and he‘s asking me if I want to

40

�be forgiven for my sins and I‘m thinking, ―What the heck is he asking a question like that
for now‖, but then when I was at the hospital, the 96th—I think it was the 96th Medevac in
Saigon, and because I lost so much blood, they rushed me—I was one of the first to get
operated on. A couple days later when I was done with the effects of my surgery and
everything, I was talking to the guy in the bed next to me and I said, ―It‘s the craziest
thing, I don‘t know if it happened, but I‘m lying there and the Chaplain‘s asking me if I
want to be forgiven for my sins‖. 53:08 The guy goes, ―Oh my God, he gave you the
last rites‖, and I went, ―What?‖ Yeah, I was extremely lucky that I got— that one of the
medics was probably where that camera is from me when I got hit, and I hollered,
―Medic‖, and that he was able to stop the bleeding before I bled out.
Interviewer: Before you bled out, yeah. Did that end you r combat career?
Yeah
Interviewer: How long did you stay in the hospital?
I spent ten days in Saigon and then I was flown to the 106th general Yokohama and I was
there for five or six months and then I went to Island Army Hospital in Knox where I was
in the hospital holding company seeing Doctors and doing a lot of work on PT on my leg
to strengthen it until I got discharged. 54:17
Interviewer: All right, What did you do then once you got discharged?
I partied for three days, came home thinking I was going to have a few weeks to—I got
home about two o‘clock Monday morning and I unlocked the door because my parents,
naturally, were sleeping. I get there and there‘s a note on the table that said, ―Get up by
nine, your dad‘s got it set up for you to have a job interview at General Motors‖, where
he worked. 55:02 I thought, ―Okay, they‘re not going to hire me right away; I‘ll still get

41

�a couple weeks to unwind‖. I go there and, ―Oh, you‘re Charlie‘s boy, you got wounded
in Vietnam‖, and I went, ―Yeah‖. They had their own doctor and their own x-rays and
everything. The doctor said, ―Can I see the medical report?‖ I said, ―I didn‘t bring it
because I didn‘t think I had to‖, and he said, ―Go home and get it and come right back, so
I did. I came back and he did an x-ray to make sure that nothing that happened there they
would be liable for, you know. He said, ―Go back to personnel now‖, and I did, and they
said, ―Wait until the doctor calls‖. The doctor called and they said, ―Okay, be here at two
thirty to start working at three, which was good for money. 56:06 I was out of the
service one day and at work three days later.
Interviewer: How long did you stay with that?
Six years, I did not—my dad loved the factory, I didn‘t, and then I was a mess.
Physiologically, very honestly, I was a mess. I had a marriage and that went south,
between the two of us, and I quit, one day just quit General Motors. I went to the VA
hospital for, down in Kalamazoo, and I was there five weeks. 57:02 Of course, they
didn‘t know PTSD because this was in 1971 and, of course, everything had to be from
your early childhood, which was good, but that wasn‘t where the problem was. So, I
ended up—I lived on the street for a year and a half.
Interviewer: What got you out of it?
I finally was able to get another job. I was able to get money to get my own—well I had
a friend and he had an apartment and he said, ―You know, you can live with me. It‘s got
two bedrooms‖, but it was a small place, but it was a place. 58:04 Then I got a job
working at another factory, but it was—I held on to that one for a long time. We moved
into a better apartment and life slowly changed. I still have PTSD, I‘m going to a

42

�meeting down in Kalamazoo every Wednesday. Wednesday, and then they have a
smaller group on the second or forth Thursday that I go to.
Interviewer: When you came back, did you pay any attention to the news about the
war and the anti-war activities and that stuff? 1:17
A lot, you couldn‘t help it, it was everywhere.
Interviewer: What kind of view did you have of the people who were in the protest
movements and stuff like that?
Not much, everybody‘s got an opinion, you know. There were some that really believed
it, but I think the majority were just didn‘t want to go fight. See, again, this was the first
war where people saw, they saw dead bodies, they saw people dying, they saw all those
ruins that happen in war. 2:16
Interviewer: The government hadn’t necessarily done that good of a job of
justifying, or explaining to people why.
Johnson bragged about he could—we couldn‘t fire a bullet unless he gave approval and
how do you fight a war like that?
Interviewer: Did you ever encounter that kind of issue or were you mostly fighting
in placed where you could shoot when you had to?
The only time you could really shoot when you had to was when you were doing it after
they opened on you, which is not a good way to fight a war. Johnson was—and I voted
all different ways in presidential elections, but I voted for Johnson. 3:16 Then I said,
―Well, that didn‘t work‖, so I voted for Nixon and there really wasn‘t much change, but I
had a hard time because I‘d see these fights and I‘d see the Americans being hit and

43

�you‘d see them being pulled out and you knew they were dead, and it was hard, it was. It
was to the point that I didn‘t watch TV much.
Interviewer: Now, to look back at the full range of the time you spent in the service,
do you think you took anything positive out of that?
I took a lot that was positive out of it. 4:08
Interviewer: What did you gain from it do you think?
Working with all kinds of different people, great friendships that I still have today, and I
Just came back last week from going down and seeing my buddy that was the mortar
platoon sergeant. We became really good friends after Vietnam and he passed away with
Lou Gehrig‘s disease last year. We went down to see—it was going to be the anniversary
of his death, so Kathy and I, and my buddy Duane, who was over in Vietnam with us, and
his wife Mary Ellen, we went down, they live in Tennessee, and we went down to see
Dave‘s wife and we spent a couple days at their place. 5:07 I got to the reunion every
year. There‘s a group that I‘m with, the Vietnam PTSD group, and I like every one of
those guys. I just feel sad that nothing came out of that with all those people getting hurt
and dying.
Interviewer: What do you think about the way, sort of the people in society today,
are treating veterans, especially the ones coming back from Iraq or Afghanistan?
6:00
Very honestly, I‘m happy they do it for them, I do it, but I feel like we were the Guinea
Pigs, and we‘re the only veterans who didn‘t come back here welcomed. Actually, envy
would be the word I would use for it. You can‘t change what‘s happened, you can‘t
change the past. I just feel it was the wrong generation, I guess.

44

�Interviewer: Well, it makes for a pretty powerful story and I just like to close here
by thanking you for taking the time and sharing it today.
Thanks you for inviting me.

45

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Douglas R. Gilbert (b. 1942) is an American photographer from Michigan. He was born in Holland, Michigan and is the son of Russell W. and Carmen (Andree) Gilbert. Gilbert earned a B.A. in social sciences and art at Michigan State University in 1964, an M.S. in photography from the Institute of Design at Illinois Institute of Technology in 1972, and a M.S.W. from Salem State College in 1993. He is married to Barbara (McDonald) Gilbert, and has three daughters, Robyn, Rachel, and Anne. Gilbert took a serious interest in photography at the age of fourteen. In 1963 he joined the staff of Look magazine in New York as the second youngest photojournalist in the magazine's history. As a Look photographer from 1964 to 1966, he photographed folk musician Bob Dylan, the Newport Folk Festival, Simon and Garfunkel, the New York City Financial District, the children and facilities at the Manhattan School for Seriously Disturbed Children. From 1967 to 1969, Gilbert did several shoots, including that of folk singer Janis Ian for Life magazine. After moving to Chicago, Illinois in 1969 to attend the Illinois Institute of Technology, Gilbert conducted notable photo shoots of business and political figure Lenore Romney, and pursued more personal and artistic photography, focusing on urban and rural landscapes in Illinois and Michigan. He then joined the faculty of Wheaton College, where he taught from 1972 to 1982. In 1993, Gilbert graduated from Salem State College, Massachusetts, with a Masters in Social Work, and later pursued a second career as a psychotherapist. Douglas Gilbert died in June 2023. &#13;
&#13;
Throughout his photography career, he pursued both freelance commercial work as well as artistic work. His art photography is characterized by its classic black-and-white format, and features people, places and objects shot great attention and sensitivity. Gilbert's works are held in the permanent collections of the Art Institute of Chicago, the High Museum of Art in Atlanta, The Norton Simon Museum in Pasadena, and the Grand Valley State University Art Galleries, as well as in numerous private and institutional collections.&#13;
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Douglas R. Gilbert (b. 1942) is an American photographer from Michigan. He was born in Holland, Michigan and is the son of Russell W. and Carmen (Andree) Gilbert. Gilbert earned a B.A. in social sciences and art at Michigan State University in 1964, an M.S. in photography from the Institute of Design at Illinois Institute of Technology in 1972, and a M.S.W. from Salem State College in 1993. He is married to Barbara (McDonald) Gilbert, and has three daughters, Robyn, Rachel, and Anne. Gilbert took a serious interest in photography at the age of fourteen. In 1963 he joined the staff of Look magazine in New York as the second youngest photojournalist in the magazine's history. As a Look photographer from 1964 to 1966, he photographed folk musician Bob Dylan, the Newport Folk Festival, Simon and Garfunkel, the New York City Financial District, the children and facilities at the Manhattan School for Seriously Disturbed Children. From 1967 to 1969, Gilbert did several shoots, including that of folk singer Janis Ian for Life magazine. After moving to Chicago, Illinois in 1969 to attend the Illinois Institute of Technology, Gilbert conducted notable photo shoots of business and political figure Lenore Romney, and pursued more personal and artistic photography, focusing on urban and rural landscapes in Illinois and Michigan. He then joined the faculty of Wheaton College, where he taught from 1972 to 1982. In 1993, Gilbert graduated from Salem State College, Massachusetts, with a Masters in Social Work, and later pursued a second career as a psychotherapist. Douglas Gilbert died in June 2023. &#13;
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Throughout his photography career, he pursued both freelance commercial work as well as artistic work. His art photography is characterized by its classic black-and-white format, and features people, places and objects shot great attention and sensitivity. Gilbert's works are held in the permanent collections of the Art Institute of Chicago, the High Museum of Art in Atlanta, The Norton Simon Museum in Pasadena, and the Grand Valley State University Art Galleries, as well as in numerous private and institutional collections.&#13;
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