Yahoo News How America’s Coastal Cities Left the Heartland Behind
The people of St. Louis weren’t really surprised when, on January 12, the National Football League announced its decision to let E. Stanley Kroenke, the owner of the St. Louis Rams, move his team to Los Angeles. Kroenke had long signaled his intentions, and L.A.’s media market beckoned as the nation’s second largest. Moving the team meant more revenue for the league, and therefore more money in owners’ pockets. And that, as serious football fans know, is the point.
The NFL isn’t a charity. It’s a legally sanctioned cartel that strictly limits the number of franchises in order to maximize the value of each. St. Louis simply was losing another round in the NFL’s long-running game of profit-maximizing musical chairs. Indeed, the city originally had lured the Rams from Los Angeles in 1995 after losing a bidding war that sent the previous hometown football team, the St. Louis Cardinals, to Phoenix in 1988.
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What was surprising, though, and hurtful, was the way Kroenke badmouthed the city. In a 26-page statement in support of the team’s relocation to Los Angeles, he noted, “Compared to all other cities, St. Louis is struggling,” adding that the city “lags, and will continue to lag, far behind in the economic drivers that are necessary for sustained success of an NFL franchise.”
St. Louisans were outraged. The well-known lawyer Terry Crouppen aired a 30-second ad that ran in St. Louis during Super Bowl 50 saying of Kroenke’s decision, “We cheered [the Rams] year after losing year. In return, they trashed, then left, us.” The St. Louis Post-Dispatch columnist Benjamin Hochman struck a more optimistic chord when he declared, “They can strip away our NFL team … but they can’t snatch our confidence because, right here, right now, we will harness it, we will cradle it, and we will carry it into the next year and years, because we are St. Louis.”
The Gateway City does have much to boast about. It’s home to world-class centers of learning (Washington University in St. Louis, to name one); nine Fortune 500 companies; a robust medical system (BJC Healthcare); cultural institutions that rival those of cities twice its size (the St. Louis Zoo); and one of the most storied baseball franchises in history, the Cardinals, a team that has won the World Series twice in the last 10 years alone.
Yet while Kroenke’s argument that St. Louis can’t support an NFL team is self-serving, he’s not altogether mistaken about the city’s economic plight. Relative to big metro areas on the coasts, St. Louis has lost ground in recent years. Job growth since the recession has slowed. The city’s population growth has stagnated. Downtown St. Louis sits eerily quiet on most days, despite millions of taxpayer dollars spent on upgrades—including on the Edward Jones Dome, the Rams’ now-vacant home. The city has a nascent tech start-up scene, but struggles to keep its most successful companies from leaving town—the payment firm Square was conceived in St. Louis by two native sons who relocated to San Francisco in 2009. The per-capita income of the St. Louis metro area today has fallen to 77 percent of that of metro New York, down from 89 percent in 1979. And while St. Louis’s nine Fortune 500 corporate headquarters are a lot for a metro area of 2.8 million people, that’s down from 12 in 2000 and (correcting for the way Fortune changed its methodology in 1994) 23 in 1980.
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Experts often point to manufacturing decline, offshoring, and racial strife to explain the relative economic weakness of St. Louis and other Rust Belt cities. But these ills hardly have afflicted St. Louis more than they have Chicago, New York, Boston, and Los Angeles—which all have mounted much stronger comebacks in recent decades. Yes, those other cities made the transition from manufacturing to services and technology. But a quarter-century ago, St. Louis was already (and, to some extent, it still is) a hub of many of the post-industrial industries that have gone on to experience the fastest growth, from pharmaceuticals to finance to food processing.
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Moreover, St. Louis had an abundance of what regional economic growth theorists such as Richard Florida, Edward Glaeser, and Enrico Moretti argue is the most important ingredient of success for post-industrial America: a large population of educated, professional, creative types who dream up the innovations that drive growth and profits (think software in Seattle and Silicon Valley, biotech in Boston, finance in New York and Charlotte). In 1980, 23 percent of adults living in the St. Louis area had completed four years of college or higher—double the national average and greater than that of economically “hot” cities like Dallas, Charlotte, and San Diego. Even more important, one out of every five residents worked in fields like finance, insurance, real estate, business, health, law, or medicine.
Indeed, St. Louis contained enough human capital to sustain one of the defining “creative class” industries: advertising. Though perhaps not quite as high-flying as their Mad Men counterparts, St. Louis firms rivaled the biggest New York, L.A., and Chicago ad agencies in terms of revenue and creativity during the industry’s heyday from the 1970s to the 1980s.
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The relative decline of St. Louis—along with that of other similarly endowed heartland cities—is therefore not simply, or even primarily, a story of deindustrialization. The larger explanation involves how presidents and lawmakers in both parties, influenced by a handful of economists and legal scholars, quietly altered federal competition policies, antitrust laws, and enforcement measures over a period of 30 years. These changes, which enabled the same kind of predatory corporate behavior that took the Rams away from St. Louis, also robbed the metro area of a vibrant economy, and of hundreds of locally based companies. This economic uprooting, still all but unaddressed by today’s politicians or presidential candidates, accounts for much of the relative stagnation of other Middle American communities, and for much of the anger roiling voters this election cycle. The rise and fall of St. Louis’s advertising industry stands as a cautionary tale for what ails so many of America’s once vigorous and innovative cities.
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If there is a living embodiment of the St. Louis advertising industry, it’s Charles Claggett, Jr. The former creative director at D’Arcy, long one of the city’s largest agencies, he retired in 2000, two years before the French firm Publicis acquired the agency. One of his many claims to fame is that in 1979, he and his team penned “This Bud’s for You”—the slogan widely credited for helping St. Louis-based brewing staple Anheuser-Busch eclipse Miller during the 1980s beer wars.
On a blustery December afternoon, Claggett and I met at First Watch, a breakfast-all-day chain restaurant in Clayton, a tony old suburb west of the city that acts as the St. Louis region’s de facto financial center. A boyish-looking man dressed in a neatly pressed blue sweater and checked shirt, Claggett is like just about every other St. Louisan you meet: wildly upbeat about the city’s prospects. “St. Louis is an undiscovered gem,” Claggett said, as he gushed about the young professionals moving into the “loft district” downtown and the Municipal Opera, the city’s famed open-air theater. (This tradition of boosterism traces to 1869, when a local named L. U. Reavis convened a 17-state delegation to lobby Congress to move all federal buildings to what he touted as “the future imperial city of the world.”)
In the late 20th century, politicians overturned laws that had for so long protected St. Louisans from distant economic predators. Another one of Claggett’s claims to fame is his father, Charles Claggett, Sr., who led the city’s oldest and largest agency, Gardner, in the late 1950s and the 1960s. During his tenure, the elder Claggett oversaw accounts such as John Deere, Ralston Purina, and Jack Daniel’s.
Claggett recalled his childhood days, sitting in his father’s office, as piquing his interest in advertising. “Ever since I saw John Deere tractor toys neatly lined up on my father’s desk,” he laughed, “it sealed the deal.” Four years after his father retired as Gardner’s CEO in 1968, he started at D’Arcy, a rival agency, as a copywriter. “I wanted to be my own self, not just Claggett’s son.”
For nearly a century, Gardner and D’Arcy stood as the twin pillars of the St. Louis ad community, and it was no surprise that they blossomed in St. Louis. In 1900, the city’s population of 575,000 was the fourth largest in the nation. Thanks to its central location near the confluence of the Missouri and Mississippi rivers, St. Louis had built up a vibrant industrial and mercantile presence—from grain milling to shoe manufacturing to insurance underwriting. And in 1904, the city proudly hosted the World’s Fair, an event that drew 20 million people, including Teddy Roosevelt, the Chinese prince Pu Lun, and Mark Twain (from just upriver in Hannibal, Missouri).
Gardner, founded in 1902, got its break with the St. Louis-based Ralston Purina, which sold animal feed and cereal nationally, and counted Oldsmobile, B. F. Goodrich, and St. Louis’s Brown Shoe Co. as early clients. In 1906, D’Arcy opened with one account: Coca-Cola. In its first year, Coke devoted only $3,000 to its ad budget, but it upped the amount to $25,000 12 months later. With the national success of its work for Coca-Cola, D’Arcy soon won other clients like Cascade Whiskey and Nature’s Remedy, before adding Anheuser-Busch in 1914.
Over the coming years, the beer maker expanded into a 50-square-block headquarters just south of downtown, the world’s largest brewery at the time, from which the tang of yeast perpetually wafted. In the 1930s, by placing ads in Life and Forbes, D’Arcy helped the brewer distribute its product nationwide, stay ahead of rivals like Pabst and Lemp, and sell the one million barrels it produced annually.
As the ad industry flowered, so did the city’s Ad Club. In 1901, a publisher of trade journals invited a half-dozen leading advertisers to lunch at the Lindell Hotel. They enjoyed their get-together so much that they soon founded what would become the nation’s first advertising club. Before long, advertisers from New York and Chicago were contacting the organization to learn how they could start chapters of their own.
The club’s accomplishments even attracted international acclaim. In 1924, a keynote speaker at the International Advertising Convention in London honored the St. Louis branch for having done the “best and most constructive work for advertising of any ad club in the world.” “St. Louis,” he said, “is to be congratulated because it is so far ahead of other cities in advertising manpower.” That keynote speaker? Winston Churchill.
During the Depression, the D’Arcy executive Archie Lee worked with Coca-Cola to enliven its brand, and commissioned the illustrator Haddon Sundblom to pair Santa Claus with the soft drink. The association between warm holiday cheer and the refreshment and friendliness of Coke is still among the international beverage maker’s most iconic hallmarks.
The nation’s advertising industry swelled in the prosperous decades after World War II. As middle-class families acquired automobiles and kitchen appliances, living-room furniture, and cleaning products for their new suburban homes, ad agencies took advantage of a new medium, television, to pitch their clients’ products.
Firms like Gardner and D’Arcy benefited not only because their clients largely sold consumer products, but also because these agencies were located in the figurative and geographic center of the country. The key to making money during this era was to capture, then package, the desires of the middle class, largely represented by midwestern cities like Cincinnati, Milwaukee, Cleveland, and St. Louis. As the Gardner president Elmer Marshutz put it in a 1950s company newsletter, “St. Louis sells goods to people, and as a result, advertisers throughout the Midwest, South, Southwest, and even New York, have brought their business to St. Louis.”
By the 1960s, Gardner added to its roster of clients, signing established local companies such as the chemical giant Monsanto and Pet Inc., the first company to commercially produce evaporated milk; local start-ups like National Car Rentals; regionally based firms like Eli Lilly of Indianapolis; and international companies like Alitalia Airlines.
Gardner was also a magnet for talent. One of its stars was Bea Adams, a pioneering female ad executive who worked her way up from the steno pool to become the agency’s creative director. Adams wrote the jingle for a St. Louis Independent Packing Co. campaign that every St. Louisan over the age of 50 will remember: “I’m a meat man, and a meat man knows, the finest meats, ma’am, are Mayrose.” In 1956, the Advertising Federation of America chose her as National Advertising Woman of the Year, and Fortune listed her as one of the top 36 American businesswomen.
And it wasn’t just Gardner and D’Arcy—whose 12 offices now fanned out across North America, as far as Havana—that flourished in mid-century St. Louis. With its ample supply of locally owned businesses as potential clients, the city supported a vibrant start-up ad-agency scene. These new firms trained up-and-coming talent, developed cutting-edge campaigns, and often grew to become regional or national in scope, enriching the metro area by bringing in revenue from outside of it.
There was Batz-Hodgson-Neuwoehner, which started out in 1950 with the snack brand Old Vienna Potato Chips as an anchor client and by the late 1970s had offices in 11 midwestern cities and $43 million in annual billings. There was Courtesy Checks, which pioneered the field of barter advertising. There was the Savan Company, which worked with the Community Federal Savings and Loan Company throughout Missouri, before handling accounts for S&Ls from New York to Honolulu.
In addition to advertising, St. Louis became a player in the related field of public relations. The PR firm Fleishman-Hillard was started in 1946 above a Woolworth’s store downtown. It quickly earned a reputation for savvy by helping Union Electric, the local utility, steer through a scandal involving company executives. Soon, Fleishman-Hillard attracted a roster of other big-name local clients, including Anheuser-Busch, First National Bank, May Department Stores, and Emerson Electric. The company would eventually become the world’s third-largest PR firm, with annual billings of $580 million and 85 offices in 30 countries.
By the 1960s, St. Louis’s advertising industry had effectively developed into what economists call an industry cluster. Though the city’s agencies competed with each other, their sheer number created citywide competitive advantages: a deep bench of talent that moved in and out of agencies, spreading ideas and transferring know-how; a network of experienced, low-cost suppliers (printers, recording studios); and a reputation for quality that attracted national and international clients. All of it was built on the foundation of locally owned companies. These firms provided a steady supply of commissions facilitated by personal connections: account executives at the agencies and the senior executives at the corporations knew each other—from charitable events, from rounds of golf, or from attending the same high school.
Elites from the advertising cluster also interacted in myriad ways with those from the city’s other industry clusters. General American Life Insurance, Boatmen’s and Mercantile banks, AG Edwards, Edward Jones, and Stifel Nicolaus supported a thriving retail financial-services sector. Pet Inc., Ralston Purina, Anheuser-Busch, and the food wholesaler Wetterau constituted the city’s food-processing hub. Mallinckrodt and Sigma-Aldrich anchored its pharmaceutical cluster, and Sverdrup, Emerson Electric, and McDonnell Douglas formed its engineering cluster.
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While these diverse companies were homegrown and locally based, they often owed their existence as independent entities to government policy, especially in Washington. As all students of high-school history will recall, in the late 19th and early 20th centuries powerful “trusts” run by financiers like J. P. Morgan and Jay Gould grabbed monopoly control of railroads, steel production, meatpacking, electrical utilities, and other industries. Their actions often thwarted local economies—St. Louis a prime example. In 1881, for instance, Gould won control of St. Louis’s famous Eads Bridge, a major crossing point for rail over the Mississippi. The high tariffs Gould charged led rail companies to re-route through Chicago, leading the Windy City to emerge as the Midwest’s dominant industrial center.
The behavior of the trusts ignited the Populist and Progressive movements, which in turn led to a series of laws that safeguarded independent businesses in cities like St. Louis from the predations of monopolists, and encouraged regional equity.
The Interstate Commerce Act of 1887 applied common-carriage rules to railways, and sapped their industrialist owners of the power to discriminately pick winners and losers. The Sherman Antitrust Act of 1890 addressed the anticompetitive practices of monopolists. Years later, the Mercantile National Bank of St. Louis president Festus J. Wade celebrated these laws, especially a 1912 decision based on them to break up a railroad monopoly that was preventing commerce from entering the city. “Railroad managers,” he said, “can no longer combine against an industry and crush it out of existence because of a disagreement with the head of a manufacturing establishment.”
The Federal Reserve Act of 1913 created a central banking system in which decisions over national monetary policy were made by 12 regional Federal Reserve banks, one of which was built (and still exists) in St. Louis. The McFadden Act of 1927 likewise dispersed lending activity by confining national banks to their headquartered states. This rule preserved the flow of capital within local communities, made bankers attuned to their community’s needs, and prevented New York financiers from gobbling up St. Louis banks. It also addressed the public’s concern that if large banking organizations operated in multiple regions, they would evade adequate supervision.
The Packers and Stockyards Act of 1921 broke up the “Big Five” meatpacking cartel that previously had manipulated prices across the nation, giving undue preference to certain businesses and localities, and controlling even non-meat-related production in the warehousing, wholesale, and retail industries. That move gave smaller companies like the St. Louis Independent Packing Company, of the famed “Mayrose” jingle, the opportunity to compete fairly.
The Wheeler-Rayburn Act of 1935 prohibited electricity, gas, and water utilities from speculating in unregulated businesses with ratepayers’ money and ensured that companies like Union Electric would remain locally headquartered and focused. The Robinson-Patman Act of 1936 protected small retailers by prohibiting manufacturers from giving larger discounts to chain stores, and the Miller-Tydings Act of 1937 did the same by permitting manufacturers to set a minimum price at which their goods could be sold. These laws safeguarded local-area retailers like Central Hardware and Bettendorf-Rapp supermarkets, as well as neighborhood pharmacies, bakeries, restaurants, clothing stores, and grocers—including those servicing the city’s predominant minority and African-American communities.
After World War II, Congress continued strengthening these anti-monopoly laws. The 1950 Celler-Kefauver Act, for instance, closed a loophole that allowed companies to thwart competition by gobbling up competitors’ regional suppliers. At the Wholesale Grocers Association convention held in St. Louis, the law’s co-sponsor, Tennessee Senator Estes Kefauver, declared that the 1950 act would “blast out those pillboxes of monopoly … that threaten our free enterprise.”
Throughout the mid-20th century, these and other antitrust statutes were vigorously enforced by the Justice Department. “Today, anybody who knows anything about the conduct of American business,” observed the historian Richard Hofstadter in 1964, “knows that the managers of the large corporations do their business with one eye constantly cast over their shoulders at the antitrust division.” Even some St. Louis companies, such as Mercantile Bank and Monsanto, grew to the point where they too were hit with antitrust actions by the federal government in the 1960s—an indication, ironically, of just how much the city’s economy was thriving.
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St. Louis’s advertising industry crested in the late 1970s and the 1980s, and Claggett recalls the era as “the peak of creative output.” Gardner and D’Arcy were headquartered in stylish mirrored and dark-glass downtown office buildings whose executive conference rooms framed the Arch. On the ground floor of the Gateway Building, which housed KMOX, D’Arcy, and Fleishman-Hillard, sat Anthony’s Bar, a rowdy after-work haunt for ad professionals, who joked that the minimum drink order was a beer and a martini.
During this era, Claggett garnered Cannes and Clio awards for his work on Budweiser’s frogs and Clydesdales campaigns, and secured more industry accolades for D’Arcy than at any other time in its history. Other shops also sustained St. Louis’s national influence and contributed original and widely distributed work. In 1977, the Stolz Advertising Agency played a key role in helping McDonald’s create the Happy Meal (much to the consternation of parents nationwide). Two years later, D’Arcy placed a crucial $10 million media buy for Budweiser on the fledgling television station ESPN, the network’s only advertiser at the time.
Indeed, well into the 1980s, St. Louis held its own in terms of advertising manpower. A Post-Dispatch article proclaimed that “D’Arcy [is] one of the top 10 agencies in the country, with the founding office here considered a major training facility for young artists, writers, and account management personnel.” In 1982 the Gateway City’s top 10 agencies collectively held 256 local accounts, netting $326 million in St. Louis billings alone. A snippet from a 1980s Ad Club newsletter notes, “St. Louis swept the categories at the industry’s regional ADDY awards,” an event that recognizes creative excellence in local, regional, and national markets.
By its nature, the advertising field attracts individuals who straddle the worlds of commerce and art. Many of those who worked in the St. Louis advertising industry became active supporters of both business-based organizations like the Rotary Club and the city’s cultural institutions, from its art museum to its symphony orchestra. Occasionally they even made artistic contributions of their own. In 1987, for instance, Glenn Savan, the son of Savan Company’s founder, Sidney Savan, penned a best-selling novel set in St. Louis, White Palace, which was later made into a movie starring Susan Sarandon.
Like virtually every other city in the country, St. Louis had serious problems in this era. Jobs, wealth, and residents had long been migrating to the suburbs, leaving the central city increasingly poor and crime-ridden. Still, its overall economy was diverse and vibrant. Per-capita income in the St. Louis metro area was 82 percent as high as in the New York metro area in 1969; by 1979 it was 89 percent.
One of the things St. Louis had going for it, as always, was its central location. The city sought to capitalize on that advantage, and attract more commerce downtown, by building a convention center, which opened in 1977. While such structures often proved white elephants for other cities, St. Louis’s was an immediate hit. The convention center, booked in advance for 10 years straight, played host to 461,450 visitors from across the globe in its first year alone.
St. Louis also profited from some of the best airline connectivity in the nation. That too was due to its central location, as well as its rich aviation history. The city famously had sponsored Charles Lindbergh’s transatlantic flight, and the military and civilian aircraft maker McDonnell Douglas was headquartered at Lambert Field, northwest of the city.
St. Louis also benefited from healthy competition between two local air carriers. One was TWA. The globe-spanning giant had long presided over Lambert, and in 1982, the company moved its headquarters to St. Louis from Kansas City. The other was the homegrown Ozark Airlines. Ozark started out as a “local service” airline licensed by the federal government’s Civil Aeronautics Board (CAB) to provide air service to small communities in the Midwest. But by the mid-1970s, having won permission from CAB to compete with major carriers on more profitable routes between major cities, the upstart airliner boomed. Flights extended deep into the Southwest, Mountain West, South, and East.
Claggett experienced the ascent of Ozark firsthand when he handled the company as a young account executive. In 1977, he stood on the tarmac at Lambert Airport and stared down a McDonnell Douglas DC-9 jet. At one of his first major shoots, Claggett worked with “hundreds of extras,” a Dutch director, and a crew from the local Technisonic Studios production company to increase the brand’s visibility. Ozark adopted a new slogan, “We’re up there with the biggest,” an assertion of the company’s growth and a playful jab at rival TWA. And as the St. Louis-based company sought to refresh its heartland brand for younger and more urbane audiences, the agency used the comedian George Carlin to proclaim, “Go-getters go Ozark.”
The rich connectivity was great, of course, for the city’s booming convention business. But it also was valuable to St. Louis’s corporate community. In 1985, Lambert’s 1,170 daily takeoffs and landings made doing business nationally or even internationally easy. It kept St. Louis competitive and at the center of the action, figuratively and geographically. That was equally true of its advertising sector. For instance, in 1980, a 19-member delegation of advertising executives from 15 foreign countries held seminars with D’Arcy’s staff to gain insight into the company’s creative process. “People came to St. Louis not as a stepping stone,” says the former D’Arcy and Gardner copywriter Gerry Mandel, but as their destination. They wanted to work, Mandel says, “on the Southwestern Bell account, or even, if they were lucky, for Budweiser.”
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As St. Louis’s advertising renaissance peaked, and admen enjoyed a martini (or two) at Anthony’s, changes were afoot in Washington. In the late 1970s and early 1980s, politicians quietly overturned many of the anti-monopoly laws that had for so long protected the citizens of the Gateway City from distant economic predators. These legislative changes—inspired by an unlikely alliance of both conservative and liberal legal scholars and economists, including Robert Bork and Lester Thurow—spoiled the very ecosystem that had birthed St. Louis’s diversified economy and powerful industrial presence.
In 1978, Jimmy Carter signed the Airline Deregulation Act, which swept away the Civil Aeronautics Board and paved the way for massive industry restructuring. In the mid-1980s, Northwest purchased Republic Airlines. US Airways acquired PSA Airlines and Piedmont Airlines. Continental swallowed Texas International, New York Air, and People’s Express.
Invariably, this activity soon reached St. Louis. In 1986, TWA bought Ozark. This didn’t help price competition, but when TWA made Lambert its hub, the city’s air connectivity increased. That is, until American purchased TWA in 2001 and later moved much of its operations to Chicago O’Hare. In 2014, only 500 aircraft took off and landed daily at Lambert, a fraction of the all-time high of 1,400 in 1997. Moreover, the airport serviced only 1,176 international flights, down from 3,826 in 2002. While some airlines like Southwest partially have filled the void, an entire terminal still sits empty.
Meanwhile, under the Reagan administration, the federal government fundamentally changed course on antitrust enforcement. The Reagan Justice Department wrote new guidelines that rejected regional equity or local control as considerations in deciding whether to block mergers or prosecute monopolies. Enforcers were instructed to wave through mergers and tolerate consolidation, as long as there was no active collusion and consumers didn’t immediately suffer higher prices. Even more, Reagan’s administration cut the budgets of the Federal Trade Commission and the Department of Justice, leaving both agencies with limited resources for enforcement.
Between 1980 and 1985, 62 Fortune 500 companies were subject to corporate takeovers, and the single greatest increase in corporate acquisitions in U.S. history took place between 1984 and 1985. This relaxed enforcement philosophy, compounded by other legislative action, quickened the consolidation of specific industries.
Throughout the 1980s, state politicians chiseled away at restrictions on interstate banking, and in 1994 the Clinton administration followed suit with the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act. Since 1984, the number of independent banks has fallen by more than half, from 15,663 to 6,799 in 2011. Of those now-defunct banks, more than 8,352 either merged or were consolidated.
In St. Louis, Boatmen’s, the oldest bank west of the Mississippi, merged with the Kansas City-based Chartercorp in 1985, and in 1997 its ownership shifted to Charlotte-based NationsBank, which was later purchased by then San Francisco-based Bank of America. Mercantile, St. Louis’s biggest locally owned bank, was gobbled up in 1999 by Milwaukee-based Firstar, which later changed its name to U.S. Bancorp. The number of community banks in Missouri dropped from 637 in 1980 to 262 in 2014.
These changes in anti-monopoly policy also affected local retailers. The Consumer Goods Pricing Act of 1975 overturned the Miller-Tydings Act of 1937, and led to the end of most “fair trade” laws. In the early 1980s, the Reagan administration’s Justice Department and FTC stopped enforcing the Robinson-Patman Act. Together, these changes led to consolidation among retailers and gave the new mega-retailers tremendous power over their suppliers.
In St. Louis, this played out in Dillard’s purchase of St. Louis flagship department store Stix, Baer, and Fuller in 1984, and Chicago-based Handy Andy Home Improvement Centers’s acquisition of Central Hardware in 1993. At the level of suppliers, these policy changes cleared the way for potato chip makers Frito-Lay and Borden Inc. to capture 50 percent of the local market, elbowing past local brands So Good Potato Chip Co. and Old Vienna, whose market share now stood at a paltry 4 percent.
In the 1990s, St. Louisans continued to witness the flight of corporate headquarters that either were acquired by outside companies or moved out of town completely. In 1993, company executives moved Southwestern Bell, then the 29th-largest U.S. company, to Texas. And in 1997, Boeing absorbed McDonnell Douglas and moved its headquarters first to Seattle and then to Chicago.
That same year, Omnicom purchased Fleishman-Hillard. In 2001, the Swiss food giant Nestlé bought Ralston Purina. In 2005, Federated Department Stores, whose chains include Macy’s and Bloomingdale’s, acquired St. Louis-based May Department Stores, whose banners included Lord & Taylor and Filene’s. That year, too, Lee Enterprises bought Pulitzer Inc., the owner of the 127-year-old Post-Dispatch. In 2007, Wachovia (later acquired by Wells Fargo) snatched up the 120-year-old A. G. Edwards. And then came the most devastating of deals for St. Louisans—the unthinkable one.
In 2008, Anheuser-Busch—the 156-year-old company that helped make D’Arcy, that had owned the St. Louis Cardinals, and that in many ways had defined St. Louis’s very identity—was bought by the Belgian-based InBev, which itself had been acquired by a team of Brazilian bankers and investors in 2004.
While some new out-of-town owners kept large operations in St. Louis, the city lost entire layers of expertise. Business and account managers were shed in Pillsbury’s 1995 acquisition of Pet Inc. NationsBank purchase of Boatmen’s and Firstar’s acquisition of Mercantile resulted in the exodus of financial analysts and bankers. MetLife’s purchase of General American Life led to the jettisoning of insurance agents. Ralston Purina’s merger with Nestlé prompted the hemorrhaging of food scientists and in-house lawyers. Tyco’s 2000 purchase of Mallinckrodt and Merck’s recent acquisition of Sigma-Aldrich resulted in the departure of pharmaceutical scientists.
The change in antitrust policies in Washington and the subsequent wave of industry consolidation affected the city’s advertising sector in a number of ways. First, when a local company was bought out, there was one fewer account for advertising agencies to serve. The loss of local retailers was especially tough on smaller ad firms that relied on them as clients. It also devastated local media outlets, which not only counted on that revenue but, thanks to other federal rule changes, were themselves now targets for acquisition by national conglomerates.
Second, when local firms were taken over by out-of-town corporations, the personal connections St. Louis ad execs had with executives at the local firms they serviced became less important. Decisions were now being made hundreds or thousands of miles away by the executives of the acquiring company. Over time, that meant losing clients. “As major corporations moved their headquarters out of St. Louis,” Claggett told me, “they took their advertising needs with them too.”
Third, the consolidation trend made ad agencies themselves merger targets. The 1980s were the “decade of the deal,” when major New York ad agencies such as J. Walter Thompson and the Ogilvy Group were acquired by the London-based WPP Group. The merger trend also hit St. Louis. Gardner had already been bought in 1972, by New York-based Wells Rich Greene (WRG), but it was largely left alone to manage its own accounts, the biggest one being Ralston Purina, which at the time was still based in St. Louis. But in 1980, WRG placed its agency operations in different cities under the control of a New York-based parent company. When Ralston Purina sold its animal-feed business Purina Mills to BP six years later, Gardner lost its largest account. That move, and additional restructuring by WRG, crippled the agency and led to the 81-year-old firm’s closure in 1989.
D’Arcy followed a similar trajectory. In 1985, it merged with the New York-based Benton & Bowles to become DMB&B, a deal that saw the headquarters and executive decision-making shift to New York. The St. Louis office still handled longstanding accounts like Mars/M&M and Anheuser-Busch, but New York now made the big decisions. As Claggett put it, “The agency slowly became just a branch office competing for accounts.”
The turning point came one day in 1994, when, unbeknownst to the St. Louis office, the agency’s New York-based media-buying unit signed a $25 million deal with Anheuser-Busch’s archrival, Miller, and then lied about it. Anheuser-Busch’s volatile owner, August Busch III, immediately cut ties with D’Arcy, costing the agency $422 million in billings. One D’Arcy copywriter quipped, “When you lose Bud, you’ve lost it all.” Two years later, the office lost its $140 million account with Blockbuster to New York. The agency closed its St. Louis doors in 2002.
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In the years since the St. Louis advertising cluster disintegrated, the entire industry has taken a major hit as the Internet has disrupted its traditional business model. U.S. ad agencies today have fewer employees than they did in 2000. The advertising talent that still remains in St. Louis—veterans from the old firms, ambitious young people with new skills—is learning to adapt. Claggett waxed enthusiastic about the “cutting-edge” creative work being done in the social-media advertising space by upstart St. Louis firms like Moosylvania.
St. Louisans, like Americans generally, take pride in their self-reliance. When things turn sour, they don’t blame others, but instead channel their energy to make their city better. While the convention business has declined, hosting only 350,000 visitors last year, local leaders are looking to renovate and upgrade the city’s key event space. A consortium of the city’s hospitals and universities has created a 200-acre innovation district in midtown St. Louis to nurture bioscience and pharmaceutical start-up companies. The Donald Danforth Plant Science Center, funded by Monsanto’s philanthropic arm and the family that founded Ralston Purina, is doing the same in the agricultural-tech sector. Square announced last year that it would open a new office in St. Louis and hire 200 people.
A few St. Louis businessmen and politicians even tried assembling a package of taxpayer-funded incentives to convince Stan Kroenke not to move the Rams to L.A. But Kroenke didn’t take the bait. Interestingly, most St. Louisans reacted with contempt to the plan to try to bribe Kroenke with more public money. St. Louis Mayor Francis Slay announced that he and his city were done negotiating with the NFL, proclaiming, “[C]ities and hometown fans are commodities to be abandoned once they no longer suit the league’s purposes.” Having been through several of these cycles, St. Louisans now understand, more than they used to, that the game is rigged—that they could have a football team in a heartbeat if the NFL expanded the number of franchises to match the number of cities that can clearly support one. That’s how fair markets are supposed to work.
Applying that lesson more broadly, when the citizens of St. Louis—and of other small- and medium-sized cities across the country—look at the decline of their local economies, they may consider a different explanation than the one Kroenke offered. The economic fates of their communities may not be the result of their own failings, or of an inability to lure educated “creative class” types, or of offshoring or deindustrialization, or of the workings of a mysterious and immutable free market. Rather, their fates may be the result of decisions in Washington, influenced by a small group of legal scholars and economists, to overturn antitrust laws passed by elected officials of both parties over the course of the 20th century. These decisions quietly changed the rules of America’s economy to be more like the NFL’s, in which monopoly power isn’t fought but catered to, in which economic opportunity isn’t disbursed but consolidated, in which fewer cities—and fewer Americans—get a fair chance to compete.
This post appears courtesy of Washington Monthly.
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