1.4: Industries That Shaped Texas Politics
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Between 1519 and 1800, when Spanish explorers first came to Texas, the Spanish established only a few settlements. Immigration from the U.S. was mainly from Tennessee. The settlement founded by Moses Austin and later his son, Stephen, continued to grow and with this growth came the early industries in Texas of cotton and cattle.
In the early 1800s, Texas was a desolate outpost, sparsely populated. Only at the end of that century did Texas begin its economic transformation with the growth of the cotton industry, the cattle industry, the timber industry, the development of railroads and the discovery of oil. Moving into the 1900s, Texas still depended on its mineral wealth, but technology and the service industry along with its integration into the national economy saw rapid growth. By the beginning of the twenty-first century, Texas became an economic powerhouse.
One of the most influential economists of the early twentieth century, Joseph Schumpeter espoused the theory of “creative destruction,” a theory that describes economic growth as part of a process wherein old industries are replaced by new ones.\(^{20}\) Technological innovations will replace the outdated ones. Certainly, this is the cycle in Texas.
Cattle
Cattle were first brought to Texas by the Spaniards as early as the 1690s. By the 1730s, herds were along the San Antonio River to feed the missionaries, soldiers, and civilians in and around San Antonio and Goliad. Later, the colonists coming to Texas in the 1830s were primarily farmers, but they recognized that cattle could graze on the lush pastures with minimal care (Figure 1.4.6). During the 1840s and 1850s, herds were driven to New Orleans, with some heading north on the Shawnee Trail. By 1860, cattle ranching moved to the north central frontier, just west of Fort Worth. In the late 1870s, the cattle industry moved into the Davis Mountains and Big Bend and the plains of West Texas. By the end of the nineteenth century, the open range changed to fenced pastures. Droughts, deflation and the depression took its toll on the cattle industry, but by the 1950s, beef cattle had returned to profitability and Texas was the leader with the Hereford breed. By 1995, Texas led the nation in cattle production and in the number of farms and ranches. Today, the industry is certainly different with the rise of commercial feedlots, sophisticated slaughter and meat-packing industries, and the use of computers. And on many ranches, hunting leases have replaced cattle raising.
Cotton
Cotton was first grown by Spanish missionaries in the late 1600s. Missions were to be self-sustaining, with local peoples recruited (or coerced) to dig irrigation, plant crops, and tend livestock, under the direction of the missionaries. Young women were usually responsible for weaving blankets and clothes from mission cotton.\(^{21}\) In 1745, the missions at San Antonio reported that several thousand pounds of cotton were produced annually.
In 1820, Spain opened Texas to immigrants to help settle and defend their borders to the north from the hostile Plains Indians. Most of the early immigrants to Texas came from Tennessee, Virginia, and Georgia, and they brought with them their expertise in growing cotton. With the invention of better plows, the laborious practice of hoeing fields by hand was made more efficient. At the same time, the invention of barbed wire made fencing inexpensive compared with the traditional wood fences, and this made it easier for farmers not only to protect but also to invest in larger landholdings. Barbed wire increased land productivity by thirty percent.\(^{22}\) Add the extension of railroads to get cotton to maket and cotton became the principal crop in Texas and remained so until the 1920s. One major change during this time was a shift from cotton farming in the east and central parts of the state to the High Plains and the Rio Grande Valley. The decline after the 1920s came as a result of a drop in demand during the Great Depression, the loss of labor during World War II, the competition of cotton production abroad, and federal efforts to hold down production to regulate prices. Today, a great deal of Texas cotton is exported overseas or used for other purposes. Contemporary uses include fertilizer, paper, tires, cake and meal for cattle feed, and cottonseed oil for cooking, paint, and lubricants.
Timber
Lumber has been manufactured in Texas since the early 1800s. After Texas won its independence from Mexico, the demand for lumber increased and sawmills increased in number. The 1860 census reported about 200 sawmills that employed about 1,200 workers. Between 1880 and the depression, the lumber industry in Texas saw a bonanza especially with the railroad network providing transportation to every section of East Texas. For those working in the sawmills, it meant long hours, low pay, and a number of accidents. Under the New Deal program of President Franklin D. Roosevelt, the Civilian Conservation Corps undertook a number of jobs including clearing underbrush and planting pine seedlings. The federal government also purchased more than 600,000 acres of over-cut land and established four Texas national forests. Here began the task of developing second-growth forests that would provide timber, recreational facilities, and a wildlife habitat for the next generation of Texans. A new industry producing newsprint from pine began operations in Lufkin, Texas, in 1940 and created a new market. Forestry programs at Stephen F. Austin State College in 1946 and Texas A&M in 1969 have allowed for better research for the problems facing the Texas forests. Even with the decline, the lumber industry in Texas continues to contribute to the economy of the state.
Railroads and Transportation
The influence of the railroads grew in the late 1800s as service extended to the Panhandle and the High Plains of West Texas. Because railroads had a monopoly (the huge investment to build them makes it inefficient to have more than one provider) they had enormous power over the farmers and ranchers. Many poor farmers formed agrarian coalitions in the 1870s to fight price gauging by the railroads, and this Grange Movement became influential in politics. Influenced by the Grange Movement, James Stephen Hogg ran for governor in 1890 on the promise of regulating the railroads. On the same ballot was a constitutional amendment to create a railroad regulating body that primarily would regulate the freight rates. The first commissioners were appointed until the next election when the legislature made them elected seats. Governor Hogg pushed through a series of laws, known as Hogg’s Laws to limit the power of the railroads, out-of-state corporations, and insurance companies.
Texas established the Texas Good Roads and Transportation Association in 1932 to allow for public expenditure and maintenance of the roads in the state. In 1946, an amendment to the Texas Constitution required that three-quarters of all revenue from gasoline taxes go towards the public roadways not only for construction and maintenance but also for implementing traffic safety laws.
Oil
The first economical discovery of oil came in 1894 in Navarro County near Corsicana, peaking in 1900 with the production of 839,000 barrels of oil. But it was the discovery at the Spindletop oilfield just outside Beaumont in 1901 that ushered in the oil boom in Texas, producing an estimated 75,000 barrels of oil a day. In 1902, J. M Guffey Petroleum Company (later renamed Gulf Oil Corporation in 1907) built the first large refinery at Spindletop. When the Houston Ship Channel opened in 1914, even more refineries were built and more discoveries of oil were found in the upper Gulf Coast area. In 1905, taxation on oil production became an important source of revenue for Texas. By the 1930s, oil exploration moved into North Texas, central Texas, the Panhandle, and the Permian Basin of West Texas. Natural gas discoveries also took place early in the nineteenth century as well, and pipelines were constructed. East Texas got into the oil scene in the 1930s with the discovery of Daisy Bradford No. 3, a giant oilfield underlying five counties. Developments in the industry during the 1950s included better means of production, expansion of the petrochemical industry, and even more natural gas discoveries.
Foreign oil production and federal regulations have played a signification role in the industry since the 1970s producing several boom or bust periods. When the financial market crashed in the Great Recession of 2007-2008, the high energy prices provided a cushion for Texas. And the fracking revolution (a technique used to extract natural gas or oil from shale and other “tight” rocks\(^{23}\)) has kept Texas as the top oil-producing state until the pandemic of 2020. In November of 2020, the price of oil was a third of what it was in January. Fortunately, the prices have been slowly inching back up.
Technology and More
Texas continued to rely on the abundant resources provided by the oil industry, timber, ranching and agriculture until after World War II. The economic boom that followed helped Texas develop a base for industrial production, create transportation hubs in the airline industry, expand technology, and create opportunities for travel and entertainment. Texas learned to diversify its economy and continues to do so.
Economically, Texas has been one of the strongest performing states for a number of years. It is known for being a good place to do business and has secured more corporate locations and expansions than any other state. Texas has won the Governor’s Cup, given by Site Selection Magazine, for the most major projects, including job creation and capital investment, for the past eight years. \(^{24}\)
The central location of Texas in the U.S. is ideal for expansion with its urban population, interstate highways, international airports, seaports, railways and international border crossings. Add to that low taxes and quality of life, many companies choose to do business in Texas. Texas is no stranger to large corporations. Dell Computer has its headquarters just north of Austin in Round Rock. Telecommunications giant AT&T is based out of Dallas, as is Texas Instruments, which produces calculators and other electronics and is the tenth largest producer of semiconductors in the world. Other companies with a headquarters or a significant presence in Texas include Samsung, GM, Toyota, and Peterbilt, just to name a few.
Texas is home to two international airlines, two of the world’s busiest airports, fifteen active military bases, and the Johnson Space Center operated by the NASA. The Dallas-Fort Worth area has the largest number of aerospace manufacturing workers and is headquarters to American Airlines and Southwest Airlines. San Antonio, referred to as Military City, USA, is home for tens of thousands of U.S. Air Force personnel. Houston is home to NASA mission control and many spaceflight contractor firms.
Texas is the only mainland state that has its own power grid, heralded until recently for producing more electricity than any other. For the most part, Texas is dependent on its own resources to supply the state with electricity. The power grid is operated by the Electricity Reliability Council of Texas (ERCOT), and currently ERCOT is under fire for its failure in the catastrophic February 2021 blizzard that left much the state without electricity. The renewable energy industry is one of the largest in the nation, with abundant wind and solar resources.
Houston is not only considered the energy capital of the nation but is the location for almost every part of the petroleum industry. It is not surprising that Texas leads the nation in petroleum refining and chemical products production. More than fifty percent of the total U.S. chemical production is produced and processed in Texas. ExxonMobil has its headquarters in Irving, adjacent to Dallas, and ExxonMobile Chemical is headquartered in Spring, just north of Houston.
Texas is home to the world’s largest medical center, the Texas Medical Center. It is also home to Texas Children’s Hospital, the world’s largest children’s hospital, and MD Anderson Cancer Center, the world’s largest cancer hospital. There are currently thirteen medical universities in the state and that will expand with a new medical school at Sam Houston State University out of Huntsville.
Enter 2020 and the COVID-19 pandemic which was not only a health crisis, but also an economic crisis. Despite the robust economy prior to the pandemic, Texas was not immune to so many unexpected situations. During 2020, all of the major taxes were down: the sales tax was down five percent; the oil production tax was down 45.5 percent; the natural gas production tax was down twenty-five percent; the alcoholic beverage taxes were down 28.5 percent; and the hotel occupancy tax was down 48.5 percent. Unemployment peaked in April at 13.5 percent but has slowly gone back down to 7.2 percent by the end of December 2020.\(^{25}\) Low wage earners, predominantly women and minorities, in the service industries suffered the most. The hotel industry along with restaurants and bars were particularly hit hard. Restaurants became creative with curbside pick-up and to-go alcohol orders, but in September the Texas Restaurant Association reported that fifteen percent of the state’s 50,000 restaurants closed for good. Retail businesses continue to report losses and of course, airline traffic declined steeply. Certainly, the COVID-19 crisis changed life as Texans and the rest of the country knew it, but it appears that individuals, businesses, schools, and others have found ways to restructure workplace practices through the use of technology. At this point, the economists still cannot predict the long-term effects of the pandemic. History has shown the resilience of Texans, and this crisis will show the same spirit.
- David Adler, “Schumpter’s Theory of Creative Destruction,” Engineering and Public Policy, Sept. 30, 2019, https://www.cmu.edu/epp/irle/irle-bl...struction.html
- Karen Gerhardt Britton, Fred C. Elliott, and E. A. Miller, “Cotton Culture,” Texas State Historical Association Handbook of Texas, https://www.tshaonline.org/handbook/...cotton-culture.
- “Barbed Wire Entrepreneurship,” Perc, Feb. 24, 2011, www.perc.org/.
- J. Quinn Norris, Donald L. Turcotte, Eldridge M. Moores, Emily E. Brodsky, and John B. Rundle, “Fracking in Tight Shales: What Is It; What Does It Accomplish; and What Ae It’s Consequences,” Annual Review of Earth and Planetary Sciences, vol. 44 (June Chapter 1: Political Culture and People 66 2016): 321-355, https://www.annualreviews.org/doi/10...-earth-060115- 012537.
- Mark Arend, “Governor’s Cupts: The 2019 Governor’s Cups,” Site Selection Magazine, March 2020, https://siteselection.com/issues/202...-cupscover.cfm.
- Olga Garza, T.J. Costello, Jessica Donald, Peggy Fikac, David Green, Spencer Grubbs and Shannon Halbrook, “Weathering the Pandemic: Texas Industries and Covid-19,” Fiscal Notes, Texas Comptroller, https://comptroller.texas.gov/econom...n/pandemic.php.