Baťa and Zlín: a town built by a company

In 1894 three siblings from Zlín, a small town in eastern Moravia, started making shoes. Forty years later their firm was one of the largest shoemakers in the world, and Zlín had become a modern city of red-brick houses, a large hospital, schools, a department store and one of the biggest cinemas in Central Europe. Most of it was built not by the state but by the company. This guide tells the story and asks what it shows about public goods, and where its limits are.

A shoemaker from Zlín

Tomáš Baťa (1876–1932) came from a family of shoemakers. In 1894 he, his brother Antonín and his sister Anna founded a small workshop with money they had inherited. The first years were hard and the firm nearly went bankrupt. Tomáš looked for a way out in cheaper production: simple canvas shoes, the “baťovky”, made with machines instead of by hand.

In 1904 he went to the United States and worked in shoe factories in Lynn, Massachusetts, to learn how they were organized. He came back with machines and a lasting admiration for American industry. After a second trip in 1919–1920, he introduced the assembly line, in the spirit of Henry Ford.

The First World War made the company large: it supplied boots to the Austro-Hungarian army and the number of workers multiplied. After the war, the orders stopped, and in 1922 a post-war crisis hit. Baťa did something his competitors thought was mad. He cut his prices by half. To make it possible, workers accepted a lower wage, and the company sold them food and goods at reduced prices in its own shops. Sales recovered, and the firm came out of the crisis stronger than its rivals.

How the company worked

Baťa’s method mixed hard discipline with incentives that were unusual for its time:

• Workshops as small businesses. From the 1920s each workshop kept its own accounts: it “bought” material from the previous one and “sold” its work to the next. Everyone could see whether their workshop made a profit or a loss.
• Profit sharing. From 1924 workers and managers received part of the profit of their workshop. A good team earned more; a careless one saw it at once.
• The customer first. The company motto was “Our customer, our master”. Prices ended in 9 so that customers noticed the low price, and the company ran its own shops so that no middleman stood between the factory and the buyer.
• Learning by working. The Baťa School of Work (from 1925) took in boys of fourteen. They worked in the factory, studied in the evening, lived in dormitories and managed their own wages. Many of them later ran the company’s factories around the world.

By the 1930s the company had factories and towns on several continents, from East Tilbury in England to Batanagar near Calcutta, and tens of thousands of employees. Part of the expansion abroad was a reaction to tariffs: when a country closed its market to imported shoes, Baťa built a factory inside it.

A town built by a company

The firm needed workers, and the workers needed somewhere to live. So the company built Zlín. Its plan was drawn by the architect Jan Kotěra and developed by František L. Gahura and Vladimír Karfík into the idea of a factory in a garden: factories in one valley, workers’ family houses with small gardens on the slopes, and green space between them.

• Homes. Whole districts of simple red-brick family houses for one or two families, rented to employees at modest rents, plus dormitories for single workers.
• Health. The Baťa hospital opened in 1927 and grew into one of the most modern in the country.
• Education. Schools from kindergarten up, the School of Work and courses for adults.
• Everyday life. A department store, a hotel, sports grounds, a swimming pool, and in 1932 a cinema with more than two thousand seats.
• The skyscraper. The company headquarters, Building 21, finished in 1938, was one of the tallest buildings in Europe at the time. The director’s office was a lift that moved between floors.

Zlín grew from a small town of a few thousand people into a city of tens of thousands. Visitors from all over the world came to see it. The same model was repeated in Baťa towns abroad.

Why would a company pay for houses, hospitals and schools? Because it paid off. Healthy workers missed fewer days, educated ones made fewer mistakes, and workers who lived well near the factory stayed. These were not gifts but investments, and that is exactly why they were well run.

Not a free society, but a lesson

Zlín is a powerful example, but an honest one has to name its limits:

• Baťa was also the mayor. Tomáš Baťa was elected mayor of Zlín in 1923 and remained mayor until his death. The company and the town hall worked hand in hand, and it is not always clear where one ended and the other began.
• The state helped the firm grow. Army boots in the First World War made the company big, and tariffs in other countries shaped where it built factories.
• Paternalism. Company life came with rules. Employees’ homes could be inspected, drinking was frowned upon and the company expected loyalty in return for what it gave. Some admired the order; others felt watched.
• Dependence. When one employer owns the factory, the houses and the shops, leaving the job can mean leaving your home too. In a free society the answer is competition: other firms, other towns, other landlords.

Tomáš Baťa died in a plane crash in 1932. His half-brother Jan Antonín Baťa took over the company. In 1945 the company in Czechoslovakia was nationalized and later renamed Svit, and from 1949 until the end of 1989 Zlín was called Gottwaldov, after the first communist president. Tomáš’s son, Thomas J. Baťa, rebuilt the company abroad from Canada; today Bata is run from Switzerland.

What it shows about public goods

The story of Zlín answers a question from the guide on public goods without a state: who would build the houses, hospitals and schools? In Zlín, a firm did, because a town where people live well is worth more than a factory alone. The same logic drives developers who build roads and parks to raise the value of their land, and private communities that provide services to their residents.

It also shows what happens when the state takes over. After 1945 the factories went on, but the incentives that made them work, profit sharing, workshop accounts and the customer as master, were replaced by plans. The town stayed; the spirit left.

Where to go next

• The theory behind the story: public goods without a state.
• How prices and profits guide production: Austrian economics.
• Other examples of order without the state: stateless societies in history.