The so-called defense industries are such an indispensable part of
government
today as to have given rise to the concept of the Warfare State.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
4
The Treasury Department for tax purposes has a category of "active corporations," numbering 1,190,286 in 1961. This category with sweeping catholicity includes
corporations in finance, insurance, real estate, services, nonallocable businesses and agriculture, forestry and fisheries. Excluding all such and retaining only the mining, construction, manufacturing, transportation, communication, electric, gas and wholesale as well as retail trade industries in order to obtain a category comparable with that of the big industrial enterprises we have been considering, we have 675,074 active industrial enterprises. 5
The total assets of all these 675,074 active industrial and trading enterprises were $561. 778 billion in 1961 6 compared with total assets in the same year of $186. 769 billion for the 500 largest industrial companies, $125. 734 billion for the 100 largest. 7 In 1962 the assets of the 500 had risen by more than $10 billion. More than 30 per cent of the industrial assets of the country, then, was confined to 500 of the largest companies.
Actually, in 1961 companies with assets of $50 million and more among all active corporations, industrial and nonindustrial, well above the range of "small business," held the bulk of assets and most of the net income.
The number of such companies was 2,632 or . 2 per cent out of the 1,190,286. The $50-million-asset-plus companies held $812. 396 billion out of total corporate assets of $1,289. 516 billion, or nearly 65 per cent. Their net income was $30,027 billion out of $45,894 billion, or 66 per cent of all corporate net income.
Confining ourselves once again to active industrial and trading companies, we find that 1,073 constituting the $50-million-plus class had assets of $346. 922 billion out of total industrial and trading assets of $561. 778 billion. , or more than 60 per cent, and net income of $24. 151 billion or 70 per cent, out of total net income of 35. 916 billion. 8 Again, one central corporation often owns many other large ones. The big corporations are not always detached entities.
Summarizing, 2,632 active corporations or slightly more than . 2 per cent of all active corporations (almost always dominantly owned and controlled by less than . 1 per cent of their stockholders) held nearly 65 per cent of all corporate assets for 1961 and got 66 per cent of net corporate income. These 2,632 corporations were those with individual assets of $50 million or more. In the industrial-trading category alone less than . 2 per cent ( 1,073 out of 684,075) of corporations, with assets of $50 million or more, held more than 60 per cent of assets and derived 70 per cent of net income.
The vast number of enterprises below the $50-million asset class (and almost 60 per cent of them had assets of less than $100,000) perform only a shrinking marginal amount of the business of the country. We can therefore with the utmost caution say that most of the productive activity of the United States is in the hands of a tiny number of very large corporations largely owned and completely dominated by a small coterie, almost a junta.
This fact is shown, too, in the figure of $302. 536 billion for total sales of the 1,073 largest industrial and trading corporations for 1961, which was nearly 60 per cent of gross national product. 9
What have been cited are official government figures and as such may be suspect to some persons who profess deep distrust of all government activity. Let us, then, turn to strictly business sources.
"The 7,126 U. S. companies with more than 100 or more employees (2. 5% of the nation's 286,817 manufacturing corporations) account for 90% of total manufacturing assets and 83% of sales," says a widely circulated business directory in referring to 1961. 10 "The nation's top 13 employers, firms with 100,000 or more workers, have assets of $37. 9 billion (15. 3% of total U. S. manufacturing assets) and sales of $47. 1 billion (13. 6% of total sales). "
No matter which source one turns to, the same prospect unfolds: intense concentration. Slightly more than 7,000 managements, often interlocked, account for 83 per cent of all sales!
Whoever owns and /or controls the large corporations, then, obviously owns and/or controls the lion's share of the productive system, We have already shown how untenable is the idea that such ownership is widely diffused among millions of small shareholders. The small shareholder in the United States stands in the same relative position to the large shareholder as the rank-and-file Communist in Russia stands to the party leadership. Useful, he nevertheless need not be seriously consulted. He carries no more weight than the rank-and-file employee. Corporatively speaking, he is a nonentity, an unperson.
The Cannibalistic Merger Movement>
The smaller enterprises, moreover, are being steadily squeezed out of business or
absorbed by the giants, most of which became giants by the cannibalistic process.
There have been three periods in this century marked by waves of American mergers-- 1900-10, the 1920's and the years since World War II. From 1920 through 1929 there were 6,818 mergers; from 1930 through 1939 there were 2,264; from 1940 through 1949 there were 2,411; from 1950 through 1959 there were 4,089; and from 1960 through 1963 there were 1,978. In most cases larger companies absorbed smaller ones; in some cases many small companies were suddenly combined into large ones. 11
The word "merger" in actual practice almost invariably indicates that large companies are involved; it is rare for really small enterprises to figure in mergers. Thus in the decade 1951-61, of 3,736 mergers involving the 500 largest industrial and 50 largest merchandising firms--almost all the mergers there were--the largest 100 industrial companies absorbed 884 firms, the next largest 100 absorbed 1,059, the third largest 100 took in 577, the fourth largest 100 absorbed 453 and the fifth largest 100 absorbed 431 firms. Among the merchandising companies the largest 50 took in 332 other companies. 12
In the years 1948-60, 33. 4 per cent of assets acquired by merger went to companies with assets of $50 million or more and 34. 3 per cent of acquired assets went to companies with assets of $10-$50 million. Assets acquired by companies with less than $1 million of assets amounted to only 1. 6 per cent. The same trend continued into the 1960's up through 1962, the latest date available. 13 Since then, the merger movement has taken a new spurt.
The small enterprise, at least rhetorically beloved by many small-town congressmen, has also been steadily driven out of business by failure, a traditional hazard of genuine businessmen as distinct from corporate manipulators. In the period 1921 through 1935 there was a yearly average of more than 20,000 failures (excluding railroad bankruptcy proceedings), with aggregate liabilities averaging more than $500 million and average individual liabilities between $21,000 and $27,000. From 1936 through 1940 the yearly average was 12,064 and in the 1940's it was a little more than 5,000. But in the 1950's the figure started burgeoning again, from 8,058 in 1951 to 14,053 by 1959. In the 1960's it is exceeding 15,000 annually.
Most of these failures are of very small firms. Only in 1961 did aggregate annual liabilities cross $1 billion, where it remained thereafter through 1963, our latest date. In no year has the average individual liability exceeded $100,000. 14
The figures tell little of blasted hopes in the uneven race toward business success.
It is almost a cardinal rule that only small businesses go out of existence through bankruptcy. The word is encountered only academically on the higher corporate circuit.
One of the effects of the propaganda about business success (propaganda based on a meager number of instances) is to encourage each year thousands of illusion-ridden citizens to jump into the business whirlpool. Unskilled in logical analysis, they optimistically accept the lopsided findings of Time, Fortune and the Wall Street Journal as representative fact. All they accomplish in most cases, sooner or later, is to enrich with their small bankrolls the coffers of suppliers of business equipment, which is later knocked down to the highest bidder at bankruptcy auction sales. There is a thriving business in the United States dealing, year in and year out, with bankruptcy itself.
By every known sign, entering into business for oneself in the United States is now, and always has been, a highly risky affair. Many are called; few are chosen. And most who remain in business do so on the thinnest of survival margins, constantly financed by short-term bank loans, the constant prey to recessions, regional strikes or even vagaries of the weather. A simple run of unseasonable weather regularly drives out of business hordes of hopeful operators of small resorts, hotels, stores and service enterprises. Many are hopelessly in debt. But in addition to misfortunes of local circumstance there stand in the background the asset-heavy large enterprises, which survive all vicissitudes, like granite cliffs against the sea. Not many German enterprises survived the military disasters that engulfed the Reich this century; but the Krupp family's steel enterprises, for one, did survive and, indeed, are flourishing now as never before. Krupp in Germany could no more be vanquished by overwhelming national calamity than could Du Pont in the United States. What would survive any event, perhaps even atomic warfare, would be titles, patents, formulas, certain key personnel and organization charts. One would, as the saying goes, have to get the country "moving" again. And who can do this better than Krupps, Du Ponts, Rockefellers, Fords, Pews, Gettys, Rosenwalds and their kind? For, among other things, they have gathered unto themselves administration of the technical "know-how. " This is what they have, over and beyond money: general far-ranging administrative authority.
Business versus the Corporation
As applied to the larger enterprises the term "business" has become a euphemism, no longer expressing the intended content of the word. The man who owns and operates a small independent shoe store is a businessman. So, it is implied, are Henry Ford II, J. Paul Getty, Crawford H. Greenewalt and Roger Blough. Yet these latter basically have no more in common with the small tradesman, either in outlook or mode of operation, than has a juke-box entrepreneur with a musician.
Among the defining characteristics of any business enterprise is that it can fail, can go out of business through bankruptcy. It is risky, in short. But the major corporations can no more fail than can the public treasury. Their risks are all marginal. Their massed financial reserves and other assets are absolute guarantees against total risk and failure. Beyond this, they are so thoroughly woven into the very warp and woof of society that they are the peculiar anxious and constant concern of sovereign power itself.
This last has been shown in this century in particular in the case of railroads, many of which through gross financial mismanagement--"milking"--have gone through bankruptcy proceedings in which unpreferred creditors were squeezed out with heavy losses. But reorganization proceedings under the supervision of the federal courts have restored them to formal financial health, often under the same management, bankers and holders of senior obligations. For the railroads serve a vital function in modern society.
The large industrial corporations have never yet had to be individually bailed out of financial difficulties by the government, for they have not experienced overwhelming
individual financial difficulties. Their financial position has been made too secure by monopolistic and semi-monopolistic practices, at times formally adjudicated illegal.
What kind of business is it, then, that is impervious to failure, one of the most basic possible experiences of business in history? If it is indeed a business, then it is something distinctly new in business history.
Close students of corporations feel driven to employ various devices to differentiate the big corporation from the ordinary corporation, which may indeed fail. There was first widely used the rather imprecise term Big Business. But, as we have noticed, the big corporation is different from the smaller corporation in crucial ways other than mere size. It is not only big but it cannot fail, cannot (as the saying goes) go out of business. Some specialists then introduced the term super-corporation, 15 which is better, as it indicates at least some sort of superiority or supremacy. But what is the superiority? The fact of being failureproof? Size?
The big corporation, as a matter of fact, is not a business enterprise at all, at least not in the sense that business enterprise has been understood through history and as it is commonly understood even today. The linguistic habits of people have simply not kept abreast of institutional change.
The big corporation, it is true, does business, engages in trade. But so do the government trading enterprises established by Soviet Russia, which seek profits but which are nevertheless not thought of as businesses or business enterprises. By definitional ukase they are excluded from the business category.
A writer on economic affairs, reflecting on AT&T, shows awareness of the inapplicability of the term "business" to the functioning of the large companies when he says: "AT&T today is less a company than a quasi-political state. " 16
But not only is AT&T a quasi-political state; many other large corporations are in the same category and, indeed, like AT&T have foreign governments among their large stock-holders. The stock is held as a national treasury asset. But it is not the participation of governments as investors that makes these entities quasi-political states; they are that even without any government stockholding. They are, too, more than an integral part of the economy. They are an integral part of the functioning political system, their acts and plans focusing the attention of legislators and political administrators, just as the acts of legislators and political administrators are of paramount concern to them. Their interests and those of government officials at many points overlap and interlock.
The big stockholders and managers of these quasi-political states, again, are stockholders and managers in some sense different from people ordinarily so recognized. They not only have more power than the common run of stockholders and managers but they must continually pass judgment and act on a wider spectrum of eventualities, a spectrum as wide indeed as that of any top government leader. What the president of the United States is thinking about is, more often than not, precisely what the big corporate people are thinking about, often in the same terms: war or peace, balance of international payments, treaties, unemployment and wages, gross national product, interest rates, consumer finance, national debt, taxes, etc. , etc.
Because referring to these men as corporate leaders or big stockholders or magnates is imprecise, and confusing as well to many (for what, really, is a big stockholder, a man owning a million shares worth $1 each or a million shares worth $500 each? ), I have coined a new term for them. They are, according to this term, finpols-- financial politicians. Their political mentalities and acts are shaped by their propertied and institutional positions.
Although not recognized by the general public as politicians, whom cartoonists still regressively depict as men in broad-brimmed black hats wearing string ties and black frock coats, much of the daily activity of the biggest property holders--the finpols-- is identical with the work of government leaders. They are, first, diplomats--so much so that they can be quickly shuttled into the highest formal diplomatic posts. They are, too, manipulators of public sentiment through advertising, public relations subordinates and corporately controlled mass media in general. They make or cause to be made speeches on fundamental public questions, seeking to persuade. They select subordinates, conduct negotiations with governments, hire and fire high-level corporate personnel, manipulate political parties and, above all, make decisions of national and international import. Most crucially, they have, like the very top governmental leaders, vast financial resources at their fingertips, resources for which they are far less strictly accountable than most government leaders working within constitutional frameworks. They can, and at times do, buy legislators and judges. Most--repeat: most--legislators are on their payrolls.
As far as that goes, many of them or their aids can and do without so much as shifting gears go right into top government posts, where they feel perfectly at home. When Robert McNamara went from the presidency of the Ford Motor Company to become secretary of defense, he simply stepped from one to another large organization. The horizon of Nelson A. Rockefeller hardly broadened when he stepped into the governorship of New York. Even though he had not previously been in any very high administrative post, the transition from the universal concerns of the Rockefeller family to those of New York State was hardly a move into a wider domain.
These quasi-political states or super-enterprises, then, are a reality. The men with the biggest stakes in them and at their helms are little different from government leaders in function, outlook or means at their disposal. To most cases they far overshadow the domains of all except the highest political leaders. Revenues for AT&T in 1964 exceeded revenues of the thirty smallest American states, nearly equaled the three richest. No governor of any American state presides over an enterprise nearly so vast, complicated or minutely far-reaching. No senator has in his jurisdiction any comparable domain. As Desmond Smith points out, the net income of AT&T's Bell Systern, after taxes, is approximately equal to the national income of Sweden. Bring a few of the other large companies into a cluster and one sees how many other long-established nations they together exceed. France becomes a minor operation, comparatively. The big corporations account for most of the American gross national product itself, and most of the national income as well. One can almost justifiably say: They are the United States. Take them out of the picture and what would be left?
AT&T is certainly a gigantic affair, an octopus or super-octopus if you will. But it has many near counterparts at home and abroad: General Motors, Standard Oil (New Jersey), Ford Motor, U. S. Steel, Socony Mobil Oil, Du Pont, Bank of America, Chase Manhattan Bank, First National City Bank, Manufacturers Hanover Bank, the big life insurance companies (Metropolitan, Prudential, Equitable, New York and John Hancock), Sears, Roebuck, Great Atlantic & Pacific Tea, Royal Dutch Shell, Unilever and still others.
These are not businesses at all as the term has been historically understood. They are clearly more like governments, or government departments, and would be more aptly termed finpolities. Their influence on formal government, direct and indirect, conscious and unconscious, is enormous. Their influence, indeed, is so often peremptory that it might better be described as in the nature of (quasi-decretal. For such entities, through agents, often tell governments, in secret conference (the United States government included) what they must do and what they, cannot do. That, I submit, is power. And, if
governments fail to comply, at the very least they will lose the considerable cooperative power of the finpolities.
"The 'top' or 'pure' executive largely symbolizes organizational authority. He is a politician," says David T. Bazelon in a general analysis (The Paper Economy, Random House, N. Y. , 1963, p. 37).
Crown, Baronnage and Church
Historians in surveying the late Middle Ages of Europe often organize their narrative around three focal centers: the Crown, the Baronage or Nobility and the Church. These were the three often rivalrous, sometimes embattled, power centers of the times. The Crown came to be held by a family line that had emerged from the Baronage and gradually extended its sovereignty over it. In its struggle it ran into a powerful rival in the Church, represented by the pope, who claimed universal dominion in the name of God. In time the Crown, linked to rising nationalism, was victorious over the barons and, finally, also over the Church. Strongly centralized national governments emerged, these contending brutishly down through the centuries with each other for imperial power. The most recent climactic acts of this recurrent European drama were colossal World Wars I and II.
Utilizing this same sort of schema it is possible to discern analogous power centers in the United States today. There is the central government roughly (and blindly) occupying the position of the late medieval Crown. There is the restless baronage in the form of the finpols and upper corporate magnates (corp-pols), seeking to bend the Crown to the purposes of their corporate baronies and dukedoms. Crown, Church and Baronage in medieval times, although contending for power against each other, were not always at swords' points; sometimes they cooperated, sometimes they fell apart and fought or intrigued one against the other. At times the Crown itself was overturned, to be succeeded by some dominant baron.
Among many additional differences in the situation, though, is the fact that the modern financial baronies have emerged under the protection of the Crown; the medieval Crown, per contra, emerged from among the competing Baronage, subdued it. The medieval Crown rose as a challenge to the Baronage; the modern financial Baronage has risen as a power challenge to duly established pseudo-democratic government.
In their overlapping aspects, government and finpolities are almost identical, a fact most apparent in time of war and in matters of defense.
The so-called defense industries are such an indispensable part of government today as to have given rise to the concept of the Warfare State. Company boardrooms are departments of the Department of Defense or, looked at another way, the Department of Defense is a special branch of the big-company boardrooms.
In dealings with the upper strata of government the finpols appear as equals, very much as prime ministers of a foreign state. When the chairman of AT&T, General Motors, Standard Oil or U. S. Steel sits down with the president of the United States to discuss some issue of mutual concern we witness a genuine political "summit conference. " It is far more than a conference between a big leader and an informed citizen. It is more like a conference between a medieval king and a powerful baron, a potential kingmaker or kingbreaker.
On the whole, most of the time, the relations between the president of the United States and the leading finpols have been cordial. Actually most of the presidents of the United States appear to have admired and stood in awe of the finpols-- men who have mastered or have been put in mastery of the mysterious life-giving market.
There have been periods, usually short, when relations between the two, like relations between the medieval Crown and the Barons, have become strained. But much of this strain, arising from groping attempts of government to regulate the far-ranging finpols, has been a sham, improvised to deceive a gullible populace. The aim has been to leave the president of the United States looking good in the eyes of the populace, preserving his image as a strong and puissant leader, but to give the finpols their way concretely although perhaps in some new package. Thus, although we live under increasing government regulation, much of the regulation is purely token. And if the finpols do defy the government and break the law in some billion-dollar foray--they will, if caught, be forthrightly fined up to perhaps $50,000 or $100,000!
National policy with respect to the finpolities has been paralyzed by ambivalence relating to two ideas. There has been, first, the strong national belief in competition. Without competition the national history itself would be seen as without meaning, simply a record of random activity. On the other hand, there has been admiration for advancing technology, linked purely by association with the corporations, and with bigness. Americans generally admire competition, advanced technology and pure bigness. The fact that one must choose between competition and corporate bigness has been evaded. It is logically impossible to have finpolity and competition, yet few are willing to make a choice between the two.
"Bigness itself is no crime" is a statement often made in classrooms and in writing by apologetic academicians with their eyes on the big corporations. And they are tautologically correct; bigness cannot be a crime because it is a pure abstraction. But to be a big corporation, as we have seen, is almost always and invariably, as the fact happens to be, to be an adjudicated criminal corporation. The proper reply to the professor who utters the empty truism is this: "But bigness in a corporation always, as a factual matter, involves crime. "
Presidents McKinley, Theodore Roosevelt, Taft, Wilson, Harding, Coolidge, Hoover and Eisenhower were deep in the confidence of the finpols and, despite harsh words at times purely for public consumption, got along very well with them. Theodore Roosevelt demagogically referred to them as "malefactors of great wealth. " But the finpols, always, despite harsh public language, managed to get their way, sooner or later. Corporate concentration for example, continues apace despite the hullabaloo of antitrust.
Where the desires of the finpols and the government became clearly divergent was in the 1930's, with the country beset by the deep crisis of unemployment initiated by the finpolities. The formula under which the finpols had prospered finally came apart, and government felt the need to improvise. There ensued a period of tension and genuine hostility between finpols and government, which was finally poulticed over by the advent of World War II, in which the finpols and finpolities were very much needed. The fusion of the finpolities with the national government, with many finpols taken boldly into the national government under the rubric of patriotic effort, was again complete, and was solemnly recemented during the Eisenhower Administration. President Eisenhower frequently expressed his admiration for the finpols and gave them a prominent role in his administrations.
In the 1960's the finpols remain restored to grace in national affairs. Most of them at the moment seem to agree that the government should be allowed to engage in somewhat wider social maneuvers than finpolity would ordinarily approve. Presidents John F. Kennedy and Lyndon B. Johnson, seeking to rebuild Franklin D. Roosevelt's synthesis of electoral support, have been allowed to engage in much social-program maneuver. And the finpols have been conceded many of their demands--removal of
price controls, lower taxes, etc. President Johnson, like President Eisenhower, has professed great admiration and respect for the finpols who are, after all, under the equal application of the laws entitled to as much consideration as, say, the ordinary workman. The finpols, then, are an integral part of "The Great Society," in which there is obviously a great deal of lucre to be made filling profitable government contracts for cement, steel, aluminum, copper, textbooks, rockets, space machines, tanks, recoilless rifles, schools, hospitals, sanitoria and bird baths.
In place of the Church today, there are the Intellectuals. In so saying I realize that my remarks lose credibility for many American readers, for intellectuals are not highly esteemed in the American mass-media or, presumably, among most of the populace. As I don't want to take the space to lay down a detailed argument supporting my case for the Intellectuals as a domestic Third Force let me, aiming right between the eyes of the dubious, simply remark that Karl Marx and V. I. Lenin were intellectuals. So, for that matter, were Winston Churchill, Albert Einstein, Thomas Jefferson. , Benjamin Franklin and John F. Kennedy. Not all intellectuals, to be sure, have attained comparable eminence. But they are nevertheless present in their various ways.
It is the intellectuals, as a group, who preside and wrangle over the undulating frontiers of ideology, philosophy, scholarship and science, in all of which they may be said to have, by popular default, a vested interest. Most broadly (and abstractly) they preside in some disorder over values. And although their concrete power today is not comparable with the power of the medieval churchmen (themselves the intellectuals of their day, supported by the propertied and psychological power of the Church), it is nevertheless implicit. It is the general task of the intellectuals to make sense out of the established order, if that is possible; but the more the established order fails to make sense in the minds of the intellectuals the nearer it is to ultimate rejection or modification. If a basic political operating rule is that all men are entitled to the equal protection of the law and Negroes and others are flagrantly denied such protection, it is the intellectuals who are most sensitive to the contradiction between rule and action and who therefore deny that the system is what it virtuously claims to be. By the test of its own rules, by the way, ours is not an operationally virtuous system.
The fact of the importance of the intellectuals as a class has nothing at all to do with the strength or virtue of the intellectuals as individuals but has everything to do with the ultimacy of systematically applied thought. Hitler threw the intellectuals out of his system, preferring to rely upon what he called his intuition. As a consequence he lost, among many other things, priority in the matter of the atom bomb. The currently split and diminished Reich stands as a monument to his folly. The Russian politicians, supposing Leninism to be ultimate political revelation rather than a restricted set of tactics, keep the intellectuals under close restriction; the expression of free thought is not permitted in contemporary Russia. Nevertheless, the Russian intellectuals do maintain some under-the-surface ferment in the Soviet Union. They are a force, however feeble, but of vast potential.
One of the latter-day difficulties of the finpols and the finpolities on the American scene is that since 1929 they have lost the sympathy of a considerable segment of intellectuals. Far fewer today than in the 1920's believe that what's good for General Motors is good for the United States. Much about the specific enterprise of General Motors, indeed, increasingly fails to make human sense in the minds of intellectuals, despite the herculean labors of public relations men. And in view of the emergence of a vast hereditary establishment of property, it is blindingly clear that huge money rewards are not merited compensation for some overpowering social contribution as in the creation of an industry. If Carnegie, Rockefeller, the original Du Ponts, Westinghouse, Ford, Hartford and other nineteenth-century men made such a contribution, a debatable
point in itself, it is certainly plain that their heirs have not. Today, the biggest money rewards in the American system come from simply sitting and listening to the reading of a will, which can scarcely be construed as a social contribution. Intellectually, it looks medieval.
It is a mistake, though, to suppose that it was the post-1929 denouement alone that caused the defection of many intellectuals from the old and easy ways of thinking. It was the literary intellectuals more particularly, committed to humanistic values, who reacted most strongly to the national experience after 1929. But public policy with respect to the new weaponry, from the atomic bomb onward, raised increasing doubts about the direction of events among scientific intellectuals, many of whom now look upon the joint policies of the government and the finpolities with an increasingly dubious eye.
Yet it is the relations between the finpols and the pubpols or public politicians that occupy the foreground, with the intellectuals kept in enfeebled attendance under steady public disparagement as "long hairs" and "impractical theorists" rather than in forthright restriction as in Russia. Finpols and pubpols are generally bedfellows, the latter probably the more ardent in the relationship, but increasingly there are signs of strain as the pubpols recognize, with some bewilderment, that in many ways their interests are incompatible. Can it be, they seem to ask themselves in dismay, that what is good for General Motors is not always good for the administration in Washington? What Big Business wants, in short, no longer always seems to harmonize with what the White House believes is required. The naive king, friend to all men, begins to feel that the barons are perhaps plotting against him.
The divergence of interests, not wholly closed since it widened under Franklin D. Roosevelt in the 1930's, seems likely to grow wider in the course of world change. The pubpols, like the medieval kings, may be obliged to struggle against the baronage, a prospect few of them can relish in view of their not too secret admiration for them. But as interests diverge and strains grow greater, the central government (like the medieval Crown, simply by reason of its wider responsibilities and inherent powers) seems bound to triumph, although by that time the central government may have been transformed into a more viable version of the Corporate State than was ever seen in Italy and Germany prior to 1945. There is indeed a discernible swing toward such a Corporate State, of which the finpolities would be integral and guaranteed formal parts (with big ownership stakes assured under some saving, perhaps socialistic, formula), and most of the smart money would no doubt bet on its emergence. Yet, in the time remaining before its advent, will the intellectuals look upon its coming with favor?
Informally, we are already well into the era of the Corporate State, of which the Warfare State is only a subdivision. Practically, it already exists as long as the pubpols find their interests running parallel with those of the finpols. A difficulty for the latter, though, is that the pubpols are sometimes obliged by the far-scattered facts confronting them to interpret the general situation differently, as President Kennedy did in the case of steel prices and as President Johnson did in the case of aluminum, copper and steel prices.
Although AT&T is a finpolity, a vast dukedom little short of a full polity, the domain over which it presides is parochial in comparison with the relatively universal domain of the United States government. AT&T is, comparatively, narrowly specialized in its interests.
And it is the narrow specialization of profit-interests of all the finpolities that, at times, makes their acts and policies inharmonious with those of the government of the United States, whose necessary task is to harmonize, at least roughly, a wide variety of foreign
and domestic problems and interests. The government, often to its distaste, must deal with a far more complicated situation than any finpolity deals with.
Such being the case there is always the potentiality of a clash--perhaps a serious clash--between the central polity and all or some of the finpolities. There can be no doubt which way the hand would go if all the chips were ever down. A question that arises at this point, unanswerable yet, is this: will the intellectuals be able to come forward with some solution or set of solutions more attractive than the looming and gradually emerging Corporate State or ultimate finpolity?
Although the medieval Crown won out in its struggle with the barons and the intellectuals of the day, when it attained its final victory it was by no means the same Crown. It had been modified and battered in the struggle. For the intellectuals in the course of time caused it to be changed almost beyond recognition, most dramatically in the French Revolution. While much remains the same today, as the effort to re-establish something like the Holy Roman Empire in the guise of a United Europe, the content, the outlook and the methods of the European governments are all different, largely owing to the efforts of the now secularized intellectuals. The slogan "Liberty, Equality and Fraternity," which exploded the emotions of men, did not come from king, nobleman, soldier, peasant or businessman. it, like modern science as a whole, came from the intellectuals.
No suggestion is intended here that some sort of established script or historical cycle is being followed or even that the same sort of structure confronts us that confronted medieval Europe. It is only that the interactive, usually muted, tug-of-war among government, the big corporations and the intellectuals stirs memories and seems to be at least a dim replica of an earlier internal struggle.
My own view is that although the big corporations and their dominant owners and managers, the finpolities and the finpols, are still unquestionably powerful they are in a long-term slipping position as far as ultimate general dominance is concerned. Too many counter-forces are emerging on the world scene.
That this is so has been shown both by Presidents Kennedy and Johnson, neither of whom was personally hostile to the corporate crowd. President Johnson has appeared to admire it as intensely as President Eisenhower and maintains close relations with it.
Yet situations arose which showed that, when the chips were down, a president who knows his own mind and interests can and must quickly bring the finpolities to heel. It has been demonstrated, in brief, that a political leader with a firm knowledge of the mechanics of government and the balance of forces in society can successfully assert the priority of the general interest over the special interests. Franklin D. Roosevelt did it most spectacularly, able as be was to act in the name of an unquestioned emergency. But neither Presidents John F. Kennedy nor Lyndon B. Johnson needed the excuse of an overriding emergency when they vetoed, only temporarily to be sure, the price increases of some of the most powerful industries. President Johnson, by releasing stockpiled government aluminum and by threatening to reallocate government orders for steel, showed that indirect government counter-action is always possible if the finpolities threaten to run away with any situation. This fact was probably always known to dominant Republicans, for which reason they have shown such marked partiality for a long line of mediocre and subservient presidents from Grant to Hoover and Eisenhower. Not a single Republican president since Lincoln, nor most of the Democratic, causes the pulse of a reader of American history to quicken even slightly. When honest, they were dull and inactive. When energetic, like Theodore Roosevelt, they were fakers; and when stupid they were calamities. No historian of any standing among his peers would deny it.
In a certain sense every big corporation is a hostage to presidential and even congressional ire, which alone explains the Republican partiality for figurehead presidents and congressmen of the worm's-eye view like Dirksen, Halleck, Hickenlooper, Curtis, Mundt and Hruska. Any corporation can be investigated and, in fact, the entire community of wealth can be inquired into via officially mobilized scholarship as was shown in the Temporary National Economic Committee's investigation. And all investigations disclose some state of affairs hitherto unsuspected and deplored by the more intelligent segment of the populace, leading to cries for change.
Trend toward Multi-Finpolity
The finpolities, in any event, are much more than merely large corporations. Indeed, even in their purely functional aspects they are not simply what the public thinks them to be.
AT&T, the man in the street supposes, is devoted to telephony, General Motors to making automobiles, Sears, Roebuck to merchandising, Great Atlantic & Pacific Tea to distributing groceries--all true. But these companies, and others, do much more, and the trend of each corporation now is to become a general enterprise engaging in any and every sort of activity that is profitable, related or not to its original line.
Let us examine a few of these multifaceted corporations, or multi-finpolities, from among the largest corporations, taking as our model one from real life.
What happens, let us first ask, if a big corporation loses its customers, its raison d' e^tre, as the old-time wagonmaking companies lost their customers with the advent of the automobile? Does it then go out of business? As many cases attest, the answer is No. As a huge financial reservoir it merely enters into one or many other businesses, provided they seem potentially profitable. They do this, too, if their original business enters upon a prolonged downtrend. The big corporations, in short, are Protean.
As good an example among many is International Telephone and Telegraph Corporation, the world's tenth biggest industrial employer with 195,000 workers in 55 countries, and the thirty-fifth largest American company assetwise. Its name suggests it to be devoted to international telegraphy and telephony but such is not at all the case. For as the Wall Street Journal justly remarked, it "sometimes seems no more than a scavenger-like monster, madly grabbing up everything in sight, always ready to strike again. " 17
it is difficult to tell precisely what business IT&T is really in aside from the business of making money. In this respect it is like a bank, and all the big corporations are, banklike, large pools of capital; what they produce, aside from profits, is secondary. And if what they produce does not bring in profits they simply switch to producing something else. Nearly all are holding companies, not operating companies as commonly supposed.
IT&T was founded in 1920, originally to run the telephone and telegraph companies of Cuba and Puerto Rico. It expanded into other countries: Spain, Belgium, Rumania, Australia, Latin America, the Philippines, etc. It also built up a manufacturing arm second in its field only to Western Electric.
But international political upheavals and wars deprived it of much of its operating territory. IT&T was quite literally forced out of business in many places.
After World War II it took a new lease on life and became a general holding company for all manner of enterprises. As its president told the Wall Street Journal, its criteria for
buying a company are only two: "The company should be growing faster than ITT. And it should have plenty of room to grow as the industry it is in grows. "
"The executive steps into his Avis rent-a-car," begins the Wall Street Journal account, "drives to his broker's to check on his Hamilton Mutual fund shares, mails the quarterly premium for his American Universal Life Insurance policy, checks on financing some capital equipment through Kellogg Credit Corp. , fires off a cable to Britain and then motors to Camp Kilmer, N. J. , for a session with the purchasing agent at the Federal Job Corps there. It's just a routine morning dealing with a variety of matters, but so far the man's business has been entirely with divisions or operations of the inappropriately named International Telephone & Telegraph Corp. "
IT&T now owns and operates the Aetna Finance Company; the American Universal Life Insurance Company; part of the Great International Life Insurance Company; Hamilton Management Corporation and Hamilton Funds, Inc. ; Avis, Inc. ; Kellogg Credit Company; the Mackey Telegraph and Cable System; Coolerator Company; Kellogg Switchboard and Supply; Kuthe Laboratories, Inc. ; Federal Caribe, Inc. ; Airmatic Systems Corp. ; Haves Furnace Manufacturing and Supply; Royal Electric Corp. ; the telephone system of the Virgin Islands; L. C. Miller Co. ; Jennings Radio Manufacturing; American Cable and Radio; Alpina Buromaschinen-Werke and Edward Winkler Apparatebau of Germany; a large group of Finnish, French, Swiss and English companies; National Computer Products; General Controls Co. ; etc. It owns scores of companies throughout Latin America and Europe in almost everything related in any way to using or producing electrical equipment, as well as many companies without the slightest relation to electrical equipment. It is a credit-insurance-investment-electricaI equipment-general world communications-transportation-chemical-computer- engineering-general service company. You name it, IT&T does it, almost, so long as it is highly profitable.
An extreme case, it will be said, but far less extreme than one might suppose. IT&T is more like a standard model of the emerging Protean finpolity. AT&T itself is not radically different.
General Motors makes automobiles at home and abroad. But it also makes giant Diesel locomotives, industrial apparatus, a full line of household electrical appliances (refrigerators, stoves, washing and drying machines, dishwashers, etc. ), airplane motors, earthmoving equipment and a variety of other items, and it can retool and make anything whatever in the electro-mechanical line. As easily as not, it could make airplanes, intercontinental missiles, submarines or space ships. Whatever it does not make it does not make because it doesn't want to. Thus far its automobile line is its main source of profit. Ford Motor is similarly in the household appliance field and heavily committed to electronics, including TV sets. Both own an assortment of underlying material-supplying companies. Both are really multi-faceted states, and with their credit companies and dealership-franchise arms are not very different from IT&T.
The diversified mixture of products of each was achieved by combining many different existing companies, as IT&T has done in a broader spectrum. In the case of some companies the product mixture has come about gradually. In the case of others the decision to diversify has come suddenly, as though recognizing an opportunity that others stumbled upon earlier. Companies suddenly and radically shift their operating emphases, always in quest of maximum return on capital.
Thus, W. R. Grace and Company, eighty-fifth in corporate size, originally operated ships to Latin America (the Grace Line) but more recently has diversified its activities so that it is now a big chemical and fertilizer producer, banker, Latin-American manufacturer, exporter-importer and oil company. This former ship operator and banker
now derives 65 per cent of its sales and 66 per cent of its pretax earnings from its chemical division. As in the case of IT&T, we may ask of W. R. Grace: What, really, is its business?
Sears, Roebuck and Great Atlantic & Pacific Tea would be defined, correctly, as merchandising enterprises. But each owns a great many supplemental manufacturing and financial enterprises which have been developed or acquired. Each does much more than mobilize, stock and deliver a wide variety of merchandise. A&P, like many of its counterparts, would ordinarily be described as a vast retail grocery chain. Yet it now also carries a big line of cosmetics, pharmaceuticals, household hardware and certain items of clothing (aprons, gloves, etc. ). It and Sears, Roebuck and their smaller counterparts are obviously on the way to becoming general national manufacturing and merchandising enterprises oriented toward the ultimate consumer.
The Treasury Department for tax purposes has a category of "active corporations," numbering 1,190,286 in 1961. This category with sweeping catholicity includes
corporations in finance, insurance, real estate, services, nonallocable businesses and agriculture, forestry and fisheries. Excluding all such and retaining only the mining, construction, manufacturing, transportation, communication, electric, gas and wholesale as well as retail trade industries in order to obtain a category comparable with that of the big industrial enterprises we have been considering, we have 675,074 active industrial enterprises. 5
The total assets of all these 675,074 active industrial and trading enterprises were $561. 778 billion in 1961 6 compared with total assets in the same year of $186. 769 billion for the 500 largest industrial companies, $125. 734 billion for the 100 largest. 7 In 1962 the assets of the 500 had risen by more than $10 billion. More than 30 per cent of the industrial assets of the country, then, was confined to 500 of the largest companies.
Actually, in 1961 companies with assets of $50 million and more among all active corporations, industrial and nonindustrial, well above the range of "small business," held the bulk of assets and most of the net income.
The number of such companies was 2,632 or . 2 per cent out of the 1,190,286. The $50-million-asset-plus companies held $812. 396 billion out of total corporate assets of $1,289. 516 billion, or nearly 65 per cent. Their net income was $30,027 billion out of $45,894 billion, or 66 per cent of all corporate net income.
Confining ourselves once again to active industrial and trading companies, we find that 1,073 constituting the $50-million-plus class had assets of $346. 922 billion out of total industrial and trading assets of $561. 778 billion. , or more than 60 per cent, and net income of $24. 151 billion or 70 per cent, out of total net income of 35. 916 billion. 8 Again, one central corporation often owns many other large ones. The big corporations are not always detached entities.
Summarizing, 2,632 active corporations or slightly more than . 2 per cent of all active corporations (almost always dominantly owned and controlled by less than . 1 per cent of their stockholders) held nearly 65 per cent of all corporate assets for 1961 and got 66 per cent of net corporate income. These 2,632 corporations were those with individual assets of $50 million or more. In the industrial-trading category alone less than . 2 per cent ( 1,073 out of 684,075) of corporations, with assets of $50 million or more, held more than 60 per cent of assets and derived 70 per cent of net income.
The vast number of enterprises below the $50-million asset class (and almost 60 per cent of them had assets of less than $100,000) perform only a shrinking marginal amount of the business of the country. We can therefore with the utmost caution say that most of the productive activity of the United States is in the hands of a tiny number of very large corporations largely owned and completely dominated by a small coterie, almost a junta.
This fact is shown, too, in the figure of $302. 536 billion for total sales of the 1,073 largest industrial and trading corporations for 1961, which was nearly 60 per cent of gross national product. 9
What have been cited are official government figures and as such may be suspect to some persons who profess deep distrust of all government activity. Let us, then, turn to strictly business sources.
"The 7,126 U. S. companies with more than 100 or more employees (2. 5% of the nation's 286,817 manufacturing corporations) account for 90% of total manufacturing assets and 83% of sales," says a widely circulated business directory in referring to 1961. 10 "The nation's top 13 employers, firms with 100,000 or more workers, have assets of $37. 9 billion (15. 3% of total U. S. manufacturing assets) and sales of $47. 1 billion (13. 6% of total sales). "
No matter which source one turns to, the same prospect unfolds: intense concentration. Slightly more than 7,000 managements, often interlocked, account for 83 per cent of all sales!
Whoever owns and /or controls the large corporations, then, obviously owns and/or controls the lion's share of the productive system, We have already shown how untenable is the idea that such ownership is widely diffused among millions of small shareholders. The small shareholder in the United States stands in the same relative position to the large shareholder as the rank-and-file Communist in Russia stands to the party leadership. Useful, he nevertheless need not be seriously consulted. He carries no more weight than the rank-and-file employee. Corporatively speaking, he is a nonentity, an unperson.
The Cannibalistic Merger Movement>
The smaller enterprises, moreover, are being steadily squeezed out of business or
absorbed by the giants, most of which became giants by the cannibalistic process.
There have been three periods in this century marked by waves of American mergers-- 1900-10, the 1920's and the years since World War II. From 1920 through 1929 there were 6,818 mergers; from 1930 through 1939 there were 2,264; from 1940 through 1949 there were 2,411; from 1950 through 1959 there were 4,089; and from 1960 through 1963 there were 1,978. In most cases larger companies absorbed smaller ones; in some cases many small companies were suddenly combined into large ones. 11
The word "merger" in actual practice almost invariably indicates that large companies are involved; it is rare for really small enterprises to figure in mergers. Thus in the decade 1951-61, of 3,736 mergers involving the 500 largest industrial and 50 largest merchandising firms--almost all the mergers there were--the largest 100 industrial companies absorbed 884 firms, the next largest 100 absorbed 1,059, the third largest 100 took in 577, the fourth largest 100 absorbed 453 and the fifth largest 100 absorbed 431 firms. Among the merchandising companies the largest 50 took in 332 other companies. 12
In the years 1948-60, 33. 4 per cent of assets acquired by merger went to companies with assets of $50 million or more and 34. 3 per cent of acquired assets went to companies with assets of $10-$50 million. Assets acquired by companies with less than $1 million of assets amounted to only 1. 6 per cent. The same trend continued into the 1960's up through 1962, the latest date available. 13 Since then, the merger movement has taken a new spurt.
The small enterprise, at least rhetorically beloved by many small-town congressmen, has also been steadily driven out of business by failure, a traditional hazard of genuine businessmen as distinct from corporate manipulators. In the period 1921 through 1935 there was a yearly average of more than 20,000 failures (excluding railroad bankruptcy proceedings), with aggregate liabilities averaging more than $500 million and average individual liabilities between $21,000 and $27,000. From 1936 through 1940 the yearly average was 12,064 and in the 1940's it was a little more than 5,000. But in the 1950's the figure started burgeoning again, from 8,058 in 1951 to 14,053 by 1959. In the 1960's it is exceeding 15,000 annually.
Most of these failures are of very small firms. Only in 1961 did aggregate annual liabilities cross $1 billion, where it remained thereafter through 1963, our latest date. In no year has the average individual liability exceeded $100,000. 14
The figures tell little of blasted hopes in the uneven race toward business success.
It is almost a cardinal rule that only small businesses go out of existence through bankruptcy. The word is encountered only academically on the higher corporate circuit.
One of the effects of the propaganda about business success (propaganda based on a meager number of instances) is to encourage each year thousands of illusion-ridden citizens to jump into the business whirlpool. Unskilled in logical analysis, they optimistically accept the lopsided findings of Time, Fortune and the Wall Street Journal as representative fact. All they accomplish in most cases, sooner or later, is to enrich with their small bankrolls the coffers of suppliers of business equipment, which is later knocked down to the highest bidder at bankruptcy auction sales. There is a thriving business in the United States dealing, year in and year out, with bankruptcy itself.
By every known sign, entering into business for oneself in the United States is now, and always has been, a highly risky affair. Many are called; few are chosen. And most who remain in business do so on the thinnest of survival margins, constantly financed by short-term bank loans, the constant prey to recessions, regional strikes or even vagaries of the weather. A simple run of unseasonable weather regularly drives out of business hordes of hopeful operators of small resorts, hotels, stores and service enterprises. Many are hopelessly in debt. But in addition to misfortunes of local circumstance there stand in the background the asset-heavy large enterprises, which survive all vicissitudes, like granite cliffs against the sea. Not many German enterprises survived the military disasters that engulfed the Reich this century; but the Krupp family's steel enterprises, for one, did survive and, indeed, are flourishing now as never before. Krupp in Germany could no more be vanquished by overwhelming national calamity than could Du Pont in the United States. What would survive any event, perhaps even atomic warfare, would be titles, patents, formulas, certain key personnel and organization charts. One would, as the saying goes, have to get the country "moving" again. And who can do this better than Krupps, Du Ponts, Rockefellers, Fords, Pews, Gettys, Rosenwalds and their kind? For, among other things, they have gathered unto themselves administration of the technical "know-how. " This is what they have, over and beyond money: general far-ranging administrative authority.
Business versus the Corporation
As applied to the larger enterprises the term "business" has become a euphemism, no longer expressing the intended content of the word. The man who owns and operates a small independent shoe store is a businessman. So, it is implied, are Henry Ford II, J. Paul Getty, Crawford H. Greenewalt and Roger Blough. Yet these latter basically have no more in common with the small tradesman, either in outlook or mode of operation, than has a juke-box entrepreneur with a musician.
Among the defining characteristics of any business enterprise is that it can fail, can go out of business through bankruptcy. It is risky, in short. But the major corporations can no more fail than can the public treasury. Their risks are all marginal. Their massed financial reserves and other assets are absolute guarantees against total risk and failure. Beyond this, they are so thoroughly woven into the very warp and woof of society that they are the peculiar anxious and constant concern of sovereign power itself.
This last has been shown in this century in particular in the case of railroads, many of which through gross financial mismanagement--"milking"--have gone through bankruptcy proceedings in which unpreferred creditors were squeezed out with heavy losses. But reorganization proceedings under the supervision of the federal courts have restored them to formal financial health, often under the same management, bankers and holders of senior obligations. For the railroads serve a vital function in modern society.
The large industrial corporations have never yet had to be individually bailed out of financial difficulties by the government, for they have not experienced overwhelming
individual financial difficulties. Their financial position has been made too secure by monopolistic and semi-monopolistic practices, at times formally adjudicated illegal.
What kind of business is it, then, that is impervious to failure, one of the most basic possible experiences of business in history? If it is indeed a business, then it is something distinctly new in business history.
Close students of corporations feel driven to employ various devices to differentiate the big corporation from the ordinary corporation, which may indeed fail. There was first widely used the rather imprecise term Big Business. But, as we have noticed, the big corporation is different from the smaller corporation in crucial ways other than mere size. It is not only big but it cannot fail, cannot (as the saying goes) go out of business. Some specialists then introduced the term super-corporation, 15 which is better, as it indicates at least some sort of superiority or supremacy. But what is the superiority? The fact of being failureproof? Size?
The big corporation, as a matter of fact, is not a business enterprise at all, at least not in the sense that business enterprise has been understood through history and as it is commonly understood even today. The linguistic habits of people have simply not kept abreast of institutional change.
The big corporation, it is true, does business, engages in trade. But so do the government trading enterprises established by Soviet Russia, which seek profits but which are nevertheless not thought of as businesses or business enterprises. By definitional ukase they are excluded from the business category.
A writer on economic affairs, reflecting on AT&T, shows awareness of the inapplicability of the term "business" to the functioning of the large companies when he says: "AT&T today is less a company than a quasi-political state. " 16
But not only is AT&T a quasi-political state; many other large corporations are in the same category and, indeed, like AT&T have foreign governments among their large stock-holders. The stock is held as a national treasury asset. But it is not the participation of governments as investors that makes these entities quasi-political states; they are that even without any government stockholding. They are, too, more than an integral part of the economy. They are an integral part of the functioning political system, their acts and plans focusing the attention of legislators and political administrators, just as the acts of legislators and political administrators are of paramount concern to them. Their interests and those of government officials at many points overlap and interlock.
The big stockholders and managers of these quasi-political states, again, are stockholders and managers in some sense different from people ordinarily so recognized. They not only have more power than the common run of stockholders and managers but they must continually pass judgment and act on a wider spectrum of eventualities, a spectrum as wide indeed as that of any top government leader. What the president of the United States is thinking about is, more often than not, precisely what the big corporate people are thinking about, often in the same terms: war or peace, balance of international payments, treaties, unemployment and wages, gross national product, interest rates, consumer finance, national debt, taxes, etc. , etc.
Because referring to these men as corporate leaders or big stockholders or magnates is imprecise, and confusing as well to many (for what, really, is a big stockholder, a man owning a million shares worth $1 each or a million shares worth $500 each? ), I have coined a new term for them. They are, according to this term, finpols-- financial politicians. Their political mentalities and acts are shaped by their propertied and institutional positions.
Although not recognized by the general public as politicians, whom cartoonists still regressively depict as men in broad-brimmed black hats wearing string ties and black frock coats, much of the daily activity of the biggest property holders--the finpols-- is identical with the work of government leaders. They are, first, diplomats--so much so that they can be quickly shuttled into the highest formal diplomatic posts. They are, too, manipulators of public sentiment through advertising, public relations subordinates and corporately controlled mass media in general. They make or cause to be made speeches on fundamental public questions, seeking to persuade. They select subordinates, conduct negotiations with governments, hire and fire high-level corporate personnel, manipulate political parties and, above all, make decisions of national and international import. Most crucially, they have, like the very top governmental leaders, vast financial resources at their fingertips, resources for which they are far less strictly accountable than most government leaders working within constitutional frameworks. They can, and at times do, buy legislators and judges. Most--repeat: most--legislators are on their payrolls.
As far as that goes, many of them or their aids can and do without so much as shifting gears go right into top government posts, where they feel perfectly at home. When Robert McNamara went from the presidency of the Ford Motor Company to become secretary of defense, he simply stepped from one to another large organization. The horizon of Nelson A. Rockefeller hardly broadened when he stepped into the governorship of New York. Even though he had not previously been in any very high administrative post, the transition from the universal concerns of the Rockefeller family to those of New York State was hardly a move into a wider domain.
These quasi-political states or super-enterprises, then, are a reality. The men with the biggest stakes in them and at their helms are little different from government leaders in function, outlook or means at their disposal. To most cases they far overshadow the domains of all except the highest political leaders. Revenues for AT&T in 1964 exceeded revenues of the thirty smallest American states, nearly equaled the three richest. No governor of any American state presides over an enterprise nearly so vast, complicated or minutely far-reaching. No senator has in his jurisdiction any comparable domain. As Desmond Smith points out, the net income of AT&T's Bell Systern, after taxes, is approximately equal to the national income of Sweden. Bring a few of the other large companies into a cluster and one sees how many other long-established nations they together exceed. France becomes a minor operation, comparatively. The big corporations account for most of the American gross national product itself, and most of the national income as well. One can almost justifiably say: They are the United States. Take them out of the picture and what would be left?
AT&T is certainly a gigantic affair, an octopus or super-octopus if you will. But it has many near counterparts at home and abroad: General Motors, Standard Oil (New Jersey), Ford Motor, U. S. Steel, Socony Mobil Oil, Du Pont, Bank of America, Chase Manhattan Bank, First National City Bank, Manufacturers Hanover Bank, the big life insurance companies (Metropolitan, Prudential, Equitable, New York and John Hancock), Sears, Roebuck, Great Atlantic & Pacific Tea, Royal Dutch Shell, Unilever and still others.
These are not businesses at all as the term has been historically understood. They are clearly more like governments, or government departments, and would be more aptly termed finpolities. Their influence on formal government, direct and indirect, conscious and unconscious, is enormous. Their influence, indeed, is so often peremptory that it might better be described as in the nature of (quasi-decretal. For such entities, through agents, often tell governments, in secret conference (the United States government included) what they must do and what they, cannot do. That, I submit, is power. And, if
governments fail to comply, at the very least they will lose the considerable cooperative power of the finpolities.
"The 'top' or 'pure' executive largely symbolizes organizational authority. He is a politician," says David T. Bazelon in a general analysis (The Paper Economy, Random House, N. Y. , 1963, p. 37).
Crown, Baronnage and Church
Historians in surveying the late Middle Ages of Europe often organize their narrative around three focal centers: the Crown, the Baronage or Nobility and the Church. These were the three often rivalrous, sometimes embattled, power centers of the times. The Crown came to be held by a family line that had emerged from the Baronage and gradually extended its sovereignty over it. In its struggle it ran into a powerful rival in the Church, represented by the pope, who claimed universal dominion in the name of God. In time the Crown, linked to rising nationalism, was victorious over the barons and, finally, also over the Church. Strongly centralized national governments emerged, these contending brutishly down through the centuries with each other for imperial power. The most recent climactic acts of this recurrent European drama were colossal World Wars I and II.
Utilizing this same sort of schema it is possible to discern analogous power centers in the United States today. There is the central government roughly (and blindly) occupying the position of the late medieval Crown. There is the restless baronage in the form of the finpols and upper corporate magnates (corp-pols), seeking to bend the Crown to the purposes of their corporate baronies and dukedoms. Crown, Church and Baronage in medieval times, although contending for power against each other, were not always at swords' points; sometimes they cooperated, sometimes they fell apart and fought or intrigued one against the other. At times the Crown itself was overturned, to be succeeded by some dominant baron.
Among many additional differences in the situation, though, is the fact that the modern financial baronies have emerged under the protection of the Crown; the medieval Crown, per contra, emerged from among the competing Baronage, subdued it. The medieval Crown rose as a challenge to the Baronage; the modern financial Baronage has risen as a power challenge to duly established pseudo-democratic government.
In their overlapping aspects, government and finpolities are almost identical, a fact most apparent in time of war and in matters of defense.
The so-called defense industries are such an indispensable part of government today as to have given rise to the concept of the Warfare State. Company boardrooms are departments of the Department of Defense or, looked at another way, the Department of Defense is a special branch of the big-company boardrooms.
In dealings with the upper strata of government the finpols appear as equals, very much as prime ministers of a foreign state. When the chairman of AT&T, General Motors, Standard Oil or U. S. Steel sits down with the president of the United States to discuss some issue of mutual concern we witness a genuine political "summit conference. " It is far more than a conference between a big leader and an informed citizen. It is more like a conference between a medieval king and a powerful baron, a potential kingmaker or kingbreaker.
On the whole, most of the time, the relations between the president of the United States and the leading finpols have been cordial. Actually most of the presidents of the United States appear to have admired and stood in awe of the finpols-- men who have mastered or have been put in mastery of the mysterious life-giving market.
There have been periods, usually short, when relations between the two, like relations between the medieval Crown and the Barons, have become strained. But much of this strain, arising from groping attempts of government to regulate the far-ranging finpols, has been a sham, improvised to deceive a gullible populace. The aim has been to leave the president of the United States looking good in the eyes of the populace, preserving his image as a strong and puissant leader, but to give the finpols their way concretely although perhaps in some new package. Thus, although we live under increasing government regulation, much of the regulation is purely token. And if the finpols do defy the government and break the law in some billion-dollar foray--they will, if caught, be forthrightly fined up to perhaps $50,000 or $100,000!
National policy with respect to the finpolities has been paralyzed by ambivalence relating to two ideas. There has been, first, the strong national belief in competition. Without competition the national history itself would be seen as without meaning, simply a record of random activity. On the other hand, there has been admiration for advancing technology, linked purely by association with the corporations, and with bigness. Americans generally admire competition, advanced technology and pure bigness. The fact that one must choose between competition and corporate bigness has been evaded. It is logically impossible to have finpolity and competition, yet few are willing to make a choice between the two.
"Bigness itself is no crime" is a statement often made in classrooms and in writing by apologetic academicians with their eyes on the big corporations. And they are tautologically correct; bigness cannot be a crime because it is a pure abstraction. But to be a big corporation, as we have seen, is almost always and invariably, as the fact happens to be, to be an adjudicated criminal corporation. The proper reply to the professor who utters the empty truism is this: "But bigness in a corporation always, as a factual matter, involves crime. "
Presidents McKinley, Theodore Roosevelt, Taft, Wilson, Harding, Coolidge, Hoover and Eisenhower were deep in the confidence of the finpols and, despite harsh words at times purely for public consumption, got along very well with them. Theodore Roosevelt demagogically referred to them as "malefactors of great wealth. " But the finpols, always, despite harsh public language, managed to get their way, sooner or later. Corporate concentration for example, continues apace despite the hullabaloo of antitrust.
Where the desires of the finpols and the government became clearly divergent was in the 1930's, with the country beset by the deep crisis of unemployment initiated by the finpolities. The formula under which the finpols had prospered finally came apart, and government felt the need to improvise. There ensued a period of tension and genuine hostility between finpols and government, which was finally poulticed over by the advent of World War II, in which the finpols and finpolities were very much needed. The fusion of the finpolities with the national government, with many finpols taken boldly into the national government under the rubric of patriotic effort, was again complete, and was solemnly recemented during the Eisenhower Administration. President Eisenhower frequently expressed his admiration for the finpols and gave them a prominent role in his administrations.
In the 1960's the finpols remain restored to grace in national affairs. Most of them at the moment seem to agree that the government should be allowed to engage in somewhat wider social maneuvers than finpolity would ordinarily approve. Presidents John F. Kennedy and Lyndon B. Johnson, seeking to rebuild Franklin D. Roosevelt's synthesis of electoral support, have been allowed to engage in much social-program maneuver. And the finpols have been conceded many of their demands--removal of
price controls, lower taxes, etc. President Johnson, like President Eisenhower, has professed great admiration and respect for the finpols who are, after all, under the equal application of the laws entitled to as much consideration as, say, the ordinary workman. The finpols, then, are an integral part of "The Great Society," in which there is obviously a great deal of lucre to be made filling profitable government contracts for cement, steel, aluminum, copper, textbooks, rockets, space machines, tanks, recoilless rifles, schools, hospitals, sanitoria and bird baths.
In place of the Church today, there are the Intellectuals. In so saying I realize that my remarks lose credibility for many American readers, for intellectuals are not highly esteemed in the American mass-media or, presumably, among most of the populace. As I don't want to take the space to lay down a detailed argument supporting my case for the Intellectuals as a domestic Third Force let me, aiming right between the eyes of the dubious, simply remark that Karl Marx and V. I. Lenin were intellectuals. So, for that matter, were Winston Churchill, Albert Einstein, Thomas Jefferson. , Benjamin Franklin and John F. Kennedy. Not all intellectuals, to be sure, have attained comparable eminence. But they are nevertheless present in their various ways.
It is the intellectuals, as a group, who preside and wrangle over the undulating frontiers of ideology, philosophy, scholarship and science, in all of which they may be said to have, by popular default, a vested interest. Most broadly (and abstractly) they preside in some disorder over values. And although their concrete power today is not comparable with the power of the medieval churchmen (themselves the intellectuals of their day, supported by the propertied and psychological power of the Church), it is nevertheless implicit. It is the general task of the intellectuals to make sense out of the established order, if that is possible; but the more the established order fails to make sense in the minds of the intellectuals the nearer it is to ultimate rejection or modification. If a basic political operating rule is that all men are entitled to the equal protection of the law and Negroes and others are flagrantly denied such protection, it is the intellectuals who are most sensitive to the contradiction between rule and action and who therefore deny that the system is what it virtuously claims to be. By the test of its own rules, by the way, ours is not an operationally virtuous system.
The fact of the importance of the intellectuals as a class has nothing at all to do with the strength or virtue of the intellectuals as individuals but has everything to do with the ultimacy of systematically applied thought. Hitler threw the intellectuals out of his system, preferring to rely upon what he called his intuition. As a consequence he lost, among many other things, priority in the matter of the atom bomb. The currently split and diminished Reich stands as a monument to his folly. The Russian politicians, supposing Leninism to be ultimate political revelation rather than a restricted set of tactics, keep the intellectuals under close restriction; the expression of free thought is not permitted in contemporary Russia. Nevertheless, the Russian intellectuals do maintain some under-the-surface ferment in the Soviet Union. They are a force, however feeble, but of vast potential.
One of the latter-day difficulties of the finpols and the finpolities on the American scene is that since 1929 they have lost the sympathy of a considerable segment of intellectuals. Far fewer today than in the 1920's believe that what's good for General Motors is good for the United States. Much about the specific enterprise of General Motors, indeed, increasingly fails to make human sense in the minds of intellectuals, despite the herculean labors of public relations men. And in view of the emergence of a vast hereditary establishment of property, it is blindingly clear that huge money rewards are not merited compensation for some overpowering social contribution as in the creation of an industry. If Carnegie, Rockefeller, the original Du Ponts, Westinghouse, Ford, Hartford and other nineteenth-century men made such a contribution, a debatable
point in itself, it is certainly plain that their heirs have not. Today, the biggest money rewards in the American system come from simply sitting and listening to the reading of a will, which can scarcely be construed as a social contribution. Intellectually, it looks medieval.
It is a mistake, though, to suppose that it was the post-1929 denouement alone that caused the defection of many intellectuals from the old and easy ways of thinking. It was the literary intellectuals more particularly, committed to humanistic values, who reacted most strongly to the national experience after 1929. But public policy with respect to the new weaponry, from the atomic bomb onward, raised increasing doubts about the direction of events among scientific intellectuals, many of whom now look upon the joint policies of the government and the finpolities with an increasingly dubious eye.
Yet it is the relations between the finpols and the pubpols or public politicians that occupy the foreground, with the intellectuals kept in enfeebled attendance under steady public disparagement as "long hairs" and "impractical theorists" rather than in forthright restriction as in Russia. Finpols and pubpols are generally bedfellows, the latter probably the more ardent in the relationship, but increasingly there are signs of strain as the pubpols recognize, with some bewilderment, that in many ways their interests are incompatible. Can it be, they seem to ask themselves in dismay, that what is good for General Motors is not always good for the administration in Washington? What Big Business wants, in short, no longer always seems to harmonize with what the White House believes is required. The naive king, friend to all men, begins to feel that the barons are perhaps plotting against him.
The divergence of interests, not wholly closed since it widened under Franklin D. Roosevelt in the 1930's, seems likely to grow wider in the course of world change. The pubpols, like the medieval kings, may be obliged to struggle against the baronage, a prospect few of them can relish in view of their not too secret admiration for them. But as interests diverge and strains grow greater, the central government (like the medieval Crown, simply by reason of its wider responsibilities and inherent powers) seems bound to triumph, although by that time the central government may have been transformed into a more viable version of the Corporate State than was ever seen in Italy and Germany prior to 1945. There is indeed a discernible swing toward such a Corporate State, of which the finpolities would be integral and guaranteed formal parts (with big ownership stakes assured under some saving, perhaps socialistic, formula), and most of the smart money would no doubt bet on its emergence. Yet, in the time remaining before its advent, will the intellectuals look upon its coming with favor?
Informally, we are already well into the era of the Corporate State, of which the Warfare State is only a subdivision. Practically, it already exists as long as the pubpols find their interests running parallel with those of the finpols. A difficulty for the latter, though, is that the pubpols are sometimes obliged by the far-scattered facts confronting them to interpret the general situation differently, as President Kennedy did in the case of steel prices and as President Johnson did in the case of aluminum, copper and steel prices.
Although AT&T is a finpolity, a vast dukedom little short of a full polity, the domain over which it presides is parochial in comparison with the relatively universal domain of the United States government. AT&T is, comparatively, narrowly specialized in its interests.
And it is the narrow specialization of profit-interests of all the finpolities that, at times, makes their acts and policies inharmonious with those of the government of the United States, whose necessary task is to harmonize, at least roughly, a wide variety of foreign
and domestic problems and interests. The government, often to its distaste, must deal with a far more complicated situation than any finpolity deals with.
Such being the case there is always the potentiality of a clash--perhaps a serious clash--between the central polity and all or some of the finpolities. There can be no doubt which way the hand would go if all the chips were ever down. A question that arises at this point, unanswerable yet, is this: will the intellectuals be able to come forward with some solution or set of solutions more attractive than the looming and gradually emerging Corporate State or ultimate finpolity?
Although the medieval Crown won out in its struggle with the barons and the intellectuals of the day, when it attained its final victory it was by no means the same Crown. It had been modified and battered in the struggle. For the intellectuals in the course of time caused it to be changed almost beyond recognition, most dramatically in the French Revolution. While much remains the same today, as the effort to re-establish something like the Holy Roman Empire in the guise of a United Europe, the content, the outlook and the methods of the European governments are all different, largely owing to the efforts of the now secularized intellectuals. The slogan "Liberty, Equality and Fraternity," which exploded the emotions of men, did not come from king, nobleman, soldier, peasant or businessman. it, like modern science as a whole, came from the intellectuals.
No suggestion is intended here that some sort of established script or historical cycle is being followed or even that the same sort of structure confronts us that confronted medieval Europe. It is only that the interactive, usually muted, tug-of-war among government, the big corporations and the intellectuals stirs memories and seems to be at least a dim replica of an earlier internal struggle.
My own view is that although the big corporations and their dominant owners and managers, the finpolities and the finpols, are still unquestionably powerful they are in a long-term slipping position as far as ultimate general dominance is concerned. Too many counter-forces are emerging on the world scene.
That this is so has been shown both by Presidents Kennedy and Johnson, neither of whom was personally hostile to the corporate crowd. President Johnson has appeared to admire it as intensely as President Eisenhower and maintains close relations with it.
Yet situations arose which showed that, when the chips were down, a president who knows his own mind and interests can and must quickly bring the finpolities to heel. It has been demonstrated, in brief, that a political leader with a firm knowledge of the mechanics of government and the balance of forces in society can successfully assert the priority of the general interest over the special interests. Franklin D. Roosevelt did it most spectacularly, able as be was to act in the name of an unquestioned emergency. But neither Presidents John F. Kennedy nor Lyndon B. Johnson needed the excuse of an overriding emergency when they vetoed, only temporarily to be sure, the price increases of some of the most powerful industries. President Johnson, by releasing stockpiled government aluminum and by threatening to reallocate government orders for steel, showed that indirect government counter-action is always possible if the finpolities threaten to run away with any situation. This fact was probably always known to dominant Republicans, for which reason they have shown such marked partiality for a long line of mediocre and subservient presidents from Grant to Hoover and Eisenhower. Not a single Republican president since Lincoln, nor most of the Democratic, causes the pulse of a reader of American history to quicken even slightly. When honest, they were dull and inactive. When energetic, like Theodore Roosevelt, they were fakers; and when stupid they were calamities. No historian of any standing among his peers would deny it.
In a certain sense every big corporation is a hostage to presidential and even congressional ire, which alone explains the Republican partiality for figurehead presidents and congressmen of the worm's-eye view like Dirksen, Halleck, Hickenlooper, Curtis, Mundt and Hruska. Any corporation can be investigated and, in fact, the entire community of wealth can be inquired into via officially mobilized scholarship as was shown in the Temporary National Economic Committee's investigation. And all investigations disclose some state of affairs hitherto unsuspected and deplored by the more intelligent segment of the populace, leading to cries for change.
Trend toward Multi-Finpolity
The finpolities, in any event, are much more than merely large corporations. Indeed, even in their purely functional aspects they are not simply what the public thinks them to be.
AT&T, the man in the street supposes, is devoted to telephony, General Motors to making automobiles, Sears, Roebuck to merchandising, Great Atlantic & Pacific Tea to distributing groceries--all true. But these companies, and others, do much more, and the trend of each corporation now is to become a general enterprise engaging in any and every sort of activity that is profitable, related or not to its original line.
Let us examine a few of these multifaceted corporations, or multi-finpolities, from among the largest corporations, taking as our model one from real life.
What happens, let us first ask, if a big corporation loses its customers, its raison d' e^tre, as the old-time wagonmaking companies lost their customers with the advent of the automobile? Does it then go out of business? As many cases attest, the answer is No. As a huge financial reservoir it merely enters into one or many other businesses, provided they seem potentially profitable. They do this, too, if their original business enters upon a prolonged downtrend. The big corporations, in short, are Protean.
As good an example among many is International Telephone and Telegraph Corporation, the world's tenth biggest industrial employer with 195,000 workers in 55 countries, and the thirty-fifth largest American company assetwise. Its name suggests it to be devoted to international telegraphy and telephony but such is not at all the case. For as the Wall Street Journal justly remarked, it "sometimes seems no more than a scavenger-like monster, madly grabbing up everything in sight, always ready to strike again. " 17
it is difficult to tell precisely what business IT&T is really in aside from the business of making money. In this respect it is like a bank, and all the big corporations are, banklike, large pools of capital; what they produce, aside from profits, is secondary. And if what they produce does not bring in profits they simply switch to producing something else. Nearly all are holding companies, not operating companies as commonly supposed.
IT&T was founded in 1920, originally to run the telephone and telegraph companies of Cuba and Puerto Rico. It expanded into other countries: Spain, Belgium, Rumania, Australia, Latin America, the Philippines, etc. It also built up a manufacturing arm second in its field only to Western Electric.
But international political upheavals and wars deprived it of much of its operating territory. IT&T was quite literally forced out of business in many places.
After World War II it took a new lease on life and became a general holding company for all manner of enterprises. As its president told the Wall Street Journal, its criteria for
buying a company are only two: "The company should be growing faster than ITT. And it should have plenty of room to grow as the industry it is in grows. "
"The executive steps into his Avis rent-a-car," begins the Wall Street Journal account, "drives to his broker's to check on his Hamilton Mutual fund shares, mails the quarterly premium for his American Universal Life Insurance policy, checks on financing some capital equipment through Kellogg Credit Corp. , fires off a cable to Britain and then motors to Camp Kilmer, N. J. , for a session with the purchasing agent at the Federal Job Corps there. It's just a routine morning dealing with a variety of matters, but so far the man's business has been entirely with divisions or operations of the inappropriately named International Telephone & Telegraph Corp. "
IT&T now owns and operates the Aetna Finance Company; the American Universal Life Insurance Company; part of the Great International Life Insurance Company; Hamilton Management Corporation and Hamilton Funds, Inc. ; Avis, Inc. ; Kellogg Credit Company; the Mackey Telegraph and Cable System; Coolerator Company; Kellogg Switchboard and Supply; Kuthe Laboratories, Inc. ; Federal Caribe, Inc. ; Airmatic Systems Corp. ; Haves Furnace Manufacturing and Supply; Royal Electric Corp. ; the telephone system of the Virgin Islands; L. C. Miller Co. ; Jennings Radio Manufacturing; American Cable and Radio; Alpina Buromaschinen-Werke and Edward Winkler Apparatebau of Germany; a large group of Finnish, French, Swiss and English companies; National Computer Products; General Controls Co. ; etc. It owns scores of companies throughout Latin America and Europe in almost everything related in any way to using or producing electrical equipment, as well as many companies without the slightest relation to electrical equipment. It is a credit-insurance-investment-electricaI equipment-general world communications-transportation-chemical-computer- engineering-general service company. You name it, IT&T does it, almost, so long as it is highly profitable.
An extreme case, it will be said, but far less extreme than one might suppose. IT&T is more like a standard model of the emerging Protean finpolity. AT&T itself is not radically different.
General Motors makes automobiles at home and abroad. But it also makes giant Diesel locomotives, industrial apparatus, a full line of household electrical appliances (refrigerators, stoves, washing and drying machines, dishwashers, etc. ), airplane motors, earthmoving equipment and a variety of other items, and it can retool and make anything whatever in the electro-mechanical line. As easily as not, it could make airplanes, intercontinental missiles, submarines or space ships. Whatever it does not make it does not make because it doesn't want to. Thus far its automobile line is its main source of profit. Ford Motor is similarly in the household appliance field and heavily committed to electronics, including TV sets. Both own an assortment of underlying material-supplying companies. Both are really multi-faceted states, and with their credit companies and dealership-franchise arms are not very different from IT&T.
The diversified mixture of products of each was achieved by combining many different existing companies, as IT&T has done in a broader spectrum. In the case of some companies the product mixture has come about gradually. In the case of others the decision to diversify has come suddenly, as though recognizing an opportunity that others stumbled upon earlier. Companies suddenly and radically shift their operating emphases, always in quest of maximum return on capital.
Thus, W. R. Grace and Company, eighty-fifth in corporate size, originally operated ships to Latin America (the Grace Line) but more recently has diversified its activities so that it is now a big chemical and fertilizer producer, banker, Latin-American manufacturer, exporter-importer and oil company. This former ship operator and banker
now derives 65 per cent of its sales and 66 per cent of its pretax earnings from its chemical division. As in the case of IT&T, we may ask of W. R. Grace: What, really, is its business?
Sears, Roebuck and Great Atlantic & Pacific Tea would be defined, correctly, as merchandising enterprises. But each owns a great many supplemental manufacturing and financial enterprises which have been developed or acquired. Each does much more than mobilize, stock and deliver a wide variety of merchandise. A&P, like many of its counterparts, would ordinarily be described as a vast retail grocery chain. Yet it now also carries a big line of cosmetics, pharmaceuticals, household hardware and certain items of clothing (aprons, gloves, etc. ). It and Sears, Roebuck and their smaller counterparts are obviously on the way to becoming general national manufacturing and merchandising enterprises oriented toward the ultimate consumer.
