No More Learning

I wish also to thank the authors and publishers cited for per- mission to quote from their works. For permission to reproduce, with minor alterations, material which previously appeared as arti- cles in their pages, I am indebted to the following: Pacific Affairs, September, 1940 (for Chapter III); the Political Science Quarterly, June-December, 1941 (for Chapters VII and IX); and the Journal of Political Economy, February, 1942 (for Chapter I).
Finally, I wish to acknowledge with thanks the countless aids of my most severe and relentless critic, Mildred Edie.
Whatever merits the book may possess are largely traceable to sources such as these; the faults, I need scarcely add, are mine alone.
XX
Kansas City, Mo. July 15, 1942
Robert A. Brady
1
? CONTENTS
Foreword by Robert S. Lynd vii Introduction: Efforts to Organize Business for Political Action i
I.
II. III.
Part I
THE EVOLUTION OF MANUFACTURING PEAK ASSOCIATIONS IN THE TOTALITARIAN BLOC
The New Order for German Industry. 21
VII. VIII.
The Fascist System of Collateral Syndicates.
56
83
120
Japan: Kokutai and the "Co-Prosperity Sphere. "
IV. France: through Double Defeat to Vichy's "New
Order. "
Part II
MANUFACTURING PEAK ASSOCIATIONS WITHIN THE LIBERAL-CAPITALIST SCHEME
Part III
COMPARISON AND CONTRAST OF TRENDS IN BUSINESS POLICY FORMATIQNS
Economic Policies: Monopoly, Protection, Privilege. 223
Social Policies: Status, Trusteeship, Harmony.
Britain's "Feudalistic System of Cartel Controls. "
V.
VI. TheAmericanWay:"BusinessSelf-Regimentation. " 189
259 IX. Political Policies: Bureaucracy, Hierarchy, Totalitar-
ianism. Bibliography
Index
294 32 331
153
? Introduction
EFFORTS TO ORGANIZE BUSINESS FOR POLITICAL ACTION
A TTEMPTS to unify business on an ever more comprehensive basis JLX- are inevitable. For how else is it possible to cope with the ad- ministrative and managerial problems of an industrial technology which has for decades past been moving toward such a policy?
Intuitively, the most unsophisticated know this part of the story. The breakfast table draws its supplies from the most distant lands. The factory soaks up materials from a continent and sets the fin- ished products flowing along well-grooved channels to the ends of the earth. Finely meshed networks of transportation, communica- tion, and energy bind the whole more closely and rigorously to- gether with each passing day. Within these spreading networks, industrial technology, in an infinity of small ways--hither and yon, endlessly, restlessly, ceaselessly--^weaves tighter and more exact- ingly the multifarious interdependencies which engineers, step by step, wring from the master patterns of the unfolding natural- science "web of reason. " Integration, coordination, planning, these are the very root and marrow, the essence and the spirit of the in- dustrial system as it is being developed in our times. In these re- spects changes are unidirectional, additive, cumulative. From them there is no turning back. And, as the bitterly fought issues of the Second World War--a "total war" which pits entire economic systems against each other--have made abundantly plain, the end is not yet.
POLICY AT THE CROSSROADS
Moving with this trend, however consciously or intuitively, businessmen all over the world are engaged in weaving parallel
? 2 EFFORTS TO ORGANIZE BUSINESS
webs of control. As the separate strands are extended, a point is reached at which, willy-nilly, a choice of direction is forced upon the businessman. One way leads to the shaking off of all popular restraints on such cumulative powers and to shaping the contours and determining the content of economic policies pregnant with far-reaching political, social, and cultural implications. This is the totalitarian road. Organized business in Germany, Italy, Japan, and France has chosen to move in this direction, and has already found that the choice once made is both irrevocable and fraught with dangerous consequences. For it seems that, for better or for worse, what businessmen have taken for the agent of social cathar- sis is no less than a modernized version of Hobbes's Leviathan, whose self-appointed monarchs have learned from the inspired pages of The Prince only a Realpolitik of survival; a Realpolitik which may as readily demolish as resurrect any given structure of preexisting special-interest controls, including--through the pre- carious fortunes of subsequent wars, revolutions, or internal paraly- sis--those of the business interests which fathered, with money, ideas, and leaders, the original coup d'etat.
The contrasting choice is to force the growth of a sense of re- sponsibility to democratic institutions, not by transmuting arbi- trary controls into series of patriarchal relationships, however mellowed and benevolently postured, but by steadily widening the latitude for direct public participation in the formulation of economic policies affecting the public interests. How, is not for us to say. But clearly this is the alternative which faces highly organ- ized business in England, the United States, and other scattered countries still moving within the orbit of the liberal-capitalistic system. Here, just as in the totalitarian countries before the fateful decisions were made, business must choose. If it hesitates, choice will be thrust upon it. On the record no further compromise is possible except a compromise moving definitely in one direction or the other. For sovereign power is indivisible, and a house cannot long remain divided against itself.
Considered solely from the point of view of vested interests, this choice is not an easy one for organized business to make. It is diffi- cult not only because one route has thus far led to successive and politically dangerous disasters while the alternative entails a de-
--
? EFFORTS TO ORGANIZE BUSINESS
mocratization reaching to the very roots of the ideology and the institutional sanctions upon which the business system rests as a whole, but also because organized business, however widely it may have cast its webs of influence and however swiftly its leaders may be centralizing authority through machinery of their own or others' devising, still has great difficulty in finding its collective mind. Some businesses are big; some little. Some are interested in contraction, others in expansion; some in local markets, others in national and international markets. Commodities, businesses, trades compete with each other long after conditions of partial or complete monop- oly have been effected in restricted areas. For widely varying rea- sons some favor dictatorships, while others--particularly small
--
Thus even when organized business may have found some traces of collective mind, it faces the greatest difficulty in expressing a col- lective will, in focusing effort on the articulation of an internally coherent business program, in giving membership a sense of direc- tion through promotion of a common social-psychological outlook, and in formulating for the doubtful a common set of simple and realizable goals. Yet, faced with the larger decisions which the trend of national and world affairs have placed before it, without these things business will everywhere be reduced to programmatic futil- ity, and its centralized direction may well find itself without the wit at the critical moment to make even those half-hearted com- promises urged upon it--as a condition to survival on any workable version of the time-honored principles of "muddling through" by its own more vocal bellwether prophets such as Rathenau and Filene.
This is what happened in France, where organized business, un- able to reconcile itself to further extension of democratic controls, sold its birthright for a condition of permanent vassalage to a foe sworn to destroy not business, but France. In the conquered terri- tories, German firms have taken over the assets of resident concerns by right of conquest, not through "business as usual. " ^ And by the
1 As shown, for example in the history of the Hermann Goring Works--modern equivalent of the Stinnes empire--collected out of regrouped former governmental
can survive only in a democratic world. Within this
businesses
newer business world, as often as elsewhere, what is one man's meat may well be another man's poison.
3
? EFFORTS TO ORGANIZE BUSINESS
4
same token, if Britain is conquered one cannot expect the Nazi principle of Britannia delenda est to be softened on behalf of the Federation of British Industries merely because the guiding figures in the Reichswirtschaftskammer learned their first economic lessons from the schoolteachers of Manchester. If German business succeeds in supplying the arms to, and financing the efforts of, a victorious Third Reich, its normal assumption will be that "to the victor belongs the spoils," an assumption followed by the British, in their turn, in South Africa and India. When a country is con- quered, neither the business community as a whole nor any single individual within the inner business-control sancta can be sure of survival.
In the struggle for control over business power, small business is everywhere losing out. 2 Amongst the giants, whoever will not play according to the transformed rules will, upon becoming truly recalcitrant, be expelled by methods which partake more and more of the spirit of the purge. ^ If we can draw any certain lesson from events of the recent past it is surely this, that organized business in one national system will show no mercy to organized business in
industrial properties, as well as concerns taken over in conquered territories, and miscellaneous private enterprises. For further details see pp. 49-50, following. See also current issues of the London Economist for data on French, Belgian, Norwegian, and Rumanian firms taken over by German interests following conquest. Nearly every leading German banking, industrial, commercial, and shipping company has shared in the booty to some extent.
2 See data submitted by Willard Thorp on business failures, in the Prologue of the TNEC Hearings (see note 10, below) data presented in the Census of Distribu- tion (1935), VI, 11; TNEC Monograph No. 17, Problems of Small Business; and data submitted below in chapters on compulsory amalgamation schemes in England, Ger- many, Italy, and Japan. The small become enrolled in control apparatus dominated by the large, shift into highly localized markets or the unprofitable fringes (such as credit and durable goods as against cash and carry, where the risks are higher and the gains through financing are secured and siphoned off by finance companies and the banks), become "sub-contractors" to the large, exist on sufferance for strategic rea- sons in facing regulatory authorities, submit to legislation and administrative con- trols which are the product of organized large-scale business pressure. See Sprague, High Pressure (New York, 1938).
3 What of Thyssen? everybody asks. But also, what of the Jews, what of Polish businessmen when the Germans took over, what of Skoda, what of the Lorraine ore fields, what of the rights of foreign corporations and stockholders? What of "chisel- ers" and "sellers-below-cost" in NRA, of perpetrators of "Unfair Trade Practices"? What of the fact that the Codes and the FTC Fair Trade Practice agreements are typically designed to catch the small-scale violator of business "codes" drawn prima- rily by the large, even though it be the latter which enjoy the almost exclusive at- tention of the Anti -Trust Division?
J.
R.
? EFFORTS TO ORGANIZE BUSINESS
another national system, once conflicts of interest have forced mat- ters to the arbitraments of war. The delegation of the Federation of British Industries in Manchukuo failed once it became clear that Japan was able to consolidate its military victory, just as did a like attempt on the part of the same organization on the day fol- lowing the British catastrophe at Munich. ^
The underlying principles are not new. They are clearly in keep- ing with those long familiar to students of "trust and combination" RealpoUtik in the domestic arena, and to those who have followed the clash of economic imperialism throughout the period leading up to the two World Wars on the larger field of action. The prin- cipal differences which contrast the contemporary with the past are found only in the size and compactness of current organization and in the scale on which the issues are now drawn. There is no differ- ence in the issues themselves.
PARALLELS IN THE EVOLUTION OF BUSINESS CONTROLS
Thus a comparative study of attempts to expand business con- trols within the several capitalistic systems becomes a prime neces- sity for both business and the public. At the outset of such an effort, one is struck by four extremely interesting facts. First, the trans- formations undergone by business organization in those countries which have revamped their national systems along totalitarian lines are fully consonant with, and may be considered the logical out- growths of, previous trends in structure, policies, and controls within the business world itself. Second, along every significant line the parallelisms in the evolution of business centralization within the several national systems, including those within countries still functioning on a liberal-capitalistic basis, are so close as to make them appear the common product of a single plan. Third, all busi- ness policies have been increasingly discussed and formulated in
*The FBI delegation was in Manchukuo during the investigations of the Lytton Commission engaged in negotiations with Japanese interests. They were unsuccessful here, and the Japanese subsequently pushed them out of north and central China as well. During the Munich negotiations which led to the downfall of Czechoslovakia, a committee of the Federation of British Industries was holding pourparlers with the Reichsgruppe Industrie which called for dividing European and world markets between British and German interests through a series of widely expanded cartel controls.
5
? 6 EFFORTS TO ORGANIZE BUSINESS
the face of widespread--in many respects very highly organized and always potentially threatening--popular opposition, whose interests have been coming into conflict with those of organized business in a way which more and more challenges the traditional business view of the proper objectives and the responsibilities of economic leadership as such. And finally, the implications of power in such wide-spreading business controls, together with the popular challenge to business leaders, cause all economic issues to take on a political meaning, and thereby cause the role of the government to grow in importance in a sort of geometric ratio.
It does not follow from the first of these facts that "totalitarian- ism" was the inevitable result of previous trends in business organ- ization within the Axis states, but only that it was inescapable, because those trends were unmodified when circumstances of an eventually revolutionary character forced quick decision within strategically placed business circles committed to no further com- promises with democratic government. It does not follow from the second fact that there was actually such a plan. The reverse is true. But it does follow that there were common sets of forces operating through greatly varying historical environments, with many factors (such as the level of industrial development and the nature of busi- ness organization at the time of rapid adoption of industrial and business methods) ^ differently timed, blended, juxtaposed, or set in conflict, which shaped and posed the issues in similar ways. And from the third and fourth, only this follows, that the issues every- where come to rest not on whether the government was or is to be the coordinator, for that is now truly inescapable, but on whether the government will be able to coordinate and plan economic activi- ties toward popular ends, responsible directly therein to demo- cratic institutions, or toward the specialized interests of self- assertive and authoritarian minority groups.
From these considerations the special question necessarily arises, does capitalist civilization anywhere show any signs of being able or willing to plan means and unify ends on a national scale accord- ing to a workable formula that is still consonant with democratic institutions? We well know what happened in the totalitarian coun- tries where organized business underwrote the antidemocratic re-
's See, in particular, the chapters on Germany, Italy, and Japan.
? EFFORTS TO ORGANIZE BUSINESS
action. Can different results be expected elsewhere? Everyone con- cerned with the present dramatic crisis in world history would like to see this question resolved. Opinions, in reply, already differ as deeply and fundamentally as the status and social philosophies of those who give answer. This much is certain, the attempt--some- times made consciously, but more often in groping fashion--to cope with the problem in some manner or other is being made in every major capitalistic country in the world. Business is becom- ing aware of the range of larger issues, is organizing to meet and resolve them, and its collective efforts to these ends are widening out on an ever more comprehensive scale.
And as it gathers together its forces, it comes everywhere to think politically, begins to come to grips at a thousand and one points with the "social question" in all its bewildering manifestations. So proceeding, organized business has more and more found itself compelled at least to make the attempt to evolve new "social phil- osophies," which will meet the more fundamental challenges divid- ing its own members in the preferred reaches of the social pyramid and at the same time meet those other challenges thrown at it by the leaders of the vast popular ranks becoming increasingly con- scious of their own specific and often opposing interests.
In accomplishing this aim, can business still hope to retain its control over the inner sancta where the fundamental economic de- cisions are made? And if it succeeds in any marked degree in so holding on, will the political and social controls evolved be recon- cilable with continuation of a democratic way of life? These are the fundamental, the critical questions of our times.
LACUNAE IN THE HISTORICAL LITERATURE
Many of the steps by which these issues have been pushed to the fore, and also the history of business methods evolved to meet them, have still to be traced. Most important of all the numerous gaps in the literature, which has laid bare one or more facets of the prob- lems here posed, is that dealing with the specific forms of organiza- tion established by business for the dual purpose of unifying within its own ranks while presenting a common front to all opposition groups. This lack in the literature is the raison d'etre of this study, which in itself can scarcely hope to give more than a sketch of a
7
? 8 EFFORTS TO ORGANIZE BUSINESS
vast terrain that urgently requires careful mapping and systematic investigation.
What has been generally missed by scholars interested in such matters is that these forms of organization, regardless of the initial purposes of their sponsors, rarely confine themselves for long to strictly "economic" matters. As a general rule, the bigger and more comprehensive trade associations and their federational or "peak associations" {Spitzenverbdnde as they are known in the German literature ^) become, the more clearly do social and political poli- cies edge to the fore. Economic problems thus come to be quickly intertwined with these other issues, and the trade association begins to take on an entirely new cast of thought and to hew a line in keep- ing with newly transformed political directives.
So it is that, if the growth in the relative importance of giant cor- porations is properly termed "concentration of economic power," expansion of trade-association networks means "mobilization of the entire business community. " If the former is defined as "trustifica- tion," "^ then the latter implies "unification" or "synchroniza- tion. " 8 If the former carries with it growing resort to "monopoly practices," the latter calls for increasing "political and social aware- ness. "
The two, of course, are not independent phenomena. As the fol- lowing pages will show they are related in time, in origin and proc- esses of growth, in the logic of circumstances which bind them to each other as historical developments, and in the compulsions they exert for an ever and cumulative widening of governmental regu- lation and control. Herein lies the larger significance of each--an importance that transcends by far the consequences of the two taken separately and by themselves.
Appreciation of the precise nature and the real meaning of such interdependence has been retarded by a curious shortcoming in the body of current economic and political literature. That the two have long existed side by side is now generally recognized. That the larger corporations and dominant business groups have taken an
6 See pp. 29-36 for a description of the pre-Nazi Spitzenverbdnde.
7 See Joseph Schumpeter, Business Cycles (2 vols. . New York, 1939).
8 A summary history of the National Association of Manufacturers is entitled, "The
Nation's Industry Synchronized," which implies a conception of functions one step beyond mere "unification. "
? EFFORTS TO ORGANIZE BUSINESS
active, and more recently (since the depression of the '30s) a lead- ing, position in the trade associations has been taken for granted. But the trade association has appeared to be, in the main, relatively unimportant in the formulation and promotion of business policy as a whole. The result has been comparative neglect. A neglect, incidentally, so pronounced that one refers with difficulty to a single outstanding study of any one trade association, or any single line of trade-association policy in the entire economic literature of the last decade. ^
Thus, while "concentration of economic power" has become sufficiently important to merit the entire attention of one of our most noteworthy recent governmental investigations, ^^ and has be- come the subject matter of a vast and swiftly proliferating technical literature on forms of "monopoly" ^^ and "trust problems," the trade association, the intercorporate "institute," and the chamber of commerce have been almost entirely neglected by the learned fraternities. With but minor exceptions--and then only with refer- ence to antitrust proceedings, problems of "civil liberties" or dis- cussions of general "association activities"--they have largely es- caped the dragnet of official inquiry as well. ^^
Yet sixty years after the beginning of the so-called "trust move- ment" in the United States, the Department of Commerce found
9 In American literature there is only one outstanding study of the phenomenon in general, and that. Employers' Associations in the United States, by Clarence E. Bonnett, was published in New York in 1922. Even this excellent survey related only to the labor angle of a few highly specialized (at that time) employer associations.
10 "Investigation of Concentration of Economic Power," made pursuant to Public Resolution No. 113, 75th Congress, "Authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentra- tion of economic power in, and financial control over, production and distribution of goods and services. " Hereafter the investigation and its findings will be referred to as TNEC Hearings.
11 By the term "monopoly" I mean, in the present connection, all those various forms and practices which give some degree or other of power over the conditions and terms of doing business which reach upon the direct limits of corporate control. See Chapter VII.
12 See the various volumes of the Senate Committee on Education and Labor ("La Follette Committee") dealing with the National Association of Manufacturers, the National Metal Trades Association, the Associated Industries of Cleveland, etc. Here- after I shall refer to these materials as La Follette Committee Reports. The National Resources Committee, in its recent publication The Structure of the American Econ- omy (Washington, D. C. , 1939), devotes slightly less than two pages in a 76-page dis- cussion of "The Organization of Economic Activity" to all trade associations and chambers of commerce.
9
? 10 EFFORTS TO ORGANIZE BUSINESS
that "The 'Key' factor in the NRA program is America's 3,500 larger [State and National Trade Associations], and the over 10,000 local Trade Associations, Chambers of Commerce, etc. " ^^ The 1931 edition of Commercial and Industrial Organizations of the United States ^"^ lists 19,000 organizations, "made up of 2,634 ^^ interstate, national and international, 3,050 state and territorial, and 13,625 local organizations. " Even this listing has since been found to be incomplete. Almost the entirety of this swiftly growing business network has been established since 1900, and probably three-fourths of it since the World War.
In 1870 there were not more than 40 chambers of commerce in the United States. Sixty years later, there were an estimated 3,000. These are set up on a local, county, state, or national basis. "Basic Membership" of all such chambers of commerce has recently been estimated to be a million or more. ^^
Equally rapid have been developments abroad. A list given out by the German Economic Ministry in 1930 showed some 2,272 national, district, and local associations affiliated with the Central Committee of German Employers' Associations (Zentralausschuss der Unternehmerverbande). ! ^ Even this list does not appear to be complete. In addition to these, an expert has estimated that Ger- many possessed in 1930 some 2,100 cartels, a type of organization intermediate between the trade association and the combination,! ^ in the manufacturing industries of that country alone. ^^
The changes brought about by the Nazis in Germany meant
13 "High Lights of the NRA, Chart 3," statement issued July 10, 1934, by the American Trade Association Executives, and prepared by the Trade Association Sec- tion of the Marketing Research and Service Division of the Bureau of Foreign and Domestic Commerce, U. S. Department of Commerce.
14 Issued by the Bureau of Foreign and Domestic Commerce, U. S. Department of Commerce, 1931.
15 Of which 2,381 are strictly commercial and business when all trade union, sci- entific, engineering, and professional organizations (253 in number) are excluded from the reckoning.
16 See American Chambers of Commerce, by Kenneth Sturgess (New York, 1915), and "Local Chambers of Commerce, Their Origin and Purpose," issued by the Com- mercial Organization Department of the Chamber of Commerce of the U. S. (Wash- ington, D. C. , undated).
^T Jahrbuch der Berufsverbdnde im deutschen Reiche, (ig^o), p. 43.
18 The cartel is more like the early American "pool"; it has legally recognized contractual standing. More recendy cartel functions have been taken over by many trade associations, particularly the American. See pp. 211, 244.
19 Horst Wagenfuhr, Kartelle in Deutschland (Nurnberg, 1931), p. xiii.
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EFFORTS TO ORGANIZE BUSINESS ii
streamlining, not abolition, of this elaborate machinery. A like generalization holds for Italy, where under four strictly business associations out of a total of nine Fascist Confederations there are to be found 91 separate associational gToupings. ^o
Although comprehensive data on England, France, and Japan are more difficult to obtain, the same trends are observable. And, once again, we find that almost all of this associational machinery is of comparatively recent vintage. Possibly, as with the United States, three-fourths of it is postwar. In Japan most of it appeared after the early '30s. This holds for cartels, both national and inter- national, as well as for trade associations and chambers of commerce.
Of all these multifarious associations, only the cartels have been examined with any considerable care; even here there is a general lack of critical works on individual cartels except in a few highly especialized fields (iron, steel, coal, and potash) and it is becoming increasingly difficult to distinguish between cartel and normal trade-association functions. In the comprehensive survey of "The Economic and Social History of the World War" published under the auspices of the Carnegie Endowment for International Peace,^! there is scarcely a mention of even the more important of these organizations, although again it was the conditions of wartime which provided the major stimuli to their formation and expan- sion. The reports of the British "Committee on Industry and Trade" (Balfour Committee),-- published in the later twen- ties, make only side and quite incidental references to an occasional few. Nor do the monumental reports of the German Committee of Inquiry,-^ concluded but a short while before
the Nazi government assumed power, take this organizational mushroom growth more seriously. As indicated, the TNEC devotes but one very superficial monograph to the trade association,^^ and
20 See Fascist Era, Year XVII (published by the Fascist Confederation of Industrial- ists), pp. 207-12.
21 Running into several hundred monographs, brochures, and abridgments of one sort or another, and including every country a party to the World War on either side.
22 Seven volumes, with a "Final Report" published in 1929.
-^ Ausschuss zur Untersiichung der Erzeugungs- unci Absatzbedingungen der deutschen Wirtschaft (Enqueteausschuss), begun in 1926, completed in 1931, and running well over a hundred volumes.
2tNo. i8, Trade Association Survey. "Superficial" because based solely on answers to questionnaires voluntarily filled out by 1,311 trade-association executives who
? 12 EFFORTS TO ORGANIZE BUSINESS
in other scattered cases makes only side reference to the subject. ^^ But for the most part its writers miss the real significance of NRA and ignore all the mass of data collected through the efforts of the Anti-Trust Division under the leadership of Thurman Arnold. ^^ In only one restricted discussion does it really come to grips with the political powers of the "peak association" at all. ^^
This general neglect becomes all the more astonishing when the growth of trade-association networks is related to two other factors. First is the correlative growth in the preponderance of the "peak association. " Influenced largely by experience with more or less vigorous wartime controls, in their postwar expansion trade- association networks began slowly but cumulatively to show cer- tain definite characteristics which marked them off definitely from prewar types. They ceased growing like Topsy, and began more and more to expand systematically, with an eye to ever more compre- hensive coverage; in an orderly fashion they began to take up each link in a chain of related problems of guidance and control, and to submit increasingly to centralized direction. Before the war, "peak associations" were largely unimportant or wholly lacking, and those in existence only occasionally came to the forefront of atten- tion. 28 After the war, they sprang up everywhere, and shortly began to serve as centralized, coordinating, business-policy boards for vast segments of the several national economies.
In the second place, though here the timing varies greatly from
naturally would not and did not answer significant questions relating to the exercise of cartel-like functions, though the listings of activities given in Table 25, p. 373, might have caused its authors to take notice that the Anti-Trust Division has found these associations almost everywhere exercising such functions.
25 No. 34, Control of Unfair Competitive Practices through Trade Practice Con- ference Procedure of the Federal Trade Commission, a rather bad whitewash of the FTC; No. 35, Large Scale Organization in the Food Industries; No. 39, Cofitrol of the Petroleum Industry by Major Oil Companies (section on the American Petroleum Company); and No. 43, The Motion Picture Industry--A Pattern of Control (section on the Motion Picture Producers and Distributors of America).
26 See almost any of the several dozen indictments of the Anti-Trust Division is- sued from the beginning of 1939, particularly those relating to the food, construc- tion, metals, and machinery industries and to patent pooling. See also numerous speeches of Assistant Attorney General Thurman W. Arnold, and his Bottlenecks of Business (New York, 1940).
27 No. 26, Economic Power and Political Pressures.
28 They were most highly developed in Germany, but were still largely in germinal form. In manufacturing, centralized peak associations were found in England, the United States, Switzerland and a number of other smaller manufacturing countries. None of any importance were to be found in France, Italy, and Japan.
? EFFORTS TO ORGANIZE BUSINESS
one country to the next, the rise of peak associations has been gen- erally paced by the movement of the business giants to the centers of the spreading webs of control. In Germany, and to a lesser extent in England, the two tendencies went pretty much hand in hand. The same was true also of Japan, though here both tendencies ap- peared very late. In the United States the latter was not clearly evidenced until the advent of NRA. But by the late thirties, the industrial and financial giants had practically without exception moved into the citadels of peak-association power all over the world.
These two tendencies take on an added significance when they are paired with two other well-known developments within the business world of the corporate giants. One is the fact that through a multitude of familiar devices (interlocking directorates, patent- pooling and other cartel-like agreements, holding companies, inter- corporate ownership of securities) ^^ the ties that bind the giants to- gether have long been growing so close, so mutually reinforcing that within, and to a certain extent amongst, the several capitalistic countries they have come as a whole to take on the characteristics of unified, more or less compact, and internally homogeneous groups. ^^ And the other is the fact that, within the several corporate segments of this almost consanguineous community of interests, de facto control has gradually been narrowed down until it is now typically held by very small, almost entirely self-perpetuating and largely non-owner directorial and managerial cliques. ^^
29 See TNEC Monograph No. 9, Taxation of Corporate Enterprise, Chapters III and IV.
30 Of particular interest in this connection, aside from those cited in footnote 31, below, is a series of studies published at intervals by Die Wirtschaftkurve (a monthly publication of the Frankfurter Zeitung) after the stabilization (1924) of national and international intercorporate affiliations of various British, French, American, Ger- man, Belgian, and other combines. See the "Electronics Chart of the Sound Picture Industry of the World," reproduced by H. A. Toulmin in Trade Agreements and the Anti-Trust Laws (Cincinnati, 1937); Robert Liefmann, Beteiligunge und Finanzie- rungs Gesellschaften (Jena, 1921); and the TNEC Monograph No. 36, Reports of the Federal Trade Commission on the Natural Gas, Gas Pipe, Agricultural Imple- ment, Machinery, and Motor Vehicle Industries.
siAdolph A. Berle, Jr. , and Gardiner C. Means, The Modern Corporation and Private Property (New York, 1933); National Resources Committee, The Structure of American Economy; Robert A. Gordon, "Ownership by Management and Control Groups in the Large Corporation," Quarterly Journal of Economics, May, 1938; TNEC Monograph No. 11, Bureaucracy and Trusteeship in Large Corporations, Part I.
13
? EFFORTS TO ORGANIZE BUSINESS
Any reader who will stop for a moment and attempt to think through the implications of these several developments when re- lated to each other in such a fashion will see at once that trade asso- ciations suddenly take on a new and almost spectacular significance. So considered in this new light they become at once power entities which may in some cases have the indefiniteness of a Herrenklub/^ and in others the potency of states within states--particularly when viewed as monopoly-minded forces, with a political turn of interest, thus strategically grouped together into centralized nationwide peak associations. But either case shows that everywhere and in every land, business has been "going political" as rapidly as it masses power.
The careful and systematic studies required as a basis for search- ing through the full historical and practical implications of this new massing of organized economic power have nowhere been made. Numerous individuals, including President Roosevelt ^^ and some of his leading subordinates,^* have shown some real appreciation of
32 A club--^similar in social cross-section in some respects to the famous New York Union League Club--of Junker potentates, landlords, industrialists, and military figures who met at fairly regular intervals in a down-town Berlin hotel throughout the post-war interval, and who were largely responsible, via the ministrations of von Papen, Hugenberg and others, for the original compromises and subsidies which led directly to the Nazi assumption of power.
33 "Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people. . . . The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism--ownership of a government by an individual, by a group, or by any other controlling private power. " Message from The President of the United States, Transmitting Recom- mendations Relative to the Strengthening and Enforcement of Anti-Trust Laws, Senate Document 173, 75th Congress, 3d Session.
J.
14
34 "Lest the people learn the lesson of history the dark powers of concentrated wealth choose in each new struggle a new name for themselves, avoiding the old names that carry the historic smell of tyranny. Tyrant, Satrap, Pharaoh, Caesar, Em- peror, Czar, and Kaiser have left their sulphurous trail across the pages of history. Today in Europe they have new names. In America we call the lesser rulers Business Leaders and Corporation Lawyers, the great ones are simply kings--oil kings, match kings, soap kings--hundreds of them. The great Overlord who will draw them all together into a perfect plutocratic dictatorship has not yet appeared. But there are portents in the heavens which betoken his opportunity. " Willis
Ballinger, Di- rector of Studies and Economic Advisor to the Federal Trade Commission, at the opening of hearings before the Temporary National Economic Committee. Again, "The best way to bring home the final results of these pressures is by the concrete example of Germany. Germany, of course, has developed within fifteen years from an industrial autocracy into a dictatorship. Most people are under the impression that the power of Hider was the result of his demagogic blandishments and appeals to the mob. This incorrect diagnosis has been responsible for most of the bad guesses
? EFFORTS TO ORGANIZE BUSINESS 15
the range of issues involved and the size of the stakes in play. But for the most part discussion has run in terms of vague defense or innuendo on the one hand, or a mere superficial glossing over on the other. ^^
The following survey cannot possibly hope to span the gap--it is a far greater void than any one student can hope to bridge--but it may possibly point the way to some more fruitful research to follow.
THE METHOD OF APPROACH
The selections made for the following chapters have been guided by two main considerations. First, and at the risk of sacrificing at a good many points desirable accumulative detail, the plan has been to obtain as wide a cross-section of variations on the major pattern as possible.
England, great industrial pioneer, contrasts with Japan, a late arrival amongst the major capitalistic powers. England as center of the vast British Empire contrasts with the minuscular empire of Mussolini's Italy. Some of the great capitalistic powers never really threw off feudal and autocratic carry-overs from their respective pasts; others, such as the United States, have little memory of these institutions at all. Laissez-faire doctrines and the ideals of free com- petition long dominated both political and economic thinking in England, France, and the United States, but never made much headway in Germany or Japan.
A second consideration was the selection of the field of manu- facturing. The reasons for this choice were several: manufacturing is itself the very heart and soul of the industrial system; singly it is
about German economy since Hitler came into power. Actually Hitler holds his power through the final and inevitable development of the uncontrolled tendency to combine in restraint of trade" Thurman Arnold, address before the Denver Bar Association, May 15, 1939 (mimeographed release, Dept. of Justice), italics mine. Or, again, "Germany presents the logical end of the process of cartelization. From 1923 to 1935 cartelization grew in Germany until finally that nation was so organized that everyone had to belong either to a squad, a regiment or a brigade in order to sur- vive. The names given to these squads, regiments or brigades were cartels, trade associations, unions, and trusts. Such a distribution system could not adjust its prices. It needed a general with quasi-military authority who could order the work- ers to work and the mills to produce. Hitler named himself that general. Had it not been Hitler it would have been someone else. " Arnold, in an address before the American Bar Association, July 10, 1939.
35 As in TNEC Monographs No. 7, Measurement of the Social Performance of Business and No. 11, Bureaucracy and Trusteeship in Large Corporations.
? i6 EFFORTS TO ORGANIZE BUSINESS
the major force making for change in the structure of economic re- lationships; the conflicts of interests are more clearly visualized and more readily focused in this field; the "peak associations" among manufacturers typically came first, or coming later, quickly as- sumed a position of commanding leadership; ^(R) the literature, though largely fugitive, is nevertheless more plentiful than for com- parable organizations in other fields of business activity. In general it may be said that whichever way the manufacturing peak associa- tion goes, so will go not only the trade association and cartel net- work of each country as a whole but also all of their various inter- locking peak associations.
In each case the plan has been, after first briefly following through the historical development of the peak association, to sketch in broad outlines the peculiarities of national institutions, social backgrounds, and political characteristics which conditioned, at each significant step, the functions, membership coverage, struc- ture, and policies of the association. In all cases, particular atten- tion has been paid to relationships with labor and the government. In order to bring certain comparisons and contrasts even more sharply to mind it was decided to separate the countries which have gone over formally to the totalitarian bloc from those which are still moving within the orbit of the liberal-capitalistic system. It is particularly important to note, in this connection, that the so- called principle of "self-government in business"--and some varia- tion on the expression is employed in all countries which have de- veloped peak associations, the better to coordinate networks of business organization--is not abandoned with the transition from a "liberal" to a "totalitarian" basis. In both systems it is now quite generally accepted as unavoidable that large and increasing meas- ures of governmental regulation must be extended over the eco- nomic system as a whole. But what appears in the first as a defensive measure to slow the process down, appears in the second as a tech-
36 Others in the United States are: retailing. The American Retail Federation; bank- ing, American Bankers Association; railroads, American Railway Association; power, Edison Electrical Institute. None of these compares even remotely in importance with the National Association of Manufacturers, and most of them are affiliated directly or indirectly with that organization. The only rival body is the Chamber of Com- merce of the United States, which the NAM helped to found, and whose functions are in turn largely those determined by its manufacturing members--typically be- longing also to the NAM. This picture is duplicated in most countries in the world.
? EFFORTS TO ORGANIZE BUSINESS 17
nique of formal decentralization of administration, coupled with what may be a more or less flexible method of delegating authority from on top.
How authority is so centralized and delegated in the two cases depends greatly upon the nature of the policies guiding the inner groups which are vested with power to formulate policy. The better to bring out these points and to underline what seem on present evidence the long-run implications of policies now guiding deci- sions, the bulk of the discussion of policy has been siphoned away from each of the more descriptive historical sketches in Parts I and II, and is brought together in the three concluding chapters, deal- ing respectively with economic, social, and political issues. Every effort has been made in these chapters to condense the discussion to the utmost in the hope that the more provocative and far- reaching issues will thereby stand more clearly outlined, and that, so standing in view, they may stimulate discussion and criticism from every possible angle.
? Part I
THE EVOLUTION OF MANUFACTUR- ING PEAK ASSOCIATIONS IN THE TOTALITARIAN BLOC
? Chapter I
THE NEW ORDER FOR GERMAN INDUSTRY
THE BATTLES of Poland, France, the Balkans, and Russia have been object lessons in the techniques of "lightning war. " Com- plete mechanization on the one hand and full coordination of air, land, and naval forces on the other have proven an irresistible com- bination against allied military strategists whose tactics have been still largely grounded in the obsolete methods of "fixed position" combat. But equally irresistible in a closely related field has been another Nazi innovation--that of the fullest possible coordination of propaganda, diplomacy, and economic power. To date, this lat- ter coordination has developed a striking power equal in paralyz- ing effect to that of the military forces; its actual conquests have reaped material gains for the Third Reich which extend far beyond anything the latter has had to offer, even in the major theater of
war.
The separate elements in both cases are in no important sense of
the term new. What is new is the fact that each element has been rationally exploited to the fullest possible extent, and at the same time all elements have been combined into a program which has been not only centrally directed but also dominated by a limited series of internally coherent objectives. While synchronization amongst the military branches is grounded in the works of Scharn- horst, von Moltke, von Schlieffen, von Hoffman and their compa- triots, the new synthesis is more boldly conceived, action is de- ployed on a far greater scale, and the services are coordinated on an infinitely more meticulous and finely detailed basis. Similarly, synchronization of the nonmilitary machinery traces back to such as von Treitschke, Bismarck, the elder Krupp, Stinnes, von Moellen-
? GERMAN INDUSTRY
dorf and Walther Rathenau. But, in order to be properly under- stood, the new synthesis must be compared simultaneously with the spiritual imperialism of the Catholic Church, the political imperial- ism of the Roman Empire, the psychoanalytic imperialism sug- gested by Le Bon, and the economic imperialism of the greatest of all British empire builders, Cecil Rhodes.
In a sense, the objectives of the Nazi program for a "new order in Europe" are self-evident. Clearly military and nonmilitary pro- grams are now but different facets of a dynamically expansionist imperial state which has effected a third line of coordination, that of domestic and foreign policy. And so, as a program for imperial coordination of European (and possibly both African and other) peoples on a continental basis, it represents a logical unfolding from earlier Germanic models for fusing the Germanics into a compact and militarily omnicompetent state. The Hohenstaufens, Frederick the Great, Friedrich List, Bismarck, the late Kaiser would all have understood the driving forces that lie behind the Hitlerian juggernaut.
Whether world domination be the eventual aim or not, there can now be no question that the Nazi conquerors are thinking of at least something like a modern European equivalent of the old Roman Empire. In this picture, a nucleus of compact, more or less "racially" and culturally homogeneous peoples stand at the center of an imperial system which is surrounded on every side by subject nations which, powerless to resist, may yet be simultaneously "en- slaved" and allowed some degree of "provincial" self-government.
On the outer fringes of these provincial areas, the expanding lines of conquest--always seeking but never finding "natural frontiers" --soon force division of the world into great competing, hostile, and continent-wide imperial systems. Within each such major sys- tem every effort will be made, step by step with the advance of con- quest, to weave the whole ever more closely together by construc- tion of the most modern transportation, communications, power, industrial, trade, and military networks. And the pattern of control fitted over "great-space economy" will necessarily be that of a mili-
tarized hierarchy of imperial command and subordination.
If so much may be predicted from analysis of past trends and present developments, what then becomes of the capitalistic sys-
22
? GERMAN INDUSTRY
tern? Will it disappear? Is it even now on its way out? Or is the transmutation of form and content one which is also in line with past developments in the structure, organization, functioning, and larger objectives of monopoly-oriented German business enter- prise?
GENESIS OF GERMAN IMPERIAL CAPITALISM
Taproots for all the immensely elaborated organizational net- works that characterize twentieth century Germany are found in Bismarck's imperial system. Under his capable hands, industrial capitalism underwent a sort of forced-draft growth within the con- fines of a modernized cameralism, in its turn greatly modified in many respects by important feudal carry-overs. The whole of the elaborate and amazingly efficient bureaucracy, inherited directly from the days of Frederick the Great and the systems of Kam- mern, was placed at the disposal of plans which visualized a swift catching-up and rapid overreaching of the industrial rivals of Im- perial Germany. To this end the recalcitrant landed aristocracy were bribed, beaten into line, or deliberately fused with favored industrial, shipping, and commercial circles, with the inevitable result that the stigmata of special privilege were transferred whole- sale to the new fields of upper class interest. And, on the other ex- treme the radicalized proletariat were numbed into submission by a combination of social security concessions--Bismarck's adaptation of Realpolitik to the "social question" which succeeded in robbing Lassalle of all independent initiative--and superpatriotic roman- ticism which appeared to gear labor's fortunes inescapably to those of the expanding state apparatus. ^
1 Within the Social Democratic theory, there existed a not unimportant social imperialist trend which was definitely anti-English; it was based on the belief that imperialist expansion would benefit the German worker and would act as a grave- digger of capitalism. This trend is represented by Lensch, Schippel, Cunow, and Parvus, and later by August Winnig. A fuller discussion of this matter is contained in Franz Neumann's Behemoth (194? ), pp. 210-15 (to this excellent study the pres- ent author owes much). Again it is interesting to note that much of Bismarck's social legislation was taken over in large part from the programs of the Social Catho- lics led by Baron von Ketteler--his bitterest opponents in his ill-fated Kulturkampf (the Nazis have succeeded here where Bismarck failed). This program led ultimately to the great papal encyclical on "The Condition of Labor" (Rerum Novarum) (1891) and indirectly to Quadragesimo Anno (1931). The Rerum Novarum launched a movement which contributed greatly to the success of Italian Fascism (see pp. 62-66, below), while the Quadragesimo Anno provided the direct inspiration for the cor-
2$
? 24
GERMAN INDUSTRY
Coming onto the industrial stage comparatively late,^ under such auspices, and with England as the principal rival,^ there was little tendency to comply with the tenets of competition or laissez faire. Some speculation on, followed by half-hearted experimenta- tion with, the advantages of the Manchestrian system had, of course, taken place. For a short period of time during the sixties and the seventies ideas imported from England seemed to be gaining ground. But this Blutezeit of laissez faire was brought to a close with the famous Bismarck tariff of 1879. Germany thus returned to more familiar ways. These ways--from the romanticism of an Adam Mueller and the rationalized protectionism of a Friedrich List--her theoreticians had assured Germany were fitting and proper in the face of economic conditions and in the perspectives of future need. *
All the important institutional seeds ^ of contemporary Ger-
porate state of the ill-starred Schuschnigg. A circular of the Federation of Austrian Industries (undated, but apparently of 1934) traces the new "vocational reorganiza- tion" to the "Constitution of May 1, 1934," which was based on Qiiadragesimo Anno and which "starts out with the inviolate right of private property, and then con- fronts individuality of property with the socialistic conception, that is, individual property in relationship to the welfare of the whole. "
2 Thorstein Veblen, in his Imperial Germany and the Industrial Revolution (New York, 1915), has attempted to show how great an advantage this late arrival was for the unrestricted taking over and full expansion of the techniques of mass production. See, in particular, pp. 174-210.
3 How very seriously this rivalry was taken by the British has been shown by
S. Hoffman, in his penetrating study. Great Britain and the German Trade Rivalry, iSy^-i^i^ (Philadelphia, 1933). The major themes of modern German im- perialism are the hatred of England and anti-Marxism. This dual hatred forged the various groups of the ruling cliques together for imperialist expansion. See Neu- mann, op. cit. , pp. 193-210.
4 Political parties and trade unions in the direct Marxian tradition were in the main satisfied to let combination take its course. They were convinced that the ulti- mates in such centralized control were the prelude to the socialist state of the future. Such was the idea underlying the Socialization Law of March 23, 1919, in which the Social Democratic government actually undertook to help along the process of capi- talist consolidation. See, in particular, Elisabeth Schalldach, Rationalisierungsmass- nahmen der Nachinflationszeit im Urteil der deutschen freien Gewerkschaften (Jena, 1930) and Fritz Tarnow, Warum arm sein? (Berlin, 1929).
5 (a) Autarkie: employing rationalized techniques in manipulation of protective tariff schedules, special shipping subsidies and expert bounties; promoting the idea of self-sufficiency in foodstuffs and industrial raw materials--"Buy German. " (b) The concept of Grossraumwirtschaft, coupled to Lebensraum, or that of a balanced im- perial system having complementary and adequate raw materials, industrial and finan- cial resources, population homogeneity in proper relation to "inferior" and "colonial" subject populations, and cultural unity. Neumann, op.