Chester, President of the NAM said that "in 1903 the
Association
adopted a set of principles which is still officially our 'Bible' in this field.
Brady - Business as a System of Power
So in every branch of trade, they flock into associations in search of aid or shelter.
The tendency is natural and the result unexceptionable insofar as it makes wartime organization easier. In war economy cooperative groups can undoubtedly exercise useful functions. But some of the conse- quences must be suspect. The direction of these associations is always quasi-monopolistic domination of their trades, and in wartime this trend is encouraged in many ways. In every business scarcity and the limitations of supplies check newcomers. Prices tend to go up, and price cutters--hitherto the chief obstacles to the associations* j>olicy of keep- ing prices up--fare badly. The associations wax while their rivals wane.
Moreover, the various associations work together. Representations on any question relating to, say, retail tobacconists will possibly be made, not only by their own associations, but also by the associations, unions and federations, local and national, of confectioners, newsagents, hotels and restaurants and off-license holders--perhaps even with the backing of that active general body, the Retail Distributors Association. Each trade is a hierarchy, beginning with the local or district organization and rising to a National Council or Federation, and as all these hierar-
raent, and almost its one idea in matters of economic policy has been to endow the big capitalist associations and combines with authority over the consumers. " New Statesman and Nation, April 2, 1938.
88 "The New Feudalism," Economist, April 2, 1938.
? i88 BRITAIN'S "FEUDALISTIC SYSTEM"
chies interlock in their activities, it means that horizontally, as well as vertically, over the whole field of retailing they exercise a nation-wide power in pursuit of aims which are often by no means national. (R)^
As policy coordinator for this swiftly unfolding and cartel-like apparatus of trade associations, given an added fillip for more rapid extension of their powers and influence in the current national emergency, the Federation of British Industries takes on a new and far-reaching significance. Commanded at the top by a small coterie of officials who are drawn chiefly from large concerns or from concerns under the influence or control of the giants in their respective fields, and with both officials and controlling concerns bound together by an infinity of interconnections--personal, fam- ily, and institutional
--
vested with political powers of propaganda and coercion, this is the
into a tightly meshed business oligarchy
British pattern in the making; in trend, at least, it does not seem very different from that already dominant in states formally com- mitted to the "corporate idea. " The eventuality remains to be seen.
69 "Retailers' Front," Economist, Feb. 15, 1941, pp. 206-7.
? Chapter VI
THE AMERICAN WAY: 'BUSINESS SELF-REGIMENTATION''
THE ORIGIN of the National Association of Manufacturers stems
from a decade of combinations par excellence. Between 1890
and 1900 more and larger combinations took place than in the
entire preceding history of this country. This is true whether one
directs attention to mere number of consolidations, number of
workmen employed, or amount of capital involved. A speaker
arguing for a federal law of incorporation before the National As-
sociation of Manufacturers in 1904 summarized the amazing rec-
^
ord:
Statistics show that in the decade between i860 and 1870 only two in- dustrial trusts, formed by the combination of formerly competing con- cerns, had been created, and that with a total capitalization of only thirteen millions of dollars. In the next decade between 1870 and 1880, four more were formed, with a capitalization of one hundred and thirty- five million dollars. Between 1880 and 1890 eighteen more were formed, with a capitalization of two hundred twenty-eight millions of dollars; while the last census shows one hundred eighty-three combinations with a capitalization of $3,619,039,200 . . . In 1902 it is claimed that there were 213 combinations, with a capitalization of seven billions of dollars; while now it is claimed that there are nearly 1,000 industrial combina- tions, not including railroads, with a nominal capitalization of $9,000,- 000,000. 2
McCrary, "Another View of National Incorporation Needs," American
1 Alvin
Industries, Oct. 1, 1904, p. 13.
J.
2 ". . . by 1904 the trusts controlled fully two-fifths of the manufacturing capital of the country. " Henry R. Seager and Charles A. Gulick, Trust and Corporation Problems (New York, 1929), p. 61. These authors define trusts somewhat more nar- rowly than the speaker before the NAM, their total estimated "trust" capitalization of 1904 being given as $5,000,000,000.
? igo THE AMERICAN WAY
THE HISTORICAL SETTING: A TREND TOWARDS MONOPOLY
Few fields of business activity escaped this flight from "free competition" entirely. In one form or another--corporate con- solidations, pools, gentlemen's agreements, interlocking direc- torates--the larger movement affected the leading branches of in- dustry, commerce, finance, and transportation. Though in line with trends reaching back through the preceding decades, the process was so swift and so far-reaching that it appeared to many that shortly it must engulf the whole of the American economic system. As the facts became generally known clamor against the trusts mounted, for it seemed that when, of the outstanding com- binations, "26 controlled 80 per cent or more of the aggregate pro- duction in their fields; 57, 60 per cent or more; and 78, 50 per cent or more," ^ it was time that all classes sit up and take notice of the revolutionary changes being brought about in the American eco- nomic scene.
Smaller businessmen throughout the country concurred in the antitrust movement. But although then, as now,* the bulk of the complaints looking toward legislative and judicial action against the trusts emanated from affected business circles, businessmen showed little inclination to organize to such an end. Leaving these matters to the government, they chose, instead, to pool their re- sources so as to present a united front in promoting more extensive aid and grants of privilege from the political authorities which would prove of common value to them all. Thus arose, along with, and at first entirely independent of, the large combinations, the trade-association movement. The "trusts" had dramatized the ad- vantages of massed and centrally directed economic power. The trade associations hoped not to level down the trusts, but to "de- mocratize" analogous privileges for the business community as a whole.
>> Idem.
4 "It is business men and business men alone who file practically all the complaints with my division, and it is for business men that the anti-trust laws must be enforced. " Thurman W. Arnold, Assistant Attorney General of the United States in an address before the American Bar Association, San Francisco, July lo, 1939. Release of the Temporary National Economic Committee (TNEC).
? THE AMERICAN WAY 191
This covert and loose form of combination, commonly termed in American business circles "business cooperation" was entirely in keeping with the anticompetitive spirit of the times. It was further stimulated by the fact that the more open type of collusive action, the "pool," was quickly driven from the field as a result of federal antitrust prosecutions. Since the "pool" was the Ameri- canized form of the cartel, this country was "saved . . . from the European cartel system," ^ the better to allow trade associations to grow more slowly into the exercise of powers and influence which in many respects now reach far beyond those of all except the more advanced cartels abroad. ^
In this mushroom growth of new forms of business "self- regimentation," ^ the National Association of Manufacturers oc- cupied from its inception in 1895 a central, and in some respects a commanding, position. It was by all odds the largest, most carefully laid out, and the most enduring of the looser forms of business organization established for the specific purpose of centralizing, unifying, coordinating, and more effectively focusing policies re- lating to the business system as a whole. Others had preceded it, but with typically much smaller industrial coverage and with much narrower range of interests. ^ It was the peculiar role of the NAM
to undertake the coordination of the efforts of all business associa- tions--existing, subsequently organized, and special-purpose--in the entirety of manufacturing industries of the whole United States.
THE CHANGING PROGRAM FOR INDUSTRIAL COORDINATION
The original statement of principles given out by the National Association of Manufacturers provided a precis for all that was to
5 See Thurman Arnold, "The Anti-Trust Laws, Their Past and Future," address over the Columbia Broadcasting System, Aug. 19, 1939. Released by TNEC.
6 As shown, for example, in Federal investigation of the National Electric Light Association (now the Edison Electrical Institute) and the National Lumber Manu-
facturers' Association. See also statements by Dr. Theodore
sultant of the TNEC (release of the TNEC, Jan. 15, 1940) and Professor Clair Wil- cox (New York Times, Jan. 20, 1940) at the Cartel Hearings before the TNEC.
7 This is the expression used by Thurman Arnold in his various speeches dealing with what is commonly called "cooperation" by businessmen.
8 Such as the various associations established to fight organized labor, e. g. , the Stove Founder's National Defense Association, an outgrowth of the National As-
J.
Kreps, Economic Con-
? THE AMERICAN WAY
follow: "The general objects and purposes for which the said cor- poration is formed are the promotion of the industrial interests of the United States, the betterment of the relations between em- ployer and employee, the education of the public in the principles of individual liberty and the ownership of property, the support of legislation in furtherance of those principles and opposition to legislation in derogation thereof. " ^ According to later spokesmen, it has fulfilled this declaration of principles almost to the limits of desire. Speaking at the Thirty-Fourth Annual Meeting of the NAM, October, 1929, President Edgerton evaluated its achievements in colorful encomium:
In eighteen hundred ninety-five near both the geographic and popu- lation centers of the United States, there occurred an event which though unheralded was even then generally recognized as of momen- tous importance to the nation. But its more complete significance re- quired and has received the dispassionate testimony of history. At that auspicious time and appropriate place, the National Association of Manufacturers, fathered by necessity and summoned by conscious op- portunity, sprang exultantly like Minerva from the forehead of Jove into immediately useful existence. Notice was thus given to the world for the first time that the American manufacturing industry had come of age, and that it could and thereafter would speak with one voice on every occasion of common defense and on all occasions pertaining to its general welfare.
At our birth in 1895 there was scarcely a handful of industrial associ- ations of any size or character in the United States. Those in existence were almost exclusively trade organizations formed primarily for de- fense against the rising cloud of labor trade unions. Ours was the first and has continued to be the only general organization of manufacturers exclusively embracing all trades, conditions, sections, and sizes of indus- trial units. We have witnessed and often assisted at birth of nearly every state association, of practically all the associations, and of many of the special organizations now serving particular trade, geographic, or other homogeneous groups. ^*^
sociation of Stove Manufacturers, which was founded in 1886 as an antiunion em- ployers' association. Similar were the American Newspaper Publishers' Association and the United Typothetae of America, both founded in 1887.
9 Constitution and By-Laws of the National Association of Manufacturers of the United States, Article II, Section I.
10 Proceedings, 34th Annual Meeting of the National Association of Manufacturers (Oct. , 1929), pp. 14-15. Italics mine.
192
? THE AMERICAN WAY 193
The age was one of organization, "an age," said President Kirby in 1911,^^ "when but little can be accomplished except through organization; an age when organization must cope with organiza- tion. . . . " All businessmen must join them, and join as many of them as they could. The NAM was to serve as the "mother of asso- ciations," that all American industry might be organized from cen- ter to circumference. But at the center was to stand the NAM, functioning as a central policy-pressure and policy-forming body for all organized activity, irrespective of the angle or the nature of the interest at stake. As a more recent brochure puts it, the NAM is dedicated to promotion of "Unit Thinking and Unit Acting on the Part of American Industry. " ^^ It represents "The Nation's In- dustry--Organized," ^^ or "The Nation's Industry Synchro- nized," ^* the better to promote "the universalization of those sav- ing principles of American Industry--the right of those who own property to control it. " ^^ Its spokesmen think of control of prop- erty as it relates to all things and with respect to all men, classes, interests, and principles.
The Association has accomplished its ends sometimes by direct pressure of organized lobbies, sometimes by the aid of propaganda, and sometimes by the further organization of business interests along special trade, regional, or industrial lines. ^(R) And its history traces the evolution of efforts to round out its program of cen- tralizing common business policies to their full social, economic, and political implications.
In accordance with changes in the general economic and politi- cal scene, its major emphasis has shifted from time to time. Thus, at the beginning, the Association was primarily concerned with the dual objectives of tariff protection at home and promotion of fa- vorable markets abroad. It held to this dominating interest until
1903, when, under the influence of a wave of strikes and trade-
11 Proceedings, i6th Annual Convention (May, 1911), pp. 65-87.
12 NAM, Pamphlet, 1935. is NAM, Pamphlet, 1923.
14 NAM, Pamphlet, "Being a Brief History of the National Association of Manu-
facturers," undated.
15 Speech delivered by President John E. Edgerton, and published in the NAM Pro-
ceedings, Oct. , 1929.
16 For comprehensive discussion of these activities see LaFollette Committee Re-
ports, Parts 17, 18, and 19, and Report No. 6, Part 6.
? THE AMERICAN WAY
union activity, and through the direction of its new president David M. Parry, it shifted its efforts to combating trade unions and advancing the plan of the open shop. Although it did not abandon its original interest, but steadily increased its pressure for favorable tariff legislation, more active government aid in the expansion of foreign markets, and similar aims,^^ its activities were largely dom- inated by the problem of trade-union expansion until the United States entered the World War.
With the war and its aftermath, interests began to broaden out more nearly in line with the general agenda of the original state- ment of principles. The influence of the war on the NAM's con- ception of its role in the national economic picture was especially profound and far-reaching. As in all belligerent countries, war con- trol in the United States was exercised primarily through the inter- mediation of businessmen and business organization. Businessmen held the principal control offices and made the key administrative decisions in economic affairs. ^^ And in all their activities they nat- urally and habitually turned to their own organizations for the instrumentation of policies--policies which combined, so happily, patriotic performance of a critical "public duty" with lucrative gains to the trades and industries which the businessmen repre-
17 Specifically, such as the following: "home markets should be retained" and "for- eign relations . . . extended in every direction and manner not inconsistent there- with"; the "principle of reciprocity" should be applied wherever possible; there should be a "judicious system of subsidies of our merchant marine"; the Nicaraguan (and later the Panama) Canal should be constructed by the Federal Government; natural and artificial waterways "should be improved and extended. " NAM pamphlet, "The Nation's Industry Synchronized. "
18 Aside from the regular governmental and war departments, the following were the principal war control agencies: Food Administration, presided over by Herbert Hoover, a mining industrialist; Fuel Administration, presided over by Harry A. Garfield, former President of the Cleveland Chamber of Commerce and Director of the Cleveland Trust Co. ; War Industries Board, directed by Bernard Baruch, a Wall Street financier and stock-market operator; War Trade Board, directed by Vance McCormick, of the family associated with the International Harvester Co. In all these boards and committees, and throughout all leading offices in the regular federal machinery primarily concerned with the war and not filled by regular staff, business- men predominated, made the decisions, gave the orders, set the prices, determined legitimate costs, and set allowable profit margins--in industries which they controlled or dominated in their private capacities, and out of which most of their concerns achieved large, and in a few cases, colossal earnings. See the summary report of the Nye Committee on the Munitions Industry, 74th Congress, 2d Session, Report No. 944, Part 4.
194
? THE AMERICAN WAY
sented and which must now supply the necessary goods and serv- ices. ^^
During the war days two leading ideas struck root in the business community which were destined to exercise growing influence in the postwar years. The first of these was the conception of uni- versal organization of all business enterprise into all-inclusive and appropriate trade and industrial associations. The War Emergency and Reconstruction Conference was held by the Chamber of Com- merce of the United States -^ in December, 1918, and was par- ticipated in actively by representatives of the NAM. A "Resolution on trade associations" adopted by the conference summarized the point: "This conference heartily approves the plan of organizing each industry in the country in a representative national trade as- sociation and expresses the belief that every dealer, jobber, manu- facturer, and producer of raw materials should be a member of the national organization in his trade and cordially support it in its work. " 21
The second, and related idea came subsequently to be known by the slogan "self-government in industry," meaning specifically that any such organization of trade, commerce, and industry should be autonomous, interdependent, self-regulating. The idea was dis- cussed extensively in the literature of the day, and gave rise to a series of trade-practice agreements according to which the govern- ment was to turn over the governance of economic affairs, trade by trade, and industry by industry, to public-spirited business leaders.
19 "The record of the war service committees," said Mr. Sibley, President of the Chamber of Commerce of the United States in an address before the Trade Associa- tion Executives in New York City, Jan. 28, 1936, "is one of lasting achievement. " Business and government learned for the first time to work together "in tinie of emergency" and the businessman within his own industry "found himself in the position of working cooperatively. " From pamphlet material published by the Chamber of Commerce of the United States.
An attempt was made at an Atlantic City convention, called shortly after the close of the war, to organize the various industry "war service committees," of which there were nearly 400, into a single organization to perpetuate in peace times the controls, and promote habits of "working together," etc. , with which these organized business groups had become familiar in the emergency of war. The proposal contained most of the leading ideas subsequently incorporated into NRA.
20 The National Association of Manufacturers participated actively in the organi- zation of the Chamber of Commerce of the United States, though at times policies of the two central organizations seems to have been in rather serious conflict.
21 Sibley, in his address of Jan. 28, 1936.
195
? 196 THE AMERICAN WAY
Though finally discouraged by an adverse judgment of the Attor- ney General that such "agreements" might be in violation of the Anti-Trust acts,^- the idea persisted and, under the active support of the Department of Commerce and its vigorous secretary, Mr. Hoover, became a sort of theme-song of the "New Economic Era. "
Correlative with these new interests, and largely under the stim- ulus of the labor difficulties and the "deportations delirium" of the immediate postwar period, many of the leading trade associations evolved a new labor program. Designed primarily to keep the "open shop"--sometimes known as the "American Plan," sometimes la- beled "management relations," or "industrial relations," or "per- sonnel relations"--the drive found its principal expression in ac- tive and widespread promotion of company unions. The leadership in this movement was quickly taken by the NAM. ^^
The idea underlying its "Open Shop Committee" was that the "American Plan" of no trade unions, and "free bargaining" be- tween employer and employee (sometimes organized in company unions), would bring "industrial peace" throughout the nation. By these methods "harmony between labor and capital" was to be achieved "cooperatively," just as "self-government in industry" was to bring about uniformity in business practices while elevating these to a moral plane which would no longer require govern- mental regulation.
The great depression, which broke in the fall of 1929, brought this rosy-colored dream world of the New Economic Era to a rude close. In the midst of the ensuing confusion, the New Deal was born; offering, as many believed, a thoroughly rational set of com- promises, it set grimly to the task of reconciling what soon proved to be at bottom irreconcilable conflicts of interest. NRA took over Mr. Hoover's revamped wartime idea of "self-government in in- dustry" (a quasi-monopolistic notion) and tried to wed it to Presi- dent Roosevelt's Jeffersonian conception of a felicitous economic paradise--an honest competitive system. It quickly appeared that
22 They were not, however, discontinued entirely. The FTC has continued down to the present time to organize "trade practice agreements," though under the guise of devices for eliminating "unfair" and "dishonest" trade practices. See TNEC Monograph No. 34.
23 See Albion Guilford Taylor, Labor Policies of the National Association of Manufacturers (University of Illinois Studies in the Social Sciences, Urbana, 111. , 1928).
? THE AMERICAN WAY
the Codes served to transform the leading trade associations into cartel-like bodies endowed with extraordinary and far-reaching powers which came directly into conflict with previous antitrust legislation. And, at the same time that they appeared to offer a carte blanche to various forms of collusive action undertaken by these central agencies, Article 7a gave a tremendous stimulus to antipathetic labor organization. Once deflation had overtaken the flight of fancy which envisioned every man and all classes putting their shoulders to the wheel on behalf of a common aim (recovery and the general welfare) in an emergency of peace, disillusionment returned; it was accompanied by a new wave of strikes and lock- outs and by a more virulent phase of both commercial and labor warfare.
The program and the mood of the National Association of Manu- facturers shifted accordingly. If we properly interpret their litera- ture, though happy about the adoption of their pet idea, "self- government in business," ^* they had smelled a rat in the New Deal program from the outset. Smelled it and pointed it out. But with the new formulation of the issues, symbolized in the mass expansion of the labor movement, all problems seemed transmuted into political and ideological terms.
The National Association of Manufacturers began to move into the picture with a new set of working objectives. Rather, one should say, with an old set of objectives seen in a quite new per- spective. ^^ This perspective called for a greatly expanded program of public relations. Beginning with a small allocation of some $36,500 in 1934, within four years the "public information pro- gram" had increased to $793,043 in 1937, or from 7. 2 percent of the nam's total budget to 55. 1 percent. ^^ Astonishing as this shift in emphasis may appear, the figures tell only a small part of the story. The totals here cited involve only out-of-pocket expenditures of the NAM; most of the "information" was disseminated through
24 See the series of bulletins issued in 1934 by the NAM (jointly with the National Industrial Conference Board) and entitled "Industrial Self-Government. "
25 Referring to the labor program in a letter to Evart C. Stevens, President of the International Silver Company, on June 22, 1936, Colby M.
Chester, President of the NAM said that "in 1903 the Association adopted a set of principles which is still officially our 'Bible' in this field. " The same is true of other declared principles.
26 From the LaFollette Committee, Report No. 6, Part 6, Labor Policies of Em- ployers' Associations, p. 168, "The National Association of Manufacturers. "
197
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space-and-time contributions of media or was paid for by other organizations. ^^ If we may take at face value the testimony of Wil- liam B. Warner, President of the NAM in 1937, that the total com- mercial value of the national public-information program "would be more like that amount [$793,043] for each state, instead of for the United States, if it were on a pay-as-you-go program," ^^ then by 1937 the commercial value of this campaign was perhaps up- wards of $36,000,000.
The central thesis of this outpouring of propaganda called for nothing short of conversion of the public at large to the economic objectives, the ideals, and the program of the business community as a whole. Its whole program for governmental aid, support, and cooperation, reaching back to the days of 1895, was now trans- formed into a campaign against "government interference in busi- ness. " The only alternative offered by their programs was, by im- plication, full and complete government coordination with the needs, interests, and social outlook of organized business. And its whole anti-union drive, memorialized in thousands of articles, speeches, and brochures from 1903 on, was now to be transposed and fitted as a central foundation stone in the new and revitalized public-relations program. To overreach labor, to state the matter somewhat epigrammatically, it was first necessary to change the out- look of government; and to accomplish this purpose, it was first necessary to convert the general public. In this new propaganda offensive, nothing was to be left out which could influence in any decisive fashion the loyalty or social outlook of any member of the public, old or young, male or female, in the ranks of labor or the professional classes.
OUTWARD SPREAD OF THE ORGANIZATIONAL NETWORK
At first glance, the membership record of the National Associa- tion of Manufacturers is unimpressive. The initial gathering in 1895 included 583 manufacturing members. By 1901 membership had almost doubled, reaching in that year a total of 1,082. Yet, ac-
27 Most of the radio, outdoor advertising, and newspaper space via which the propaganda was fed out was contributed space. To each of these in the year indicated was contributed a minimum of one million dollars. Idem.
28 Idem.
--
? THE AMERICAN WAY
cording to the 1900 Census, there were 296,440 manufacturing es- tablishments in the United States. ^(R) On the surface such a coverage seems insignificant. Rapid as was the growth of membership in subsequent years,^" the percentage of all manufacturing establish- ments brought into the organization has always been extremely small.
Inspection of the rather incomplete records, however, shows quite a different picture. Member concerns, if not always the larg- est in their fields, have typically been among the leaders. In a year (1915) when the membership fluctuated around 4,000, a spokesman for the association found that *'The Members of our National As- sociation of Manufacturers alone employ, in normal times, nearly six million workers, and the members of this association manu- facture, in America, each year, more goods, measured by money values, than are produced by the entire population of any other nation of the world. " ^^ Ten years later another spokesman de- clared that members of the NAM represented an invested capital of something like four billion dollars. ^^
Impressive as such figures may be when taken by themselves and the picture has not changed much with respect to coverage today ^^--it would still seem that on such a basis the NAM fell far short of its claim to represent the whole of industrial activity in America. ^* This defect has been remedied by the establishment of the National Industrial Council, organized and controlled by the NAM, and designed to include in its membership all associations, national and local, which represent all the industrial enterprises of America.
Originally known as the National Council for Industrial De- fense, the National Industrial Council was founded in 1907 "as a
29 This total did "not include 215,814 hand trades; 127,419 establishments with a product of less than $500; 138 governmental establishments and 383 educational, eleemosynary and penal institutions. " Twentieth Century Fund, Big Business, Its Growth and Its Place (New York, 1937), p. 34.
30 2,707 in 1903; 4,000 in 1916; 4,500 in 1919; 6,000 in 1924. The most recent figure is given as 7,500. NAM brochure, "Women, Partners with Industry in the Economic and Social Advancement of the Nation. "
^^ American Industries, May, 1915, p. 22.
32 Ibid. , Nov. , 1925, p. 5. 33 See pp. 201-2.
84 In a prepared statement before the LaFollette Committee, Mr. Walter B. Weisen-
burger of the NAM estimated that members of the NAM "employ between one-third and one-half of all workers in manufacturing industry. " LaFollette Committee Re- ports, Part 18, pp. 7850-51.
199
? 200 THE AMERICAN WAY
joint legislative committee of the National Association of Manu- facturers and the Citizens' Industrial Association of America. " ^^ Its membership is made up exclusively of associations, and its functions are controlled by the NAM through the devices of com- mon officers, common headquarters, common research staff, and through a largely cooptative--in effect, largely self-elected and self-perpetuating--executive committee. By 1913 its membership included 253 national, state, and local organizations. By 1920, this number had grown to 300. Subsequently the Council has shown relatively slight increase in number of member associations, but the coverage of these associations has been enormously ex- panded. ^(R)
In fact, one of the purposes in establishing the NIC was to pre- vent undue multiplication, duplication, and overlapping of em- ployer organizations. An NAM brochure of 1928 makes this clear. "While functioning as a national body, the leaders of the associa- tion realized the value of work on a decentralized basis and in- augurated campaigns for the organization of state manufacturers' associations. Their efforts were rewarded by the formation and development of many such organizations, and to coordinate their efforts, thus eliminating unnecessary duplication of effort, the National Industrial Council was organized by the Association. " ^^ This is a consistent following out of the original intentions of its founders, as is shown by the speech of President Van Cleave one year after the founding of the new body:
I called a meeting of representatives of a number of various organiza- tions here at the Waldorf-Astoria, and after several meetings we finally succeeded in getting a simple working-plan. We realized the undesira- bility of multiplied associations, and we finally adopted the plan that, working under the auspices of the National Association of Manufac- turers, we would ask of these various organizations, both national and state, and of the local boards of trade and associations of business men to authorize this council movement, which we designated the National Council for Industrial Defense, to authorize us to represent them. The
35 Clarence E. Bonnett, Employers' Associations in the United States (New York,
1922), p. 374.
36 In the statement of Mr. Weisenburger quoted in footnote 34, it is estimated that
through the NIC the NAM "comes in contact with an additional 40,000 manufac- urers. "
87 NAM, "The Nation's Industry Synchronized," p. 14.
? THE AMERICAN WAY 20 i
National Association of Manufacturers becomes primarily, but not fully the financial representative. ^(R)
Its purpose was and is to focus all manufacturing power, local and national, on behalf of mutual interests in general, but par- ticularly with respect to legislation bearing upon the labor ques- tion. This is shown both by its declared objectives as stated in its constitution, and by general commentary in the trade press of the times. Among the stated objectives the following are particularly significant:
To establish and maintain a legislative reference bureau for the com- pilation, analysis and distribution of accurate and timely information respecting legislation affecting industrial relations.
To advise its members with respect to legislation proposed or enacted, affecting their business relations with the various departments of the national government and with state governments when deemed ad- visable.
To preserve and promote the principles of individual freedom for employers and employees in commerce and industry. To emphasize the essential worth of these, and to defend them against legislation calcu- lated to impair or destroy them or the legal remedies by which they are efficiently protected. To appeal to public and legislative opinion re- specting these matters through every medium through which it can be legitimately and effectively informed.
Vigorously to oppose class legislation in whatever form it proposes to make it lawful for one class of citizens to do that which remains un- lawful for any other class to do. To encourage legislation tending to better the relations between employer and employee. ^^
In 1933 the NAM and in 1936 the NIC underwent general re- organization for the purpose of further centralizing control and tightening up the organizational structure. The changes brought about in the NAM, which we will discuss shortly, fall primarily under centralization of control--although a by-product of efforts along this line was to increase materially the badly impaired mem- bership ranks. *? The NIC, however, underwent a general over- hauling, which transformed it from a loose federation of mis-
38 NAM, Proceedings (1908), p. 295.
39 Constitution, National Council for Industrial Defense.
40 Members and noncontributing members had fallen, in 1933, to 1,469. Increase
thereafter was as follows: 1934, 1,910; 1935, 2490; 1936, 2,905; 1937, 3,008. In 1938 membership approached 4,000.
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cellaneous trades organizations and employers associations into a compact and efficiently functioning affiliate of the NAM.
Prior to 1936, the NIC had been, in the words of William Frew Long, head of the Associated Industries of Cleveland, composed "almost entirely of State associations, and those of us in local asso- ciations rather resented that fact. " *^ Furthermore, there had been thrown together under the old arrangement miscellaneous associa- tions, large and small, special-purpose trade associations and gen- eral employer associations, without any clear grouping by inter- ests, powers, or functions. This the reorganization was designed to correct, by setting up three distinct types of members. The first is made up of state industrial associations, some 35 ^^ in number in 1 940, which represent central coordinating associations similar on a state-wide basis to the NAM on a nation-wide basis. The second comprises industrial-employment-relations organizations, mostly on a city-wide basis, but including most of the central employers' associations in the leading manufacturing centers of America. There were 107 of these in 1940. The third group includes (1940) 92 national manufacturing associations, constituting the dominant large associations in both heavy and light manufacturing fields. There are also 14 "miscellaneous" association members.
To state the matter somewhat differently, the NIC is now made up of three functionally different types of associations whose mem- bership is overlapping in part and whose interests are interlaced in an almost infinitely complex pattern. Most of the large manu- facturing companies of America belong to the NAM in their cor- porate capacities. Most of them, likewise, are organized in manu- facturing trade associations such as the Iron and Steel Institute, the Cotton Textile Institute, the National Electric Manufacturers As- sociation, and the rest. Again, most of these concerns are located in or near large cities, and are members of employers' associations, such as the Associated Industries of Cleveland and the Industrial Association of San Francisco, primarily concerned with formulat-
ing and carrying through a common policy on all phases of labor relations. Finally, most of these manufacturers are to be found in the principal manufacturing states, and are members of state manu-
al Cited in La Follette Committee Reports, Part 6, No. 6, p. 61.
*2 From data given in a letter from Noel Sargent, Secretary of the NAM, dated Feb. 8, 1940.
? THE AMERICAN WAY 203
facturers' associations interested in formulating common policies on a state-wide or regional basis. In part, consequently, individual membership is fourfold.
This holds almost exclusively, however, for members of the NAM, who, with very few exceptions, are members of the other three types of associations brought together in the NIC. But as one goes from the national manufacturing associations, to the more specifically employers' associations, and down to the state industrial associations, the coverage spreads, and the degree of duplica- tion of membership declines. Under one or another form of repre- sentation, it seems probable that the NIC includes in its member- ship close to 80 percent of all manufacturing activity in the United States. The other 20 percent, with rare exceptions, is made up of small-scale and relatively unimportant concerns.
Thus the reorganization of the NIC has at once simplified, streamlined, and extended the reach of the NAM down through the entirety of the American industrial system. To employ the nam's own term, the association has taken the step from the "na- tion's industry organized," to the "nation's industry synchronized. "
Paralleling in part this elaborate policy-formulating meshwork is the National Industrial Conference Board. Originally estab- lished in 1916, as a by-product of experience in war-controls and war-time habits of "business cooperation," it was designed to serve a two-fold function. On the one hand it was to supply relevant information to the NAM and other sponsoring and member asso- ciations; on the other it was to provide the factual background for a convincing propaganda that has been adjusted, as it has evolved over the years, to meet all levels of intelligence and knowledge, and to affect professor, housewife, and day laborer.
It was, consequently, advertised as an "impartial, fact-finding body," whose object it would be to investigate all aspects of in- dustrial life, and through its analyses and publications "promote good understanding and friendly relations between employees and employers for the benefit of both, and between those engaged in industry and the public, for the general good of the community. " This was to be done in "cooperation with individuals, institutions, associations, and agencies of the Government," to the end that, by making its findings generally available to legislatures, scholars,
? 204 THE AMERICAN WAY
labor and the general public, it might "encourage and promote the sound development of American industry by all proper and legiti- mate means. " *^
The NICB was a "war baby," and it participated actively in the promotions of coordination of the war effort. On the practical side, it assisted in, and by spokesman of the NAM has been given credit for, the formation of the War Labor Board. ** On the ide- ological front it promoted "unit thinking. " As Mr. L. W. O'Leary, President of the National Metal Trades Association expressed it in
1920, "The National Industrial Conference Board is of . . . great
value in that it is bringing about uniformity of thought and action
among employers, woefully lacking in the past. We are thinking
*^
together. "
The Board's research facilities are elaborate, expensive, and im-
pressive. Occupying sumptuous quarters on lower Park Avenue, New York City, it is equipped with a large research staff, extensive library facilities, and a vast corps of domestic and foreign cor- respondents, who enable it to turn out research findings on a mass production basis. To give even an outline of its functions and product would require an extensive monograph. *^
Its activities fall under three mains heads. Discussion, Research and Publication, and Service. The first includes four different types of special committee meetings: Private Meetings of the Con- ference Board (monthly). Advisory Committee Meetings (peri- odic), meetings of a Conference Board of Statisticians in Industry (monthly), and of the Conference of Corporate Statisticians (monthly). *^ Research and Publication include Books and Special Reports (comprising seven subdivisions). Periodical Publications
(four subdivisions), and Confidential Memoranda (including key information sent on request to members, and also regular circulars). Service includes a Reference Library, Publicity, and Correspond- ence. Foreign correspondents, executive officials strategically lo- cated in the leading industrial centers of the world, keep the
*3 Bonnett, Employers' Associations, p. 478.
4* Ibid. , p. 490. 45 Ibid. , p. 483.
46 A good general outline of the Conference Board's work, functions, and organiza-
tion is given in its 23d Annual Report, revised to Jan. 1, 1940.
47 Additional conferences are held from time to time by business economists, per-
sonnel executives, and foreign trade executives.
? THE AMERICAN WAY 205
Board in close and intimate contact with developments abroad. There is practically nothing the Board does not examine--local, national, or international--of interest to the economic, political, social and cultural interests of manufacturers' and allied associa- tions. ^^
Having such an elaborate apparatus for soaking up, sifting, dis- seminating the raw materials for "thinking together" at their beck and call, the NAM and its numerous affiliates are "able to voice a united opinion on vital national questions," and to back up the nam's claim that it "is the only organization exclusively repre- senting the interests of American industry," ^(R) on all policies of mutual interest.
Consistent with the view that its central function is to coor- dinate the thought and action of all American industry, the NAM has promoted the extension of business organization, thus further expanding its own powers, and has at the same time discouraged any other type of organization that might split or divide those powers. A few examples will suffice to show the issues at stake.
It has actively promoted employers' associations (trade, regional, and local), which have become affiliated with it through the Na- tional Industrial Council, and it has also aided in the formation of many general- and special-purpose organizations. An example of the former activity is the participation in the organization of the U. S. Chamber of Commerce in 1912, which was established to promote all American business objectives similar to those cham- pioned by the NAM for industry. An example of the latter is found in the ill-fated Trades and Workers' Association, organized around
igio by a Mr. Joseph W. Bryce, expatriate union leader, as an early effort to establish a nation-wide federation of company unions similar in membership and structure to the Labor Front of con- temporary Germany. ^^ This is illuminating not only for the anal-
48 The "affiliated Organizations" include the Air Corps, the Military Intelligence Division, and the Ordnance Dept. of the U. S. Army, and the Bureau of Ordnance and the Intelligence Division of the U. S. Navy.
49 NAM, Exhibit 3793, LaFoUette Committee Reports, Part 17, pp. 7528-37.
50 ". . . both employers and employees could become members of the Association. " Branches were to be established in various cities, organized by "mixed" or "one trade" lines . . . such as carpenters' branch, a bricklayers' branch, etc. , for each lo- cality where there were NAM members. Employers were to lead and conduct all activities. Strikes, lockouts and boycotts were to be prohibited. This type of company-
? 2o6 THE AMERICAN WAY
ogies current times offer, but also because it anticipated issues which were subsequently to engage the NAM in a fundamental organizational problem.
It was not until after the World War that the NAM shifted its general position from violent opposition to unions as such to an attempt to control labor organization by the establishment of company-controlled unions. With the inauguration of the "Open- Shop" drive, according to plans and policy lines laid out by such organizations as the National Metal Trades Association, the Spe- cial Conference Committee,^^ Industrial Relations Councilors,^^ and others, members of the NAM had to face the question of set- ting up central associations especially to handle labor problems separate from other matters of common concern.
This issue came to a head in 1933 with the proposal of A. C. Rees, manager of the Associated Industries of Utah and chairman of the American Plan-Open Shop Conference, to establish a "Coun- cil of American Industry" which would parallel the NAM and the NIC in part, but would also "interest . . . large groups such as bankers. Mining Congress, utilities, railroads, telephone compa- nies,shippinginterests,oil,etc. , . .
The tendency is natural and the result unexceptionable insofar as it makes wartime organization easier. In war economy cooperative groups can undoubtedly exercise useful functions. But some of the conse- quences must be suspect. The direction of these associations is always quasi-monopolistic domination of their trades, and in wartime this trend is encouraged in many ways. In every business scarcity and the limitations of supplies check newcomers. Prices tend to go up, and price cutters--hitherto the chief obstacles to the associations* j>olicy of keep- ing prices up--fare badly. The associations wax while their rivals wane.
Moreover, the various associations work together. Representations on any question relating to, say, retail tobacconists will possibly be made, not only by their own associations, but also by the associations, unions and federations, local and national, of confectioners, newsagents, hotels and restaurants and off-license holders--perhaps even with the backing of that active general body, the Retail Distributors Association. Each trade is a hierarchy, beginning with the local or district organization and rising to a National Council or Federation, and as all these hierar-
raent, and almost its one idea in matters of economic policy has been to endow the big capitalist associations and combines with authority over the consumers. " New Statesman and Nation, April 2, 1938.
88 "The New Feudalism," Economist, April 2, 1938.
? i88 BRITAIN'S "FEUDALISTIC SYSTEM"
chies interlock in their activities, it means that horizontally, as well as vertically, over the whole field of retailing they exercise a nation-wide power in pursuit of aims which are often by no means national. (R)^
As policy coordinator for this swiftly unfolding and cartel-like apparatus of trade associations, given an added fillip for more rapid extension of their powers and influence in the current national emergency, the Federation of British Industries takes on a new and far-reaching significance. Commanded at the top by a small coterie of officials who are drawn chiefly from large concerns or from concerns under the influence or control of the giants in their respective fields, and with both officials and controlling concerns bound together by an infinity of interconnections--personal, fam- ily, and institutional
--
vested with political powers of propaganda and coercion, this is the
into a tightly meshed business oligarchy
British pattern in the making; in trend, at least, it does not seem very different from that already dominant in states formally com- mitted to the "corporate idea. " The eventuality remains to be seen.
69 "Retailers' Front," Economist, Feb. 15, 1941, pp. 206-7.
? Chapter VI
THE AMERICAN WAY: 'BUSINESS SELF-REGIMENTATION''
THE ORIGIN of the National Association of Manufacturers stems
from a decade of combinations par excellence. Between 1890
and 1900 more and larger combinations took place than in the
entire preceding history of this country. This is true whether one
directs attention to mere number of consolidations, number of
workmen employed, or amount of capital involved. A speaker
arguing for a federal law of incorporation before the National As-
sociation of Manufacturers in 1904 summarized the amazing rec-
^
ord:
Statistics show that in the decade between i860 and 1870 only two in- dustrial trusts, formed by the combination of formerly competing con- cerns, had been created, and that with a total capitalization of only thirteen millions of dollars. In the next decade between 1870 and 1880, four more were formed, with a capitalization of one hundred and thirty- five million dollars. Between 1880 and 1890 eighteen more were formed, with a capitalization of two hundred twenty-eight millions of dollars; while the last census shows one hundred eighty-three combinations with a capitalization of $3,619,039,200 . . . In 1902 it is claimed that there were 213 combinations, with a capitalization of seven billions of dollars; while now it is claimed that there are nearly 1,000 industrial combina- tions, not including railroads, with a nominal capitalization of $9,000,- 000,000. 2
McCrary, "Another View of National Incorporation Needs," American
1 Alvin
Industries, Oct. 1, 1904, p. 13.
J.
2 ". . . by 1904 the trusts controlled fully two-fifths of the manufacturing capital of the country. " Henry R. Seager and Charles A. Gulick, Trust and Corporation Problems (New York, 1929), p. 61. These authors define trusts somewhat more nar- rowly than the speaker before the NAM, their total estimated "trust" capitalization of 1904 being given as $5,000,000,000.
? igo THE AMERICAN WAY
THE HISTORICAL SETTING: A TREND TOWARDS MONOPOLY
Few fields of business activity escaped this flight from "free competition" entirely. In one form or another--corporate con- solidations, pools, gentlemen's agreements, interlocking direc- torates--the larger movement affected the leading branches of in- dustry, commerce, finance, and transportation. Though in line with trends reaching back through the preceding decades, the process was so swift and so far-reaching that it appeared to many that shortly it must engulf the whole of the American economic system. As the facts became generally known clamor against the trusts mounted, for it seemed that when, of the outstanding com- binations, "26 controlled 80 per cent or more of the aggregate pro- duction in their fields; 57, 60 per cent or more; and 78, 50 per cent or more," ^ it was time that all classes sit up and take notice of the revolutionary changes being brought about in the American eco- nomic scene.
Smaller businessmen throughout the country concurred in the antitrust movement. But although then, as now,* the bulk of the complaints looking toward legislative and judicial action against the trusts emanated from affected business circles, businessmen showed little inclination to organize to such an end. Leaving these matters to the government, they chose, instead, to pool their re- sources so as to present a united front in promoting more extensive aid and grants of privilege from the political authorities which would prove of common value to them all. Thus arose, along with, and at first entirely independent of, the large combinations, the trade-association movement. The "trusts" had dramatized the ad- vantages of massed and centrally directed economic power. The trade associations hoped not to level down the trusts, but to "de- mocratize" analogous privileges for the business community as a whole.
>> Idem.
4 "It is business men and business men alone who file practically all the complaints with my division, and it is for business men that the anti-trust laws must be enforced. " Thurman W. Arnold, Assistant Attorney General of the United States in an address before the American Bar Association, San Francisco, July lo, 1939. Release of the Temporary National Economic Committee (TNEC).
? THE AMERICAN WAY 191
This covert and loose form of combination, commonly termed in American business circles "business cooperation" was entirely in keeping with the anticompetitive spirit of the times. It was further stimulated by the fact that the more open type of collusive action, the "pool," was quickly driven from the field as a result of federal antitrust prosecutions. Since the "pool" was the Ameri- canized form of the cartel, this country was "saved . . . from the European cartel system," ^ the better to allow trade associations to grow more slowly into the exercise of powers and influence which in many respects now reach far beyond those of all except the more advanced cartels abroad. ^
In this mushroom growth of new forms of business "self- regimentation," ^ the National Association of Manufacturers oc- cupied from its inception in 1895 a central, and in some respects a commanding, position. It was by all odds the largest, most carefully laid out, and the most enduring of the looser forms of business organization established for the specific purpose of centralizing, unifying, coordinating, and more effectively focusing policies re- lating to the business system as a whole. Others had preceded it, but with typically much smaller industrial coverage and with much narrower range of interests. ^ It was the peculiar role of the NAM
to undertake the coordination of the efforts of all business associa- tions--existing, subsequently organized, and special-purpose--in the entirety of manufacturing industries of the whole United States.
THE CHANGING PROGRAM FOR INDUSTRIAL COORDINATION
The original statement of principles given out by the National Association of Manufacturers provided a precis for all that was to
5 See Thurman Arnold, "The Anti-Trust Laws, Their Past and Future," address over the Columbia Broadcasting System, Aug. 19, 1939. Released by TNEC.
6 As shown, for example, in Federal investigation of the National Electric Light Association (now the Edison Electrical Institute) and the National Lumber Manu-
facturers' Association. See also statements by Dr. Theodore
sultant of the TNEC (release of the TNEC, Jan. 15, 1940) and Professor Clair Wil- cox (New York Times, Jan. 20, 1940) at the Cartel Hearings before the TNEC.
7 This is the expression used by Thurman Arnold in his various speeches dealing with what is commonly called "cooperation" by businessmen.
8 Such as the various associations established to fight organized labor, e. g. , the Stove Founder's National Defense Association, an outgrowth of the National As-
J.
Kreps, Economic Con-
? THE AMERICAN WAY
follow: "The general objects and purposes for which the said cor- poration is formed are the promotion of the industrial interests of the United States, the betterment of the relations between em- ployer and employee, the education of the public in the principles of individual liberty and the ownership of property, the support of legislation in furtherance of those principles and opposition to legislation in derogation thereof. " ^ According to later spokesmen, it has fulfilled this declaration of principles almost to the limits of desire. Speaking at the Thirty-Fourth Annual Meeting of the NAM, October, 1929, President Edgerton evaluated its achievements in colorful encomium:
In eighteen hundred ninety-five near both the geographic and popu- lation centers of the United States, there occurred an event which though unheralded was even then generally recognized as of momen- tous importance to the nation. But its more complete significance re- quired and has received the dispassionate testimony of history. At that auspicious time and appropriate place, the National Association of Manufacturers, fathered by necessity and summoned by conscious op- portunity, sprang exultantly like Minerva from the forehead of Jove into immediately useful existence. Notice was thus given to the world for the first time that the American manufacturing industry had come of age, and that it could and thereafter would speak with one voice on every occasion of common defense and on all occasions pertaining to its general welfare.
At our birth in 1895 there was scarcely a handful of industrial associ- ations of any size or character in the United States. Those in existence were almost exclusively trade organizations formed primarily for de- fense against the rising cloud of labor trade unions. Ours was the first and has continued to be the only general organization of manufacturers exclusively embracing all trades, conditions, sections, and sizes of indus- trial units. We have witnessed and often assisted at birth of nearly every state association, of practically all the associations, and of many of the special organizations now serving particular trade, geographic, or other homogeneous groups. ^*^
sociation of Stove Manufacturers, which was founded in 1886 as an antiunion em- ployers' association. Similar were the American Newspaper Publishers' Association and the United Typothetae of America, both founded in 1887.
9 Constitution and By-Laws of the National Association of Manufacturers of the United States, Article II, Section I.
10 Proceedings, 34th Annual Meeting of the National Association of Manufacturers (Oct. , 1929), pp. 14-15. Italics mine.
192
? THE AMERICAN WAY 193
The age was one of organization, "an age," said President Kirby in 1911,^^ "when but little can be accomplished except through organization; an age when organization must cope with organiza- tion. . . . " All businessmen must join them, and join as many of them as they could. The NAM was to serve as the "mother of asso- ciations," that all American industry might be organized from cen- ter to circumference. But at the center was to stand the NAM, functioning as a central policy-pressure and policy-forming body for all organized activity, irrespective of the angle or the nature of the interest at stake. As a more recent brochure puts it, the NAM is dedicated to promotion of "Unit Thinking and Unit Acting on the Part of American Industry. " ^^ It represents "The Nation's In- dustry--Organized," ^^ or "The Nation's Industry Synchro- nized," ^* the better to promote "the universalization of those sav- ing principles of American Industry--the right of those who own property to control it. " ^^ Its spokesmen think of control of prop- erty as it relates to all things and with respect to all men, classes, interests, and principles.
The Association has accomplished its ends sometimes by direct pressure of organized lobbies, sometimes by the aid of propaganda, and sometimes by the further organization of business interests along special trade, regional, or industrial lines. ^(R) And its history traces the evolution of efforts to round out its program of cen- tralizing common business policies to their full social, economic, and political implications.
In accordance with changes in the general economic and politi- cal scene, its major emphasis has shifted from time to time. Thus, at the beginning, the Association was primarily concerned with the dual objectives of tariff protection at home and promotion of fa- vorable markets abroad. It held to this dominating interest until
1903, when, under the influence of a wave of strikes and trade-
11 Proceedings, i6th Annual Convention (May, 1911), pp. 65-87.
12 NAM, Pamphlet, 1935. is NAM, Pamphlet, 1923.
14 NAM, Pamphlet, "Being a Brief History of the National Association of Manu-
facturers," undated.
15 Speech delivered by President John E. Edgerton, and published in the NAM Pro-
ceedings, Oct. , 1929.
16 For comprehensive discussion of these activities see LaFollette Committee Re-
ports, Parts 17, 18, and 19, and Report No. 6, Part 6.
? THE AMERICAN WAY
union activity, and through the direction of its new president David M. Parry, it shifted its efforts to combating trade unions and advancing the plan of the open shop. Although it did not abandon its original interest, but steadily increased its pressure for favorable tariff legislation, more active government aid in the expansion of foreign markets, and similar aims,^^ its activities were largely dom- inated by the problem of trade-union expansion until the United States entered the World War.
With the war and its aftermath, interests began to broaden out more nearly in line with the general agenda of the original state- ment of principles. The influence of the war on the NAM's con- ception of its role in the national economic picture was especially profound and far-reaching. As in all belligerent countries, war con- trol in the United States was exercised primarily through the inter- mediation of businessmen and business organization. Businessmen held the principal control offices and made the key administrative decisions in economic affairs. ^^ And in all their activities they nat- urally and habitually turned to their own organizations for the instrumentation of policies--policies which combined, so happily, patriotic performance of a critical "public duty" with lucrative gains to the trades and industries which the businessmen repre-
17 Specifically, such as the following: "home markets should be retained" and "for- eign relations . . . extended in every direction and manner not inconsistent there- with"; the "principle of reciprocity" should be applied wherever possible; there should be a "judicious system of subsidies of our merchant marine"; the Nicaraguan (and later the Panama) Canal should be constructed by the Federal Government; natural and artificial waterways "should be improved and extended. " NAM pamphlet, "The Nation's Industry Synchronized. "
18 Aside from the regular governmental and war departments, the following were the principal war control agencies: Food Administration, presided over by Herbert Hoover, a mining industrialist; Fuel Administration, presided over by Harry A. Garfield, former President of the Cleveland Chamber of Commerce and Director of the Cleveland Trust Co. ; War Industries Board, directed by Bernard Baruch, a Wall Street financier and stock-market operator; War Trade Board, directed by Vance McCormick, of the family associated with the International Harvester Co. In all these boards and committees, and throughout all leading offices in the regular federal machinery primarily concerned with the war and not filled by regular staff, business- men predominated, made the decisions, gave the orders, set the prices, determined legitimate costs, and set allowable profit margins--in industries which they controlled or dominated in their private capacities, and out of which most of their concerns achieved large, and in a few cases, colossal earnings. See the summary report of the Nye Committee on the Munitions Industry, 74th Congress, 2d Session, Report No. 944, Part 4.
194
? THE AMERICAN WAY
sented and which must now supply the necessary goods and serv- ices. ^^
During the war days two leading ideas struck root in the business community which were destined to exercise growing influence in the postwar years. The first of these was the conception of uni- versal organization of all business enterprise into all-inclusive and appropriate trade and industrial associations. The War Emergency and Reconstruction Conference was held by the Chamber of Com- merce of the United States -^ in December, 1918, and was par- ticipated in actively by representatives of the NAM. A "Resolution on trade associations" adopted by the conference summarized the point: "This conference heartily approves the plan of organizing each industry in the country in a representative national trade as- sociation and expresses the belief that every dealer, jobber, manu- facturer, and producer of raw materials should be a member of the national organization in his trade and cordially support it in its work. " 21
The second, and related idea came subsequently to be known by the slogan "self-government in industry," meaning specifically that any such organization of trade, commerce, and industry should be autonomous, interdependent, self-regulating. The idea was dis- cussed extensively in the literature of the day, and gave rise to a series of trade-practice agreements according to which the govern- ment was to turn over the governance of economic affairs, trade by trade, and industry by industry, to public-spirited business leaders.
19 "The record of the war service committees," said Mr. Sibley, President of the Chamber of Commerce of the United States in an address before the Trade Associa- tion Executives in New York City, Jan. 28, 1936, "is one of lasting achievement. " Business and government learned for the first time to work together "in tinie of emergency" and the businessman within his own industry "found himself in the position of working cooperatively. " From pamphlet material published by the Chamber of Commerce of the United States.
An attempt was made at an Atlantic City convention, called shortly after the close of the war, to organize the various industry "war service committees," of which there were nearly 400, into a single organization to perpetuate in peace times the controls, and promote habits of "working together," etc. , with which these organized business groups had become familiar in the emergency of war. The proposal contained most of the leading ideas subsequently incorporated into NRA.
20 The National Association of Manufacturers participated actively in the organi- zation of the Chamber of Commerce of the United States, though at times policies of the two central organizations seems to have been in rather serious conflict.
21 Sibley, in his address of Jan. 28, 1936.
195
? 196 THE AMERICAN WAY
Though finally discouraged by an adverse judgment of the Attor- ney General that such "agreements" might be in violation of the Anti-Trust acts,^- the idea persisted and, under the active support of the Department of Commerce and its vigorous secretary, Mr. Hoover, became a sort of theme-song of the "New Economic Era. "
Correlative with these new interests, and largely under the stim- ulus of the labor difficulties and the "deportations delirium" of the immediate postwar period, many of the leading trade associations evolved a new labor program. Designed primarily to keep the "open shop"--sometimes known as the "American Plan," sometimes la- beled "management relations," or "industrial relations," or "per- sonnel relations"--the drive found its principal expression in ac- tive and widespread promotion of company unions. The leadership in this movement was quickly taken by the NAM. ^^
The idea underlying its "Open Shop Committee" was that the "American Plan" of no trade unions, and "free bargaining" be- tween employer and employee (sometimes organized in company unions), would bring "industrial peace" throughout the nation. By these methods "harmony between labor and capital" was to be achieved "cooperatively," just as "self-government in industry" was to bring about uniformity in business practices while elevating these to a moral plane which would no longer require govern- mental regulation.
The great depression, which broke in the fall of 1929, brought this rosy-colored dream world of the New Economic Era to a rude close. In the midst of the ensuing confusion, the New Deal was born; offering, as many believed, a thoroughly rational set of com- promises, it set grimly to the task of reconciling what soon proved to be at bottom irreconcilable conflicts of interest. NRA took over Mr. Hoover's revamped wartime idea of "self-government in in- dustry" (a quasi-monopolistic notion) and tried to wed it to Presi- dent Roosevelt's Jeffersonian conception of a felicitous economic paradise--an honest competitive system. It quickly appeared that
22 They were not, however, discontinued entirely. The FTC has continued down to the present time to organize "trade practice agreements," though under the guise of devices for eliminating "unfair" and "dishonest" trade practices. See TNEC Monograph No. 34.
23 See Albion Guilford Taylor, Labor Policies of the National Association of Manufacturers (University of Illinois Studies in the Social Sciences, Urbana, 111. , 1928).
? THE AMERICAN WAY
the Codes served to transform the leading trade associations into cartel-like bodies endowed with extraordinary and far-reaching powers which came directly into conflict with previous antitrust legislation. And, at the same time that they appeared to offer a carte blanche to various forms of collusive action undertaken by these central agencies, Article 7a gave a tremendous stimulus to antipathetic labor organization. Once deflation had overtaken the flight of fancy which envisioned every man and all classes putting their shoulders to the wheel on behalf of a common aim (recovery and the general welfare) in an emergency of peace, disillusionment returned; it was accompanied by a new wave of strikes and lock- outs and by a more virulent phase of both commercial and labor warfare.
The program and the mood of the National Association of Manu- facturers shifted accordingly. If we properly interpret their litera- ture, though happy about the adoption of their pet idea, "self- government in business," ^* they had smelled a rat in the New Deal program from the outset. Smelled it and pointed it out. But with the new formulation of the issues, symbolized in the mass expansion of the labor movement, all problems seemed transmuted into political and ideological terms.
The National Association of Manufacturers began to move into the picture with a new set of working objectives. Rather, one should say, with an old set of objectives seen in a quite new per- spective. ^^ This perspective called for a greatly expanded program of public relations. Beginning with a small allocation of some $36,500 in 1934, within four years the "public information pro- gram" had increased to $793,043 in 1937, or from 7. 2 percent of the nam's total budget to 55. 1 percent. ^^ Astonishing as this shift in emphasis may appear, the figures tell only a small part of the story. The totals here cited involve only out-of-pocket expenditures of the NAM; most of the "information" was disseminated through
24 See the series of bulletins issued in 1934 by the NAM (jointly with the National Industrial Conference Board) and entitled "Industrial Self-Government. "
25 Referring to the labor program in a letter to Evart C. Stevens, President of the International Silver Company, on June 22, 1936, Colby M.
Chester, President of the NAM said that "in 1903 the Association adopted a set of principles which is still officially our 'Bible' in this field. " The same is true of other declared principles.
26 From the LaFollette Committee, Report No. 6, Part 6, Labor Policies of Em- ployers' Associations, p. 168, "The National Association of Manufacturers. "
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space-and-time contributions of media or was paid for by other organizations. ^^ If we may take at face value the testimony of Wil- liam B. Warner, President of the NAM in 1937, that the total com- mercial value of the national public-information program "would be more like that amount [$793,043] for each state, instead of for the United States, if it were on a pay-as-you-go program," ^^ then by 1937 the commercial value of this campaign was perhaps up- wards of $36,000,000.
The central thesis of this outpouring of propaganda called for nothing short of conversion of the public at large to the economic objectives, the ideals, and the program of the business community as a whole. Its whole program for governmental aid, support, and cooperation, reaching back to the days of 1895, was now trans- formed into a campaign against "government interference in busi- ness. " The only alternative offered by their programs was, by im- plication, full and complete government coordination with the needs, interests, and social outlook of organized business. And its whole anti-union drive, memorialized in thousands of articles, speeches, and brochures from 1903 on, was now to be transposed and fitted as a central foundation stone in the new and revitalized public-relations program. To overreach labor, to state the matter somewhat epigrammatically, it was first necessary to change the out- look of government; and to accomplish this purpose, it was first necessary to convert the general public. In this new propaganda offensive, nothing was to be left out which could influence in any decisive fashion the loyalty or social outlook of any member of the public, old or young, male or female, in the ranks of labor or the professional classes.
OUTWARD SPREAD OF THE ORGANIZATIONAL NETWORK
At first glance, the membership record of the National Associa- tion of Manufacturers is unimpressive. The initial gathering in 1895 included 583 manufacturing members. By 1901 membership had almost doubled, reaching in that year a total of 1,082. Yet, ac-
27 Most of the radio, outdoor advertising, and newspaper space via which the propaganda was fed out was contributed space. To each of these in the year indicated was contributed a minimum of one million dollars. Idem.
28 Idem.
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cording to the 1900 Census, there were 296,440 manufacturing es- tablishments in the United States. ^(R) On the surface such a coverage seems insignificant. Rapid as was the growth of membership in subsequent years,^" the percentage of all manufacturing establish- ments brought into the organization has always been extremely small.
Inspection of the rather incomplete records, however, shows quite a different picture. Member concerns, if not always the larg- est in their fields, have typically been among the leaders. In a year (1915) when the membership fluctuated around 4,000, a spokesman for the association found that *'The Members of our National As- sociation of Manufacturers alone employ, in normal times, nearly six million workers, and the members of this association manu- facture, in America, each year, more goods, measured by money values, than are produced by the entire population of any other nation of the world. " ^^ Ten years later another spokesman de- clared that members of the NAM represented an invested capital of something like four billion dollars. ^^
Impressive as such figures may be when taken by themselves and the picture has not changed much with respect to coverage today ^^--it would still seem that on such a basis the NAM fell far short of its claim to represent the whole of industrial activity in America. ^* This defect has been remedied by the establishment of the National Industrial Council, organized and controlled by the NAM, and designed to include in its membership all associations, national and local, which represent all the industrial enterprises of America.
Originally known as the National Council for Industrial De- fense, the National Industrial Council was founded in 1907 "as a
29 This total did "not include 215,814 hand trades; 127,419 establishments with a product of less than $500; 138 governmental establishments and 383 educational, eleemosynary and penal institutions. " Twentieth Century Fund, Big Business, Its Growth and Its Place (New York, 1937), p. 34.
30 2,707 in 1903; 4,000 in 1916; 4,500 in 1919; 6,000 in 1924. The most recent figure is given as 7,500. NAM brochure, "Women, Partners with Industry in the Economic and Social Advancement of the Nation. "
^^ American Industries, May, 1915, p. 22.
32 Ibid. , Nov. , 1925, p. 5. 33 See pp. 201-2.
84 In a prepared statement before the LaFollette Committee, Mr. Walter B. Weisen-
burger of the NAM estimated that members of the NAM "employ between one-third and one-half of all workers in manufacturing industry. " LaFollette Committee Re- ports, Part 18, pp. 7850-51.
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joint legislative committee of the National Association of Manu- facturers and the Citizens' Industrial Association of America. " ^^ Its membership is made up exclusively of associations, and its functions are controlled by the NAM through the devices of com- mon officers, common headquarters, common research staff, and through a largely cooptative--in effect, largely self-elected and self-perpetuating--executive committee. By 1913 its membership included 253 national, state, and local organizations. By 1920, this number had grown to 300. Subsequently the Council has shown relatively slight increase in number of member associations, but the coverage of these associations has been enormously ex- panded. ^(R)
In fact, one of the purposes in establishing the NIC was to pre- vent undue multiplication, duplication, and overlapping of em- ployer organizations. An NAM brochure of 1928 makes this clear. "While functioning as a national body, the leaders of the associa- tion realized the value of work on a decentralized basis and in- augurated campaigns for the organization of state manufacturers' associations. Their efforts were rewarded by the formation and development of many such organizations, and to coordinate their efforts, thus eliminating unnecessary duplication of effort, the National Industrial Council was organized by the Association. " ^^ This is a consistent following out of the original intentions of its founders, as is shown by the speech of President Van Cleave one year after the founding of the new body:
I called a meeting of representatives of a number of various organiza- tions here at the Waldorf-Astoria, and after several meetings we finally succeeded in getting a simple working-plan. We realized the undesira- bility of multiplied associations, and we finally adopted the plan that, working under the auspices of the National Association of Manufac- turers, we would ask of these various organizations, both national and state, and of the local boards of trade and associations of business men to authorize this council movement, which we designated the National Council for Industrial Defense, to authorize us to represent them. The
35 Clarence E. Bonnett, Employers' Associations in the United States (New York,
1922), p. 374.
36 In the statement of Mr. Weisenburger quoted in footnote 34, it is estimated that
through the NIC the NAM "comes in contact with an additional 40,000 manufac- urers. "
87 NAM, "The Nation's Industry Synchronized," p. 14.
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National Association of Manufacturers becomes primarily, but not fully the financial representative. ^(R)
Its purpose was and is to focus all manufacturing power, local and national, on behalf of mutual interests in general, but par- ticularly with respect to legislation bearing upon the labor ques- tion. This is shown both by its declared objectives as stated in its constitution, and by general commentary in the trade press of the times. Among the stated objectives the following are particularly significant:
To establish and maintain a legislative reference bureau for the com- pilation, analysis and distribution of accurate and timely information respecting legislation affecting industrial relations.
To advise its members with respect to legislation proposed or enacted, affecting their business relations with the various departments of the national government and with state governments when deemed ad- visable.
To preserve and promote the principles of individual freedom for employers and employees in commerce and industry. To emphasize the essential worth of these, and to defend them against legislation calcu- lated to impair or destroy them or the legal remedies by which they are efficiently protected. To appeal to public and legislative opinion re- specting these matters through every medium through which it can be legitimately and effectively informed.
Vigorously to oppose class legislation in whatever form it proposes to make it lawful for one class of citizens to do that which remains un- lawful for any other class to do. To encourage legislation tending to better the relations between employer and employee. ^^
In 1933 the NAM and in 1936 the NIC underwent general re- organization for the purpose of further centralizing control and tightening up the organizational structure. The changes brought about in the NAM, which we will discuss shortly, fall primarily under centralization of control--although a by-product of efforts along this line was to increase materially the badly impaired mem- bership ranks. *? The NIC, however, underwent a general over- hauling, which transformed it from a loose federation of mis-
38 NAM, Proceedings (1908), p. 295.
39 Constitution, National Council for Industrial Defense.
40 Members and noncontributing members had fallen, in 1933, to 1,469. Increase
thereafter was as follows: 1934, 1,910; 1935, 2490; 1936, 2,905; 1937, 3,008. In 1938 membership approached 4,000.
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cellaneous trades organizations and employers associations into a compact and efficiently functioning affiliate of the NAM.
Prior to 1936, the NIC had been, in the words of William Frew Long, head of the Associated Industries of Cleveland, composed "almost entirely of State associations, and those of us in local asso- ciations rather resented that fact. " *^ Furthermore, there had been thrown together under the old arrangement miscellaneous associa- tions, large and small, special-purpose trade associations and gen- eral employer associations, without any clear grouping by inter- ests, powers, or functions. This the reorganization was designed to correct, by setting up three distinct types of members. The first is made up of state industrial associations, some 35 ^^ in number in 1 940, which represent central coordinating associations similar on a state-wide basis to the NAM on a nation-wide basis. The second comprises industrial-employment-relations organizations, mostly on a city-wide basis, but including most of the central employers' associations in the leading manufacturing centers of America. There were 107 of these in 1940. The third group includes (1940) 92 national manufacturing associations, constituting the dominant large associations in both heavy and light manufacturing fields. There are also 14 "miscellaneous" association members.
To state the matter somewhat differently, the NIC is now made up of three functionally different types of associations whose mem- bership is overlapping in part and whose interests are interlaced in an almost infinitely complex pattern. Most of the large manu- facturing companies of America belong to the NAM in their cor- porate capacities. Most of them, likewise, are organized in manu- facturing trade associations such as the Iron and Steel Institute, the Cotton Textile Institute, the National Electric Manufacturers As- sociation, and the rest. Again, most of these concerns are located in or near large cities, and are members of employers' associations, such as the Associated Industries of Cleveland and the Industrial Association of San Francisco, primarily concerned with formulat-
ing and carrying through a common policy on all phases of labor relations. Finally, most of these manufacturers are to be found in the principal manufacturing states, and are members of state manu-
al Cited in La Follette Committee Reports, Part 6, No. 6, p. 61.
*2 From data given in a letter from Noel Sargent, Secretary of the NAM, dated Feb. 8, 1940.
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facturers' associations interested in formulating common policies on a state-wide or regional basis. In part, consequently, individual membership is fourfold.
This holds almost exclusively, however, for members of the NAM, who, with very few exceptions, are members of the other three types of associations brought together in the NIC. But as one goes from the national manufacturing associations, to the more specifically employers' associations, and down to the state industrial associations, the coverage spreads, and the degree of duplica- tion of membership declines. Under one or another form of repre- sentation, it seems probable that the NIC includes in its member- ship close to 80 percent of all manufacturing activity in the United States. The other 20 percent, with rare exceptions, is made up of small-scale and relatively unimportant concerns.
Thus the reorganization of the NIC has at once simplified, streamlined, and extended the reach of the NAM down through the entirety of the American industrial system. To employ the nam's own term, the association has taken the step from the "na- tion's industry organized," to the "nation's industry synchronized. "
Paralleling in part this elaborate policy-formulating meshwork is the National Industrial Conference Board. Originally estab- lished in 1916, as a by-product of experience in war-controls and war-time habits of "business cooperation," it was designed to serve a two-fold function. On the one hand it was to supply relevant information to the NAM and other sponsoring and member asso- ciations; on the other it was to provide the factual background for a convincing propaganda that has been adjusted, as it has evolved over the years, to meet all levels of intelligence and knowledge, and to affect professor, housewife, and day laborer.
It was, consequently, advertised as an "impartial, fact-finding body," whose object it would be to investigate all aspects of in- dustrial life, and through its analyses and publications "promote good understanding and friendly relations between employees and employers for the benefit of both, and between those engaged in industry and the public, for the general good of the community. " This was to be done in "cooperation with individuals, institutions, associations, and agencies of the Government," to the end that, by making its findings generally available to legislatures, scholars,
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labor and the general public, it might "encourage and promote the sound development of American industry by all proper and legiti- mate means. " *^
The NICB was a "war baby," and it participated actively in the promotions of coordination of the war effort. On the practical side, it assisted in, and by spokesman of the NAM has been given credit for, the formation of the War Labor Board. ** On the ide- ological front it promoted "unit thinking. " As Mr. L. W. O'Leary, President of the National Metal Trades Association expressed it in
1920, "The National Industrial Conference Board is of . . . great
value in that it is bringing about uniformity of thought and action
among employers, woefully lacking in the past. We are thinking
*^
together. "
The Board's research facilities are elaborate, expensive, and im-
pressive. Occupying sumptuous quarters on lower Park Avenue, New York City, it is equipped with a large research staff, extensive library facilities, and a vast corps of domestic and foreign cor- respondents, who enable it to turn out research findings on a mass production basis. To give even an outline of its functions and product would require an extensive monograph. *^
Its activities fall under three mains heads. Discussion, Research and Publication, and Service. The first includes four different types of special committee meetings: Private Meetings of the Con- ference Board (monthly). Advisory Committee Meetings (peri- odic), meetings of a Conference Board of Statisticians in Industry (monthly), and of the Conference of Corporate Statisticians (monthly). *^ Research and Publication include Books and Special Reports (comprising seven subdivisions). Periodical Publications
(four subdivisions), and Confidential Memoranda (including key information sent on request to members, and also regular circulars). Service includes a Reference Library, Publicity, and Correspond- ence. Foreign correspondents, executive officials strategically lo- cated in the leading industrial centers of the world, keep the
*3 Bonnett, Employers' Associations, p. 478.
4* Ibid. , p. 490. 45 Ibid. , p. 483.
46 A good general outline of the Conference Board's work, functions, and organiza-
tion is given in its 23d Annual Report, revised to Jan. 1, 1940.
47 Additional conferences are held from time to time by business economists, per-
sonnel executives, and foreign trade executives.
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Board in close and intimate contact with developments abroad. There is practically nothing the Board does not examine--local, national, or international--of interest to the economic, political, social and cultural interests of manufacturers' and allied associa- tions. ^^
Having such an elaborate apparatus for soaking up, sifting, dis- seminating the raw materials for "thinking together" at their beck and call, the NAM and its numerous affiliates are "able to voice a united opinion on vital national questions," and to back up the nam's claim that it "is the only organization exclusively repre- senting the interests of American industry," ^(R) on all policies of mutual interest.
Consistent with the view that its central function is to coor- dinate the thought and action of all American industry, the NAM has promoted the extension of business organization, thus further expanding its own powers, and has at the same time discouraged any other type of organization that might split or divide those powers. A few examples will suffice to show the issues at stake.
It has actively promoted employers' associations (trade, regional, and local), which have become affiliated with it through the Na- tional Industrial Council, and it has also aided in the formation of many general- and special-purpose organizations. An example of the former activity is the participation in the organization of the U. S. Chamber of Commerce in 1912, which was established to promote all American business objectives similar to those cham- pioned by the NAM for industry. An example of the latter is found in the ill-fated Trades and Workers' Association, organized around
igio by a Mr. Joseph W. Bryce, expatriate union leader, as an early effort to establish a nation-wide federation of company unions similar in membership and structure to the Labor Front of con- temporary Germany. ^^ This is illuminating not only for the anal-
48 The "affiliated Organizations" include the Air Corps, the Military Intelligence Division, and the Ordnance Dept. of the U. S. Army, and the Bureau of Ordnance and the Intelligence Division of the U. S. Navy.
49 NAM, Exhibit 3793, LaFoUette Committee Reports, Part 17, pp. 7528-37.
50 ". . . both employers and employees could become members of the Association. " Branches were to be established in various cities, organized by "mixed" or "one trade" lines . . . such as carpenters' branch, a bricklayers' branch, etc. , for each lo- cality where there were NAM members. Employers were to lead and conduct all activities. Strikes, lockouts and boycotts were to be prohibited. This type of company-
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ogies current times offer, but also because it anticipated issues which were subsequently to engage the NAM in a fundamental organizational problem.
It was not until after the World War that the NAM shifted its general position from violent opposition to unions as such to an attempt to control labor organization by the establishment of company-controlled unions. With the inauguration of the "Open- Shop" drive, according to plans and policy lines laid out by such organizations as the National Metal Trades Association, the Spe- cial Conference Committee,^^ Industrial Relations Councilors,^^ and others, members of the NAM had to face the question of set- ting up central associations especially to handle labor problems separate from other matters of common concern.
This issue came to a head in 1933 with the proposal of A. C. Rees, manager of the Associated Industries of Utah and chairman of the American Plan-Open Shop Conference, to establish a "Coun- cil of American Industry" which would parallel the NAM and the NIC in part, but would also "interest . . . large groups such as bankers. Mining Congress, utilities, railroads, telephone compa- nies,shippinginterests,oil,etc. , . .
