No More Learning

The specific purpose is always and universally that of consolidating the economic and political power of the upper social layers. And the content is designed to inculcate public loyalty to the same social layers whenever their authority or rights of leadership are seriously questioned. Just what symbolism it uses, and by what methods or routes popular acceptance of the dictates of the upper social layers is achieved, will depend upon times, circumstances, and historical antecedents. But the purpose is always the same, and the central
theme is always that felicitous relation between the rulers and the
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ruled, between master and man which is said to represent "social harmony. "
Most public relations as we know it in America, to make a long story short, not only strives to "sell the public" on the "enterprise system," but also makes its appeal primarily to the symbolism and myths of "social harmony" and "class collaboration," as these have been transmuted to fit into the ideological framework of the "mid- dle class" outlook.
That "social harmony," with its implied--^when not directly in- sisted upon--blind acceptance of the "leadership" of compactly or- ganized business, is the object of American public relations is so well known that it no longer requires proof. The series of adver- tisements by the NAM captioned "Prosperity Dwells Where Har- mony Reigns," is typical of the central strain running through all big-business controlled propaganda here and abroad. In a society where the burgherdom has played such an important role through- out its history as it has in the United States, this really means "mid- dle class relations. "
That the central appeal in American public-relations literature is directed largely, if not exclusively, to the middle class can easily be demonstrated. Aside from early sporadic efforts, the first clear appeal made in peacetimes for public support of the business sys- tem as such came during the postwar years, when middle-class "unions" of one sort or another were organized in the various formerly belligerent countries as an offset to resurgence of popular demands and threatened civil strife. In one form or another they were established by militant business interests in the United States, England, France, Italy and Germany. ^* With the return to "pros-
74 In England the Middle Classes Union, organized in 1919 to defend the "people with the middle interests" claimed that it was able to destroy successively a railroad strike, a coal strike, and a dock strike. In France a "confederation of Intellectual Workers" was formed about the same time. It claimed 120,000 members in 1921 dedicated to the position that demands of intellectuals "had nothing in common with those of the manual laborers. " New York Times, May 22, 1921. In Italy "a number of organizations comparable to what may be called a vast middle-class union" were "formed throughout the various cities and towns" during 1920 which brought to- gether "the gentlemen of assured income" in forces sufficiently powerful to "break the back" of a strike of postal clerks and railroad employees. New York Times, May 23, 1920. In Germany a similar union made up primarily of professional people had doctors and hospital help who refused during the period of the Spartacist revolts
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perity," and the subsidence of popular discontent, middle-class unions everywhere went on the rocks.
But with the beginning of the great depression of the early thir- ties, the leading business concerns made new and much more effec- tive efforts to mobilize sentiments along these lines. By this time, however, a number of factors conspired to alter greatly the type of appeal within the United States. The factors, outlined in this study, include the growth in the relative importance of the Spitzenver- bdnde and the dominant position of the giant corporations within these newer networks, together with an increasing concentration of control over the media for the dissemination of information on the one hand, and the critical character of American relations with countries which had formally gone over to a totalitarian basis on the other. The change in appeal was twofold. One emphasis led to the organization of various types of semi- or openly vigilante Citi-
zens' Committees and Citizens' Forums. The other led to the rise of public-relations counselors, frequently in connection with or- ganized advertising agencies, but everywhere openly and frankly employing the techniques and the approach of high-pressure ad- vertising. Fusion of these two in the middle thirties, with adver- tising steadily gaining the guiding power, had led by the latter part of the decade to the swift articulation of an organized nation-wide business propaganda for the "sale of ideas" to the American people dealing with promotion of the values and merits of "the enterprise system. "
Just what this means can be seen when it is realized that ad- vertising in America, contrary to the common impression, had come by the early thirties to direct its appeals not to the broad masses but primarily to the middle-income layers. The expression long employed in these circles to describe the shift of the basis of the
to serve "sick Proletarians" in a "counter strike," with the result that these same "sick proletarians could thenceforth obtain neither drugs nor medical attention, while proletarian patients were left unattended in their beds. " The result was a breaking of the strike. Lothrop Stoddard, "The Common People's Union," World's Work XXXIX (Nov. , 1919), No. 1, pp. 102-4. A"nd in 1920, on the suggestion of Chauncey Depew of the New York Central Railroad, a People's Union was estab- lished with headquarters at the New York Press Club. It announced in its first official statement that "The breath of our life is public opinion. This movement is answer to a demand by the country's press for protection of the organized public from the terrible consequences of general strikes. " New York Times, July 22, 1920. See also, Corbin, The Return of the Middle Class.
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appeal from mass markets to the middle class has been, "the market
is a diamond. " The phrase means simply that, when incomes are
aggregated by layers horizontally across the typical income pyra-
mid, purchasing power by income layers takes on the shape of a
diamond, not a triangle. Advertising copy is then written to a mass
market, rated in terms of purchasing power, across the center of a
diamond and not the base of a pyramid. Sales above or below what-
ever may be determined as the two limiting bands of profitable
appeal are then regarded as of the order of "windfall gains. " Only
to the income territory within the two bands, however, does "it pay
"^^ to advertise. "
The market for every commodity has been shown to have some variation on the general diamond shape, including even the cheap- est and most widely sold foodstuffs. Likewise the market for con- sumer goods as a whole shows the diamond pattern. But it is inter- esting to note that the companies which advertise, the agencies which write the advertising copy, and the media through which advertising appeals are made are not only typically large-scale, ex- clusive, and closely controlled by the upper social strata, whose in- comes are above the upper band, but also that the lower band, de- pending upon the commodity, excludes from between 20 and 60 percent or more of the entire population of the United States. This only means, of course, that the upper social layers purchase but small quantities of mass produced goods and services from which they draw their incomes, and that the lower income layers have in- sufficient purchasing power to be worth the cost of the appeal.
Consequently, when militant interests within the advertising in- dustry begin to take over the "sale of ideas," its copy is written primarily as appeal to the middle-income layers. Such a fusion of advertising and public relations not only directs attention to the values, institutions, and symbolisms of the middle layers, but also does so at a time when the income, occupation, and social security status of these same ranks is becoming peculiarly and increasingly unstable. The "average citizen," for example, is gradually losing his property stakes. The little businessman is in a more precarious position than at any time since the very beginning of the capitalis-
ts See W. H. Mullen, "Diamond as Market Pattern," Printers' Ink, Feb. 6, 1936, pp. 66-70.
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tic system. The farmer-operator is in the process of being trans- ferred from an independent owner to a dependent tenant. It is be- coming more expensive to acquire education for, and proficiency in, the learned professions, with the result that the professions are becoming more exclusive and opportunities for jobs more re- stricted. A large and increasing range of skilled crafts and white- collar workers are being proletarized. And so on, ad infinitum. Yet the very multiplicity of variables in the picture, the varied social antecedents of these ranks, and the general confusion wrought by the swiftness of some of the changes, when coupled to the momen- tous social and political issues at stake, makes these people while in the very process of being declassed still peculiarly susceptible to a "middle class" appeal directed by the upper social stratum.
The content of the appeal made to these ranks by such adver- tising is not only geared to "middle class" ideologies, but also, so to speak, to its modes of speech and manners of thought. Historically the "middle classes" took root as rising trading, commercial, and industrial classes, deeply imbued with what Sombart has called the ideologies of "holy economy" as practiced by an Alberti, a Jacob Fugger or such a shrewd and calculating Yankee Bonhomme as Benjamin Franklin. The characteristic gospel of Franklin's "get ahead," altered and transmuted by the evolving techniques of
"high' pressure," has led directly to the ripened techniques of much contemporary advertising.
These can be said to center around such generally accepted, if not almost hallowed ideas as caeterus paribus, "all the traffic will bear," "repetition is reputation," and "truth is believability. " When these techniques and ideas are focused on the "sale of ideas," the net result may be summarized as forceful persuasion, via cal- culating doctrinal exegesis, of those potentially convertible social layers who are most apt to be won over to the rules of status at the lowest per capita cost, by articulate and ideologically ambidextrous spokesmen for those who have a special vested interest in the main-
tenance of the status quo. And the content of this propaganda is the notion of "social harmony. "
It would be extremely interesting to compare the forms, ideas, appeals, and symbolisms employed by this American propaganda with those being evolved abroad--particularly within the totali-
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293
tarian countries. The American techniques are, of course, charac- teristically of native vintage, yet the care of the central "harmony" argument on the one hand, and the cavalier disregard of the usual canons of scientific truth on the other, amount to much the same thing both in this country and abroad. When such a blending is fully centralized and carefully rationalized, the logical result can only be a "ministry of propaganda" directed towards the defense and maintenance of whatever slowly consolidating hierarchy of policy-making power its characteristic ideology was devised to promote.
It is, then, perhaps unnecessary to remark that public relations in America are thus increasingly designed as means for coordinat- ing (1) labor or "industrial" relations activity, (2) advertising or "consumer relations," (3) small business or "trade relations," and (4) farmer or "agricultural relations. " Which is to say that while public relations directs its programs primarily at the conquest of the "soul" of the middle classes, its officers are attempting to make this appeal the center around which to group all other propaganda efforts directed to the coordination of all groups and interests to the evolving ideologies of status.
And from all our historical evidence it is entirely obvious that, in a regime of benevolent status, "social harmony" calls for the "lead- ership" of the "trustee" in all things and with respect to all people. Otherwise it becomes unalloyed despotism.
But under neither circumstance, of course, is the result recon- cilable with democratic institutions--except in the propaganda.
? Chapter IX
POLITICAL POLICIES: BUREAUCRACY, HIERARCHY, TOTALITARIANISM
c4npiHE ANIMOSITY o? German capitalism against the state," wrote JL Professor Bonn on the eve of the Nazi coup d'etat, "does not rest upon fundamental theoretical foundations, but upon purely opportunistic considerations. It is opposed to the state when state control is in the hands of a political majority whose permanent good will it doubts. German capitalism, which would like to be freed of the power of the state, and which seeks to push back state intervention as far as possible, is constructed exclusively upon the most thorough intervention of the state. " ^ A correct generalization this, but one which might have been as readily applied to monopo- listically-oriented business in any other major or minor capitalistic country. For the confessed objectives of German business which filled Bonn with gloomy foreboding--the drive for a well-nigh all- inclusive system of tariff protection, ever more elaborate subsidies and subventions, more and more governmental aid in the control over competition--^were at that same time coming swiftly to domi-
nate the programs of organized business all over the world. German levels of organization were at that time doubtless some- what higher than those obtaining abroad, the clarity of her business leaders less confused by serious factional cross-currents, and the attitude of the government in general was far more lenient. But the patterns of thought, the modes of procedure, the forms of organiza- tion, and the principles at stake were shared by companion inter- ests in England, France, the United States and elsewhere. There was nothing in principle to distinguish the programs of the Reichs- verband der deutschen Industrie from that of the National Asso-
1 M. J. Bonn, Das Schicksal des deutschen Kapitalismus, (1931), pp. 95-96, 98.
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295
elation of Manufacturers in the United States or the Confederation Generale de la Production Fran^aise, nor of the immense and rap- idly proliferating meshwork of trade-associations, cartels, syndi- cates, chambers, and business institutes brought together in these general purpose peak associations, or Spitzenverbdnde. Nor, least of all, was there anything to distinguish the trend of economic thinking, social outlook, and political interests of the huge com- binations which had come increasingly to dominate the inner coun- cils of their respective central associations in the capitalistic coun- tries.
Since the time Bonn wrote his study, this dual process of expand- ing business organization and business-government interpenetra- tion has been greatly speeded up. Within three major capitalistic countries the fusion between private enterprise and political au- thority has been extended far enough for the habit of regarding politics and economics as but two facets of a single thing to become the rule and not the exception. Fascist Italy has greatly expanded the power and influence of the "Corporate System. " Germany has become National Socialist, and the whole of her elaborate economic machinery has been given some degree of official political status. Japan has followed suit, and from latest reports France under the occupation is treading the same path. NRA within the United States pointed in the same general direction, and the more recent developments of the National Defense program appear to be pick- ing up where that ill-fated experiment left off. British war controls, as the London Economist has pointed out in a series of caustic articles, have vested in private hands political authorities which sanctify de jure what was rapidly becoming de facto a ''feudalistic system of cartel control. "
Now, in appraising the significance of this morganatic alliance of private economic power and government it is important to re- member, that the former derives from a system of monopoly, or of interlocking monopoly-minded groups, and that the institutional umbilicus of this monopoly-orientation feeds upon the sanctions of private property. It is, of course, a truism that even in its ger- minal form private property is far more than a mere economic cate- gory; that it is equally a "political" institution. Through owner- ship of productive means, the individual is, under capitalism.
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vested with a bundle of definitive rights and prerogatives. Under these sanctions he is granted narrowly defined but inherently ex- clusive power to manipulate people in an environment of rigor- ously interdependent human relations. Whether, as Spencer once wrote in a scorching passage, "the original deeds were written with the sword," it is nevertheless true that with and through such pos- sessions one can coerce, bend others to one's will, withhold, re- strain, settle the fate and alter the fortunes of growing numbers of non-owners without, and increasingly against, their consent. The natural frame of reference of ownership is, and has been from the beginning, as clearly political as economic, as obviously "Machia- vellian" as "Ricardian. "
Fee simple is related to private monopoly as youth is to age, as acorn to oak. It is the minuscular shape, the germinal form, the archetypal pattern for the proliferating giants which have sprung from its institutional loins. If private ownership of the means of production prevails throughout an economic system and is largely unimpaired by hostile countervailing forces, then, sooner or later monopoly in all its manifold expressions must appear on the scene. For property is power, and collusion is as "natural" as competi- tion--a fact which the great Adam Smith was quick to recognize. ^ Because this is true, growth of such possessions expresses power cumulatively; left to itself this power is additive, unidirectional, without internal restraints and external limits. Its higher economic form of expression is monopoly, and monopoly prerogatives are to power as fulcrum is to lever.
2 The passages are well known: "Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular ac- tion [today it would be known as an "unfair trade practice"! ], and a sort of reproach to a master among his neighbors and equals. We seldom, indeed, hear of this com- bination because it is the usual, and one may say, the natural state of things which nobody ever hears of. " Again, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such as- semblies; much less to render them necessary. " Adam Smith, The Wealth of Na- tions, Cannan ed. , pp. 66-67, 128. Italics mine. This latter, of course, is exactly what is done by NRA, price maintenance, "unfair trade practice," marketing control and other recent types of legislation, which are to be found in similar form in prac- tically all other countries, totalitarian and non-totalitarian alike; except for the word "necessary" one must now substitute the word "compulsory" in about half the casesl
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Power is compulsive, and when distributed unequally between bargaining groups is irreconcilable with "free contract. " Fee sim- ple distributes power unevenly between the "haves" and the "have-nots"; monopoly heightens and complicates the dispropor- tionalities in the graduated ranks of both. Law and the courts as frequently underline as correct the resultant distortion. It is this configuration of coercive forces, disproportionately matched, which accounts for the usual and inherently lop-sided "contract," and not the nature of the "rights" of bargaining groups. Power, in private hands, comes up against such claims as water comes to a wall, taking advantage of every crevice, depression, resource, or structural weakness. The proper expression is not "expansion of power" from these property nuclei, but cumulative permeation of power, as the history of the unfolding controls of all the great com- bines, cartels, trade associations, and Spitzenverbdnde abundantly shows.
Now it is a common characteristic of all monopoly-oriented groupings, major and minor, that each newly acquired leverage is typically employed for further collusive, rather than for com- petitive, efforts. Not "monopolistic competition" but "monopo- listic collusion" paces the gathering up and centralization of power to determine business policies over ever widening areas. ^ In plans lying behind the strategies of price fixation such things as produc- tion control, market allocations, and similar economic programs become increasingly the vehicles for strengthening tactical position in the pressure politics of collusive Realpolitik; they are not ends in themselves as so many recent economic theorists have mistakenly assumed. * But more than that, as struggle for strategic position
s See Callman, Das deutsche Kartellrecht and Unlautere Wettbewerb; Lucas, In- dustrial Reconstruction, for the British story; and the various reports of the LaFollette Committee, the Temporary National Economic Committee, and the indictments of the Anti-Trust Division of the Department of Justice and the Federal Trade Com- mission.
4 E. g. , and most notoriously, Edward Chamberlain, The Theory of Monopolistic Competition, and Joan Robinson, The Economics of Imperfect Competition. (Not,
M. Keynes, though many of his proposals in this connection appear as
however,
the product of "split-personality. ") Chamberlain by implication (Appendix E, "Some Arguments in Favor of Trade-Mark Infringement and 'Unfair Trading' ") and Mrs. Robinson explicitly recognize as much when they admit that their examination of monopolistic practices assume the absence of collusive intent or strategies reaching beyond the end of maximum gains. But it will no longer do to insist that an economist qua economist can only remain true to himself when he acts naively towards half to two-thirds of his problem, or, becoming sophisticated, insists on
J.
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broadens out over wider and wider areas, both ends and means be- come increasingly enmeshed in more or less distinctly and canoni- cally social and political issues--issues which, to employ the lan- guage of Karl Mannheim, reach to the ''roots of domination" and thus become "vested with a public interest" in a new and revolu- tionary sense of the term.
Why this is so may be read directly from the record by the more astute who have steeped themselves in the raw materials of the combination and business organization movements. But there is a certain "internal logic" to these transmutations of monopoly- minded policy which may be thrown into fluoroscopic relief by a less direct and time-consuming method. Consider first the nature of the new business self-bureaucratization.
THE NATURE OF BUSINESS BUREAUCRATIZATION
To say that business enterprise in all major capitalistic countries is becoming bureaucratic is to add nothing new. It is so well ac- cepted in the technical literature as to no longer require proof. ^ Obviously the vast control apparatus and the elaborate organiza- tional machinery of large-scale enterprises, of cartels and trade associations, and of their various peak associations call for func- tional division of duties, for circumscription of tasks and fixation of special responsibilities, for hierarchies of command and subor- dination, for special systems of recruitment and training of per- sonnel at different levels of competence. Obviously the growth in size and complexity of the individual business enterprise, the spread of ever more inclusive cartel and trade association net- works, the gathering up and centralizing of policies in series of
throwing the baby out with the bathwater simply because in his family tree such a baby must surely be illegitimate. The earlier economists, as well as the earlier political theorists (e. g. , Machiavelli, Bodin, Hobbes, Filmer, Locke, Bentham, Burke) made no such mistake. For the orthodox tradition, after the lame synthesis of John Stuart Mill, the separation of economics and politics became an issue as important as the separation of church and state, but at a time when, in contrast with the latter, the real historical interdependence between the two was growing ever closer and more rigorous with the passage of time.
5 See, in particular, Mooney and Reiley, Onward Industry! on "The Principles of Organization and Their Significance to Modern Industry"; Marshall Dimock and Howard K. Hyde, in TNEC Monograph No. 11, Bureaucracy and Trusteeship, and the various summary volumes of the huge German Enqueteausschuss, in particular the Gesamtbericht. See also, Louis D. Brandeis' provocative volume, The Curse of Bigness (New York, 1936).
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interlocking Spitzenverbdndej the formalization of relationships not only amongst these various business groupings but vis-a-vis the ever widening system of governmental regulation (whether friendly or hostile to business) and the ever greater attention paid to expert staff counsel, not to mention the science of management and ad- ministration itself--obviously these mean steady and cumulative bureaucratization of business. On present showing it is possible to predict that in the normal course of events the time will shortly arrive when all business activity, big and little, and from center to circumference, will be enmeshed in bureaucratic machinery, will conduct its activities in terms of bureaucratic dicta, following bureaucratic procedures, and complying with bureaucratic cri- teria.
Business, that is to say, is becoming organized; that organization is becoming large scale, highly centralized, and complex; and such centralization and complexity define the area of bureaucratic con- trol. But there are many types of bureaucracies, good and bad. The question is not, "Is business being bureaucratized? " but rather, "What type of bureaucracy is coming to dominate in business circles? "
There are three clues which merit especially close and careful inspection. First is the system of recruitment and training. The more one pages through the literature and publicity of the giant corporations and the networks of business and employer organiza- tion brought together under the central policy direction of the Spitzenverbdnde the more one is struck by the increasing attention devoted to this subject. A variety of motives dominate. A common incentive is specialized training for specialized jobs. Uppermost in many cases is the desire to take control over jobs away from the trade unions. ^ In many cases this objective appears to be more nar- rowly conceived as the recruitment of an absolutely loyal corps of workers from which the future managerial forces will be selected. ''
6 See Sidney and Beatrice Webb, The History of Trade Unionism (New York, 1920). In the early days employers fought apprenticeship programs, since these were employed by unions for the purpose of restricting labor supply. Now the roles are in many cases reversed, unions opposing apprenticeship plans designed to break down their own monopoly controls over labor supply on the one hand, and their partial control over the attitude of the lower managerial corps recruited directly from union ranks. This was particularly clear in the case of Dinta. See p. 283.
7 This seems to have been the original purpose of Dinta when it was organized in
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Quite generally the purpose is to attach managerial--and some- times even nonmanagerial--ranks directly to the individual com- pany or trade so as to cut down the high expense associated with turnover of an executive and staff personnel which it is becoming increasingly costly to "break in. " ^ Again, and perhaps more com- monly in recent years, the device provides an extremely effective method for the spread of antitrade union propaganda.
Trends here move on three closely related levels. Most common and perhaps best known are apprenticeship programs. One line of emphasis in these programs calls for systematic and far-reaching attempts to overhaul public-school educational programs on more purely vocational lines. This feature has been particularly marked in England and Germany. Under the Nazis, and to a lesser extent in Italy and Japan, the program of Dinta and other closely allied groups has been extended to cover all educational training in the country. The second line of emphasis calls for greatly extend- ing formal company-controlled apprenticeship training systems throughout industry in general. More recently in the United States, governmentally sponsored, but privately directed, local, state and national apprenticeship training programs have been worked out on a basis sufficiently comprehensive to forecast the time when they will include all jobs requiring some degree of skill. The various Spitzenverbdnde have without exception shown a lively and sustained interest in these systems for sifting, shaping, guiding, and controlling the lower levels of future labor ranks.
A parallel interest has led in the United States to ''foremanship training. " Both the National Association of Manufacturers and the United States Chamber of Commerce and their various sub- sidiary and member bodies have paid much attention to this feature of recruitment, since it is recognized that the foreman is the "front line representative of management. " Ideally, "foremanship train- ing" performs somewhat the same functions for the nonexecutive
1926, and of the National Association of Manufacturers when it first began to show an active interest--c. 1910-12--in apprenticeship programs.
8 A particularly important problem where automatic machinery has been de- veloped to the point where staff is largely of an engineering or semi-engineering supervisory character, and in cases where processes have become so highly specialized machine tool production, airplane manufacture and repair--that the costs of spoil- age, quite aside from the direct costs of training, from faulty workmanship are high and may ramify, bottle-neckwise, far beyond the individual operation or process.
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managerial ranks that apprenticeship and vocational education do for those who habitually handle the machines.
Within these two levels, training is in many instances almost entirely technical. But increasingly--notoriously in such cases as Ford, General Motors, Standard Oil of New Jersey, Mitsui, I. G. Farbenindustrie, Siemens and Halske, and particularly Dinta-- there has been added schooling in economics, sociology, history, and other subjects which may be manipulated to support the gen- eral social and philosophical point of view of management. It is probably safe to say that no large company, trade association, Spitzenverband, or governmental employee-training program is now entirely free of this ideological coloring. In many cases, com- pany propaganda plays a role as important or even more important than the formal technical training itself. This is particularly apt to be the case in company "colleges," such as that of the Standard Oil Company of New Jersey. (R)
Through these methods business is attempting to create its own "officialdom" ^? and its own "civil service," ^^ dedicated to business ends and loyal to business philosophies. However much the content of specific programs may vary in detail, the general tendency here is to evolve specialized training for specialized jobs, to delimit, de- fine, and circumscribe each and every specialized task, to define responsibilities and duties within each bracket of competence, to arrange these competencies in a rationally articulated hierarchy of command and subordination in which vertical movement is lim-
9 See also literature of the Goodyear Tire and Rubber Co. on the "Goodyear In- dustrial Union," which offers, amongst other courses, one on "Business Science" deal- ing with "The individual in self-analysis, his relation to others, his attitude towards his job and his understanding of the proper approach to the job. " (Circular of the Goodyear Tire and Rubber Co. ) How many of these "schools" and "colleges" there may be, what ground they cover, what differences they show from one country to another, and to what uses they are being put nobody knows. A careful and critical study is much needed.
10 A particularly penetrating book was written by Kurt Wiedenfeld (one of the more acute German economists subsequently to enlist in the Nazi services), called Kapitalismus und Beamtentum: Produzententum und Konsumententum in der Welt- markt-Wirtschaft (1932). See also, TNEC Monograph No. 11.
11 One of the common shortcomings of the more recent books on wage theory, as, e. g. , J. R. Hicks, The Theory of Wages, (London, 1932), is that employers are assumed to take a purely passive role vis-^-vis labor in that he is treated as a bar- gainer who does not really bargain since he is interested only in the wage-cost: labor-efficiency calculus, and whose only choices are (a) the sea in which he fishes, and (b) the bait he will use (bait is all of one sort; it varies only by more-or-less).
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ited and defined by "seniority," formal rules, and other formally graduated systems of employer-controlled rewards and punish- ments, and to direct the whole of these efforts along a more or less common ideological front.
Above foreman ranks, the story is somewhat different. A line somewhat similar to that found in governmental circles between "civil service" and "political appointees" seems to run between the two lower levels of business staff on the one hand and the direc- torial and upper managerial ranks on the other. Here, as has been pointed out, the evidence seems to show that "position," "pull," "family," "contacts," "family wealth," "nepotism," "sinecure," "in- dulgences," and the like are becoming increasingly important. These upper layers seem to be "inbreeding" in business, just as the leading families of the upper wealth brackets from which they are mostly drawn intermarry within the charmed circles of the Social Register. There can be no question but that cooptation is
the rule and not the exception throughout all business large and small, and that the practice holds as generally for the trade associa- tions and their various Spitzenverbdnde as it does in principle for the more compact corporate set up. ^^ But more, that within the upper executive and directorial layers, cooptation is increasingly from socially acceptable ranks, and that the rules that guide selec- tion come more and more to be woven of the same cloth as those which define the limits, the attitudes, the codes, and the social and political philosophies of self-conscious ruling-class status.
Before pursuing the implications of these developments a bit further, it will be useful to consider briefly the two other "clues" to the nature of business bureaucracy hinted at above. The first of these relates to the fact that all attempts to rationalize business organization lead, under liberal-capitalistic political conditions, to dual, overlapping, and, in part, "competing," managements which become increasingly costly, inefficient, cumbersome, and confusing with the passage of time, and which sooner or later require, by more or less common agreement, surgical treatment. It is a well-
known fact that few efforts to coordinate, for example, private natural monopolies over territories coextensive with their natural potentialities have been successfully carried through without ac-
12 See pp. 259-65, above.
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tive governmental aid. The American Telephone and Telegraph Company is a partial exception, as are a few local tram and electric power systems. Railway unification, however, has nowhere been carried through except by government fiat. The Interstate Com- merce Commission has striven for railway unification for years. The railway unification which led to the British "Big 4" in the early twenties and the development of the unified rail networks of Germany and Japan were forced through on the initiative of their respective governments. The same holds for most electric power "grid" schemes, unification of postal and telegraph systems, and most local and metropolitan transit networks.
The monopoly urge, in other words, seems to be typically stopped before monopoly has been really achieved. The results the reasons why need not detain us at this point, for they require independent analysis, case by case and industry by industry ^^ however, belie at least in part the superficial impression. They seem to be about as follows: (1) monopoly efforts are funneled in- creasingly through the machinery of trade association, Chamber of Commerce, and Spitzenverband; (2) within these councils a broad line separates the inner governing cliques made up of the corporate giants and their medium and smaller satellite concerns; (3) the former divide markets, manipulate prices and production, and in general so direct affairs that, the total possible "take" being
treated as given, each of the former receives his due allotment where the gains are relatively speaking assured, and the latter are granted the more or less unprofitable fringes; (4) there is a cumu- lative pressure to "settle into the allotted groove," and not to encroach upon "most-favored company" territory, nor to push entirely out those whose existence on sufferance is deemed a con- tinuous advantage for propaganda and other reasons; (5) disputes concerning position are increasingly handled by the equivalent of negotiation, arbitration, "treaty-making," special grant and privi- lege, etc. ; (6) enterprise management is kept in a largely fraction- alized state within each industry or trade, more or less irrespective
of geographic, technological, and other features; ^*
13 Further combination may be stopped by fear of Anti-Trust prosecution, as in the United States.
14 Patent pooling, standard grades and labels, simplification of types and varieties, cartel and syndicate practices, and the like, do not militate against this generaliza-
(7)
increasingly,
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the leading functions ot the trade association or Spitzenverband becomes the guidance and leadership on all social and political issues. Finally, so long as either the internal coordinative functions or the external representative tasks of the central associations are pursued in the face of partially or largely antagonistic political authorities, the two facets will be dovetailed into a single program known as "self-government in business. " ^^
Consequently, the more "self-government in business" there is, the more governmental regulation there must be. And the more governmental regulatory machinery expands, the more complete and thorough betomes the duplication of managerial and admin- istrative hierarchies between government and private enterprise. Governmental regulatory agencies have shown a more or less com- mon pattern of development: (i) they tend to become permanent bodies well staffed with expert panels; (2) they find that regulation which has been instituted at any point--price, market allocation, or the like
business policies of regulated concerns; (3) regulation gradually comes to embrace the entire trade or industry; (4) it gathers into its hands increasingly legislative and judicial as well as administra- tive authority. Under pressure to expand functions along these
lines, regulatory authorities gradually begin to compile informa- tion which runs the gamut of business and industry interests; to organize information, prosecution, negotiation, and its own inter- nal administration along functional lines characteristic of the industry as a whole; to build up staffs until they come to approxi- mate the business administration which they face constantly across the conference table or the courtroom; and to acquire powers sometimes negative and more frequently positive--which involve de facto participation in the management of the enterprises falling into the authority's bailiwick. ^^
tion, for these represent cost cutting, orgnization simplifying, and strategic manipu- lation factors. There is little or no evidence that they tend to "rationalize" the industry either to the public good, or to cut down the plethora of separate manage- ments. So far as the public good is concerned, these devices usually appear in com- binations which retard the pace of change; they tend to slow down the weeding out which would occur under either "normal" competitive or monopoly conditions.
15 See pp. 227-39, above.
16 It would be possible to show this in great detail by dissecting any of a large number of governmental regulatory authorities in the United States or abroad. The
--leads them step by step to cover the whole range of
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There are some reasons for regarding the typical governmental regulatory body as organizationally superior to those evolved by the businesses they regulate/^ but that is quite another matter. Of key importance in the present connection are two by-products of the developments traced above. First, as pointed out above, there tends to be duplication all the way up and down the line between government and business administrative machines. And second, a large and increasing percentage of staff, and of the necessary facili- ties in terms of office space, office personnel, files, and the para- phernalia for grinding out countless memoranda is taken up with the tactics of manoeuvre, concealment and uncovering of key in- formation, legalistic haggling, enforcement and evasion, and so on, ad infinitum, brought about and dependent upon the conflicting interests expressed in such dual administrative control.
Facing this situation, what do the Spitzenverbdnde propose to do? First, they tend to duplicate in their own central headquarters
chairman of one of the largest Federal regulatory agencies--perhaps the best known
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that his Commission Avould ultimately be compelled to duplicate every scrap of in- formation, every leading staff officer and specialist, concerning companies and trade associations they were charged to regulate in the public interest. Perhaps not in absolute numbers, he thought, since they might never be under compulsion to be- come as inefficiently organized as the industry, taken as a whole, patently was. But certainly on a scale capable ultimately of taking over the entire industry without serious hitch should business management and staffs be suddenly stricken, let us say, by a highly selective desire for permanent vacations. A similar judgment was given by equally highly placed German and British regulatory authorities with respect to their own administrative machineries.
17 Partly because they have come into the picture later than the companies and administrative bodies which they seek to regulate; partly because they tend to be manned by experts and not by business "politicos"--civil service requirements for staff, bad as they may be in many instances, are obviously superior to the staffs they face in training, in singleness of purpose, and in the quality of their loyalty; partly because they bear responsibilities which are matters of public record wherein their actions and decisions are constantly subject to either legislative or judicial review; and partly because they have arisen in most countries after the trend towards cen- tralization of governmental regulatory authority in the hands of the federal--as against local, state, and provincial--has asserted itself. To an increasing extent, there is less duplication here than division of authority so that local bodies take over primarily the residue functions which relate to purely local matters. There is, how- ever, a contrary tendency to set up governmental regulatory bodies which have to do not with a single industry or set of narrowly related industries, but with business functions (e. g. , securities and trading, surplus commodities, pure food and drug). This means that each business must face not one but a series of regulatory bodies. And at many points the functions and prerogatives of these latter are bound to duplicate and overlap each other.
hazarded the guess in private conversation with the author some four years ago
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the regulatory set-up ^^--thereby tending in many respects to fur- ther duplicate functions, staff, and facilities--of their own mem- bership. Not uncommonly, as an interesting by-play, they, or their member associations, or the strategically placed corporations which shape their leading policies attempt to entice governmental staff to join their own payrolls at higher salaries. ^^ But most signifi- cantly, they seek direct representation on committees, commis- sions, advisory bodies, and other governmental agencies which were either established at the outset for the specific purpose (or subsequently acquired the power) of determining in whole or in part the very policies which guide the administrative bodies them- selves.
Thus the Federation of British Industries claimed before the outbreak of war to be directly represented on the Board of Trade Advisory Council and Council for Art and Industry, the War Of- fice Technical Coordinating Committee on General Stores and Motor Transport Coordinating Committee, the Ministry of Health Joint Advisory Committee on River Pollution and the Town and Country Planning Advisory Committee, and the Ministry of Agri- culture's Standing Committee on River Pollution. But this is only the beginning. It claimed that its representations before govern- mental bodies have resulted in adoption of its own plans for fiscal policy, tariff policy, imperial trade, commercial treaties. ^^ There is scarcely a governmental committee or commission which affects its
18 This is most readily shown in the departmentalization of the various Spitzen- verbdnde, the range of the expanding committee and staff functions, the nature of the regional and functional groupings of membership, the content of regular reports to members in their official publications and annual congresses, etc. The same holds for many of their own member associations and certain of their larger member cor- porations. See the annual reports of the National Association of Manufacturers; the
Yearbook and Register of British Manufacturers, put out by the Federation of British Industries; the speeches, and especially the organizational data given in the ap- pendices, collected in the book of M. Rene P. Duchemin (President d'honneur de la Confederation Gen^rale du Patronat Frangais), Organisation syndicate Patronale en France; and see also Fascist Era, the yearbook of the Fascist Confederation of In- dustrialists; and sketches by Dr. Horst Wagenfiihr of the Reichsverband der deutschen Industrie and the Verein Deutscher Maschinenbau Anstalten in his Kartelle in Deutschland.
19 Probably one-half of the leading figures amongst the directorial, executive, and staff ranks of the leading Spitzenverbdnde have gone directly from governmental regulatory bodies to the firms and associations which they formerly regulated. Higher salaries are the common reason given. A careful study might reveal many others.
20 See, in particular, the NAM pamphlet "Industry and Action. "
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Members' interests at any given point upon which it did not claim membership or influence of decisive importance. Since the out- break of hostilities, under the system of war control bodies, this fusion has been rendered almost complete.
The British picture is not unusual but is typical for the liberal- capitalistic countries as a group. ^^ But it becomes quickly altered in some respects drastically--the instant monopoly and business coordinative drives move from a "liberal" to an "authoritarian" environment. As evidenced in Germany and Italy, though by some- what different routes, the inauguration of totalitarianism results in a general overhauling of business machinery along the following lines: (1) "streamlining," that is, a considerable mass of overlap- ping and duplicate trade association, regional and national, and peak association machinery is cut away. ^^ (2) Correlatively, the com- bination and cartel movement is greatly strengthened; large and increasing numbers of small concerns are eliminated; compulsory association membership becomes the rule. (3) The relationships between governmental committees and commissions are altered in several ways, but in general these relationships become func- tional instead of "fighting," coordinative instead of duplicating and overlapping, and "self-government" follows lines of mana- gerial decentralization rather than principles of checks and bal- ances between governmental and private authorities. The basis of
the "efficiency" claims of all totalitarian systems is the cutting thorugh and setting aside of conflicting machinery which has arisen (paradoxically, as a result of governmental "interference") to co- ordinate and simplify business itself, or to prevent the inefficient disposal of social resources according to the common formulae of "business as usual," or both. Finally, (4) the former "self-govern- ing" bodies are more or less formally vested with legal or quasi- legal powers to formulate policy within the larger "totalitarian" directives, and to implement decisions with powers of enforcement.
21 See the sources cited in footnote 18 above.
22 This could readily be shown by following through in detail the change in any given line of industry or trade. But such "streamlining," coupled with other changes indicated above, may well mean in many cases quite new and greatly elaborated ma- chinery. For example, unorganized trades will now be organized; unfederated will now be federated; relationships between and amongst central associations and their various functional and regional divsions will be handled by various combinations of compacts, ad hoc and permanent committees, and so on.
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Great and far-reaching as many of these changes may be in detail, they are, however, fully and without important exception in line with preceding trends. This could be shown in great detail by tracing through the successive changes, for example, which led to the formation in 1917 of the Reichsverband der deutschen Indus- trie out of two bodies representing respectively the heavy and light manufacturing industries, and the steps taken to transform the re- sultant body in 1933 into the Reichsgruppe Industrie. Or, again, by those whereby the former General Confederation of Italian In- dustry was made over into the Fascist Confederation of Industrial- ists. Another example is offered in the changes which signalized the pretty complete overhauling of the Confederation Generale de la Production Fran^aise, following the famous Matignon Agreement in 1936, into the Confederation Generale du Patronat Fran^ais. The formal dissolution in late 1940 of this latter body, which was modeled more or less directly after the Fascist pattern in Italy, seems to have been preparatory to remodeling along more dis- tinctly Nazi lines.
Whether traced along lines of structure, function, or authority, these changes would be found consistent with past trends. They represent a very considerable "tightening" up, to be sure, but even the more rigorous and authoritarian controls are consistent with past lines of growth. Still another check is provided by noting the nature of the changes these various associations and their Spitzen- verbdnde undergo between so-called "emergency" and "normal" periods. Quite aside from the fact that it has now become custom- ary to justify all "tightening" up by appeal to "emergency" con- ditions,^^ and that we have at least two major attempts to carry through far-reaching reorganization of business-governmental re- lationships in peacetimes--those of the NRA and the various Bri- tish industrial reorganization schemes ^^--the ease with which
23 This is the case with all the various British industrial reorganization schemes such as those for railroads, cotton textiles, coal and steel, and with controls estab- lished under such laws as the Miller-Tydings, the Robinson-Patman, and the various state marketing and resale price maintenance laws. Much the same, of course, was true of the whole of the NRA and the AAA.
24 Not to mention a series of attempts made in practically every country in the world immediately following the great war to carry over wartime controls inrg
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these transitions have been made between peace and war and back again to peace fully bears out the above contention, the main differ- ence being that the binding sanctions are qualitatively quite dif- ferent. In these respects, the Second World War has differed from the First in that the transition from peace to war is greatly facili- tated by the much higher level of business organization, in which authorities, controls, and group objectives are more completely worked out along lines required for ready adaptation to war con- ditions. That this is so largely arises from the fact that peacetime endeavors in the major capitalistic countries to extend the network and expand the controls of business organization were almost with- out exception based upon former wartime experience. ^^ Thus it comes about that it is precisely in war and emergency times that the dominance of big business in the councils of state comes most clearly to the fore. What was true of the United States in 1917-18, in the depression and the period of NRA, and in the National Defense efforts of 1940-41 can be duplicated in all other major capitalist countries. Mr. Knudsen, Edward Stettinius, and Bernard Baruch are paralleled by Mr. Ogura in Japan, Lord Beaverbrook in England, and Hermann Goring (himself a leading industrialist), Friedrich Flick, and their group in Germany.
Now the essence of the newer strategies of wartime controls where the military arm is, in effect, regarded as merely the "cutting edge" of a belligerently mobilized industrial system taken as a whole--is authoritarian hierarchy with totalitarian coverage. Thus, since war controls represent an ever simpler transmutation from normal peacetime conditions, our third clue to the nature of evolving business bureaucracy lies in these factors. Let us examine them a bit more carefully.
peacetime conditions--one of the by-products of which was the formation of many of the Spitzenverbdnde themselves. Particularly interesting in this connection are the attempts made in the United States to formulate a national council out of the various "war advisory committees" established by leading trade associations during the war to represent business interests in the various war-control boards. An attempt to bring all these together into a single national organization, made at an Atlantic City con- vention in 1919, broke down. The plan, it seemed, was prematurel
25 This was especially true of NRA, largely an adaptation of Mr. Hoover's Trade Practice conventions, in turn based directly on war control ideas.
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THE "slant" of the HIERARCHICAL OR "scalar" PRINCIPLE
So far as structure and control factors are concerned, trade associ- ations and their Spitzenverhdnde tend to be modeled after the pat- tern of the typical large-scale corporation. The managerial hier- archy of command and subordination follows typically the "line" or "military" form of organization: any necessary breakdown in function and staff is so dovetailed into the "line" of authority as to take maximum advantage of expert counsel and whatever prin- ciples of decentralization of management may be appropriate in each separate case. Policy-making power lies typically in the direc- torial and managerial ranks, and is not subject to check from be- low. So far as concerns the lower reaches of the hierarchy of com- mand and the labor that performs the functions which management directs, the system is completely authoritarian (antidemocratic); all duties and responsibilities are fixed from above except when counter-organization of labor or other organized special interest groups may be able to force concessions via governmental or direct- action pressure.
More recently, as has been outlined in numerous places,^^ man- agement has succeeded in largely freeing itself from owner or investor control. Conversely, labor is increasingly able to make its voice heard and its power felt only so far as it operates under the protection of government. The trade union may be the power that forces the government to act, but without government intervention the trade union finds itself increasingly unable effectively to make its influences felt or even to recruit its members. A first condition to trade-union bargaining power is favorable law. That is to say, even in labor relations organized business finds itself facing the government.
Free in large part of direct investor control,^^ managements which for one reason or another are primarily interested in execu- tive and not in larger policy matters, may be able greatly to ration-
26 See the works of such authors as Berle, Means, Bonbright, Gordon, and others, referred to in Chapter VII.
27 Here again government takes the place of the disenfranchised. Something the equivalent of the Securities and Exchange Commission is now to be found in most capitalist countries.
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alize productive operations where formerly such changes were in- hibited by investor interest in higher returns. ^(R) But even where this proves both possible and, from the point of view of manage- ment, desirable, management now largely swings free from all direct controls other than those which may be imposed upon it by governmental authority; this fact will and apparently does mean that the executive and managerial end will be handled by paid functionaries, the better to allow the leading figures within these ranks to focus the massed power of their pendulous corporations upon larger issues of policy. Business leadership not only acquires political interests, but it turns to the political arena already backed by enormous, fully mobilized, and easily focused power. There are but few good modern parallels for this situation in the field of in-
ternal-pressure politics. For most apt comparison one must turn to the massed and personally manipulable powers of ancient and tribal armies of legionaries and retainers, or to the medieval bar- onry of the crusading knights.
So far as this picture holds, the appropriate medium for express- ing, and the machinery for canalizing and focusing, the social and political power of management is the trade association and its Spitzenverbdnde. To the extent that paid functionaries in the hier- archy of management are enabled to handle matters on an authori- tative but expert or "civil service" basis (because they have been recruited from an especially trained and ideologically precondi-
tioned corps), to that extent will policy matters be the more com- pletely funneled through supra-managerial apparatus organized for this specific purpose. Such rationalization, simplification, and centralization as may on occasion be attempted within these latter bodies become, thus, merely problems of efficient organization ^^ of largely, if not primarily, political bodies.
28 A number of railroad reorganizations (e. g. , the New York, New Haven and Hartford) have greatly improved operations, road, rolling stock, and service facili- ties which cannot possibly--except perhaps in the very long run--benefit stockhold- ers. For all practical purposes the roads are run expertly, the compromise now being not between owner-income interests and public service demands--the ICC keeping an ever watchful eye on affairs--but between career-management and public service, the ICC now regarding prospective changes with a friendlier attitude.
29 In many cases, perhaps making the rule and not the exceptions, career men run associations, and much association activity seems a by-product of expansion of point- less tasks and "services," bureaucratically overstaffed and incompetently run by
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But the question of how far and in what ways rational organiza- tion of the productive properties underlying management, or the manipulative machinery lying over these directorial levels, may be afiEected by the new functional segregation is somewhat beside the point at present. It is doubtful if the run of recent improvements below the upper layers is as great as one might be led to suspect at first. ^^ But the significant point is that trade associations and their Spitzenverbdnde are largely, if not in many cases exclusively, poli- tical-pressure bodies. This remains true even in those cases where trade associations act as coordinating bodies for cartels, or where they themselves have taken on cartel functions. The records are, of course, unsatisfactory, since here as elsewhere they leave next to no traces, such collusive practices as they may resort to proceeding by rules known from times immemorial within inner political party circles, and not by the etiquette of written statements and formal contracts. ^^ Secrecy, long the essence of national diplomacy, becomes entirely natural and normal, as the Spitzenverband be- comes a politically potent pressure group.
But the main concern of the supra-managerial business organiza- tions is not, strictly speaking, economic. Even where it is so, the issues at stake are increasingly burdened with social, philosophical, and political problems. That this is true can readily be substanti- ated by any reader who will take the trouble to leaf through a few thousand pages of trade-association literature, or who can find time to sit in on a few hundred of their congresses and conventions. What he will find is that the issues relate predominately, at some remove or other, to known, felt, or feared challenges by labor or
functionaries whose main efforts are devoted to proving to a gullible membership that the completely or primarily useless is of overwhelming importance.
80 See the records of plant reorganizations reproduced in the pages of the Bulletin of the International Management Institute (now defunct).
81 Thus, when the author of the TNEC Monograph No. i8. Trade Association Survey, dealing with trade associations in the United States, finds little ground for the belief that trade associations have "engaged in collusive restraints of trade," he cites as proof not evidence, but the lack of it! Which is only to say that he has con- fused not only the nature of trade-association activity, but also the nature of such collusion and of its characteristic proofs. The evidence of NRA might have disabused the author, who was familiar with its practices, of this naive interpretation. But if nothing else, he might have turned to a brief review of the last year's crop of anti- trust indictments for proof that the very reverse was true. Political machines rarely keep vouchers or reduce understandings to the written form, as Lincoln Steffens was not the first to discover, nor Clarence Darrow (cf. his review of NRA) the last.
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other groups--operating independently or through regular poli- tical channels--to the tenets underlying the capitalistic system as a whole.
As political-pressure bodies, the trade associations and their Spitzenverbdnde will be found responsible to their membership on the principle of representation, de jure or de facto according to property holdings and clique groupings. In practice, except per- haps for some of the associations representing smaller businesses,^^ clearly most of them are as closely controlled by a few of the busi- ness giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel. That is to say, where the structure of organization and methods of control recognized in constitution and by-laws do not permit--which typically they do--centralized, self-perpetuating control, the Realpolitik of power and clique effects a like result. This picture is so well accepted in association circles throughout the world and is so typical and general as to seem clearly beyond dispute in point of fact.
Both above and below the level of corporate managerial circles, the "scalar chain" or principle of graduated hierarchical controls obtains. Leadership, so far as the respective underlying hierarchy of command and subordination is concerned, is typically self- appointed, self-perpetuating, and autocratic. In the submanagerial zones, this leadership impinges on the nonproperty interests of labor and the general public. But in the supra-managerial zones it bears largely, and in some respects exclusively, on business interests in general. Authority in both ranges from the top down, and re- sponsibility from the bottom up. Below, authority coordinates the non- or but partially-property minded in an operative complex policy being predetermined and given. Above, authority coordi- nates big and little business in a policy complex forged as a by- product of the Realpolitik practiced by their own self-appointed general staffs. The same individuals, the same groups and cliques, the same interests dominate in each sphere; in each the principle of
82 Although the evidence seems to indicate dearly that many of the leading small businessmen's associations have been formed on the initiative of the large. This is the case with many of the British associations, and with the vast network of trade or "guild" associations which have sprung into existence in Japan over the past five years.
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organization, relating as it does to policy issues, is that of an inher- ently undemocratic, authoritarian hierarchy.