Harvard never
endorsed
either stock market pools or the general conduct involved in such pools.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
In such a situation an owner gets richer and richer by declining to take cash income as an individual.
Naturally all this affluence has wrought some changes in Rautbord's life. He owns a Rolls-Royce, a big yacht and seventy pairs of cuff links. 66
Hans Fischer, born in Vienna, heads H. Fischer and Associates of Cleveland. A consulting engineer, he came to the, United States in 1939, as yet, alas, a non-American. Around 1950 he had only $4,000 and with only that much was practically an un- American but--such had been his success when the Journal editors looked him over--he, now fully American, was worth $1. 2 million, owned a Cadillac, a Jaguar and a forty- five-foot Chris-Craft, and lived in a big house in Shaker Heights, Ohio, near other true- blue Americans.
But J. W. Walters did somewhat better, possibly because he was American-born and therefore by nature anointed. A Navy veteran driving a truck in 1946, he was looking for a really cheap house, all he could afford. He saw an ad for a "shell" structure at $1,195 and went with borrowed money to buy from a man named Davenport. Instead, he went into partnership with this man. Davenport, evidently a person of little faith or having other worlds to conquer, sold out to Walters in 1948 for $48,000; Walters was then thirty-eight years old.
The lowly enterprise went on to become National Homes Corporation, producer of prefabricated homes, which the Journal men say has made more than $1 million for each of seven persons and left Mr. Walters with a net worth in 1960 of $8,700,000. 67 Walters, who quit school after the twelfth grade, has acquired a 1,700-acre Florida hunting ranch as well as other dazzling properties. National Homes now makes prefabricated apartment buildings, shopping centers and schools as well as individual houses. It will build whole prefabricated towns, and has done so, at the drop of a nail.
But these people, though we salute them as true-blue American enterprisers, are all really small potatoes, hardly worth a feeble cheer from the House Un-American Activities Committee. The new crop, either the one of Fortune, 1952, or the Wall Street Journal, 1962, simply does not rate on the scale of wealth even though its members may be having the time of their lives in their cruisers, jaguars, $50 bats and $160 suits.
The Sweetest-Smelling Real Estate Empire
The New York Times in 1965 introduced two formidable contenders into the arena of big new wealth, as if to replace the void left by the departure of bulky William Zeckendorf.
These new tycoons, said the Times, are Sol Goldman, forty-seven, and Alex Di Lorenzo, Jr. , forty-eight, who have built a real estate empire on a pyramid of mortgage loans.
When the Times studied them in April, 1965, they quietly owned more than twenty office buildings, including the seventy-seven-story Chrysler Building; extensive harbor terminals; a growing flotilla of hotels; various "sprawling" industrial buildings; shopping centers; and large apartment houses. More than 20,000 persons were employed in keeping these properties operative.
Cruising under the firm name of Wellington Associates (presumably it would be unlucky to be Napoleon Associates), they have followed the technique of "mortgaging out"--that is, borrowing enough money with first and second mortgages to cover the full purchase price of a property, literally nothing down. " If, through improvements or other devices, the buyer can increase the rent rolls, he can go to a bank in a year or two and borrow enough money on a new mortgage at lower rates to wipe out the high-interest mortgages, sometimes leaving a surplus above the original purchase price. This surplus is then invested in other properties and the process goes on like a rolling barrage. A neat feature is that the surplus is tax-free because it is technically borrowed money, on which one pays no tax, naturally.
Wellington Associates bought the Chrysler Building in 1942 for $42 million, mostly carried on first and second mortgages charged against them. Some four years later they borrowed $47 million at 5-1/2 per cent from a Wall Street syndicate, which spread the paper around the country, and paid off on the old paper. In the meantime by amortization out of rents they had reduced their original obligation by $3 million, so they had $8 million of technically borrowed nonrepayable tax-free money to play with, the best kind there is.
Now the Chrysler Building alone is producing for them $1. 5 million a year, tax-free, for their investment in other properties.
Proceeding in this way, if nothing goes wrong (such as an interruption in rents or balkiness of the banks), Goldman and Di Lorenzo should in time own all of the United States, cost free. They have already bought more than 250 pieces of property in Manhattan and own more than 450 properties "conservatively estimated," says the Times, to be worth more than $500 million. The equity of the two partners in this chunk is set at about $150 million, a worthy figure. But it could shrink--or expand.
The Times got wind of Wellington Associates because its swift rise had set alarm bells ringing in nearly every investigative agency in the country, including the FBI. The latter was instantly fascinated because of the persistent rumor that underworld money is finding its way into American business, that "bad guys" born in Sicily and other unhallowed places are infiltrating "good guys" with names reminiscent of Astor, Vanderbilt and Rockefeller. No basis whatever for these rumors was found in the Goldman-Di Lorenzo set-up, which emerged smelling as sweet as any real estate empire ever smelled. It appeared, indeed, to be the sweetest-smelling real estate empire that the investigators had ever encountered. 68
The Rising Tide of Wealth
But wealth is apparently rising around us like a tidal wave even as inquiry proceeds. Herman P. Miller, assistant to the Director of the Census Bureau, reports that "The rich among us are flourishing as never before. And not only millionaires, but multi- millionaires. " The figure of 27,000 persons owning $1 million or more of property in 1953, according to the Lampman study, must now be raised to close to 90,000 in 1965, says Miller.
It is this increase in the wealth of wealth-holders that is taken to prove that newcomers are making big money in droves.
"The 90,000 millionaires are a diverse lot," says Miller. "They include men and women, young and old, creators and contrivers, new rich and established rich.
"Since their number is rapidly growing, it suggests that the new millions are largely earned [sic! ] and not simply passed down through inheritance--that is, they come from the creation of goods and services we can all enjoy. A large proportion of today's new millionaires derive their wealth from scientific inventions, home construction, new products and other things that enrich our lives in many ways. " 69
There is nothing in the set of figures presented to justify this disarmingly pleasant conclusion. The simple fact is this: In the general rise in prices holdings previously valued below $1 million are now valued at $1 million or more. No doubt some new earning properties have been created out of inventions and the like but most of these million-dollar-plus properties are owned by the same people who in most cases inherited them. It is not the case, as far as these bare statistics show, that "the new millions are largely earned"; that remark is thrown in from nowhere, with no evidential basis cited. A man worth $200,000 in 1940 may now be worth $2 million and may in five or fifteen years be worth $800,000 or $5 million, depending upon the swing in the economy and the nature of his property.
But it is not the case that there are 90,000 newly moneyed millionaires, 9,000 or even 900. It is clearly incumbent upon anyone who contends this to show it, Some few persons have in the past twenty years come up from nothing to $1 million or more; but they represent only a minor fraction of this phalanx of 90,000, who are simply the old- line upper property holders.
A New String fromTime
But reports such as these are quickly followed by others, all with the same message but a different cast of characters. Thus Time, December 3, 1965, under the title "Millionaires" presented a new list of men who had allegedly made a million or more before they were forty. Editors should notice that there is still to be presented a list of women, like Lucille Ball, who have made a million or more before forty and even of children who have become worth more than $10 million before they are five years old.
Said Time:
"As a land passionately devoted to free enterprise, the U. S. has always been the best place for a man to make his million. The fabled 19th century millionaires . . . all began poor. Despite their often controversial actions, they, like most American millionaires, basically enriched themselves by enriching a growing nation [a statement that might be seriously questioned. -- F. L. ].
"The U. S. still offers countless opportunities for the man who wants to accumulate a personal net worth of $1,000,000 or more--and thousands [sic! ] seize them every year. The number of U. S. millionaires, reports the Federal Reserve Board, has swelled from 40,000 in 1958 to nearly 100,000 at present. How do they do it? In a variety of individual ways, but their common denominator is that they find an economic need and fill it. "
My readers are aware, to the contrary, that nearly all of these 90,000-plus do it by inheriting, with the increasing number of millionaires traceable to the rise in prices.
But Time goes on to present its own meager bottom-of-the-barrel list of new wealthy: Net
Worth*
Arthur J. Decio, 35, Elkhart, Ind. , Skyline Homes $5
million
Charles Bluhdorn, 39, N. Y. C. , Gulf & Western Industries $15
million
Harold Smith Prince, 37, N. Y. C. , Broadway producer $1
million
Arthur Carlsberg, 32, Los Angeles, real estate $5
million
Merlyn Francis Mickelson, 38, Minneapolis, computer parts $47
million
John Diebold, 39, N. Y. C. , management consultant $1
million +
Eugene Ferkauf, 44, N. Y. , Korvette, Inc. , cut-price stores $55
million
Jerry Wolman, 38, Philadelphia, football impresario
"Millions"
Art Modell, 41, Cleveland, football impresario
"Millions"
Michael Mungo, 37, South Carolina, ex-cottonpicker, real estate $2
million
John F. Donahue, 41, securities salesman $1. 5
million
Alvin Weeks, 41, Atlanta, frozen pastries Not
stated
Joseph McVicker, 35, Cincinnati, toys
"Millionaire"
Walter Davis, 42, Texas, trucking $7
million
Ernest Stern, 45, Pittsburgh, theater magnate Not
stated
Robert K. Lifton, 37, N. Y. C. , real estate
$4. 75 million
Fletcher Jones, 34, Los Angeles, computer programme $20
million
Del Coleman, 40, Chicago, jukeboxes Not
stated
James Thomas, 37, Los Angeles, real estate
"Millionaire"
Michael Rafton, ? , Oakland, portable classrooms
"Huge profit"
Charles Stein, 37, Chicago, orange juice
"Millionaire"
Al Lapin, 38, Los Angeles, coffee vending, pancakes
"Rich"
Jerry Lapin, 36, Los Angeles, coffee vending, pancakes
"Rich"
Fred Bailey, 39, Los Angeles, ordnance parts $2
million
Charles Gelman, 33, Michigan, chemist, filter manufacturer $1. 3
million
* Time cites no public record for its figures.
Accepting all these valuations as authentic, what do they prove? Not , surely, that big wealth is new wealth or vice versa. Nobody denies that a few score or even a few hundred men in business ventures make a temporary million or more. The point is that most of these sums mentioned are chicken feed and the larger figures might require some further examination. Again, how many of these will survive economic downdrafts? How many will follow William Zeckendorf into sterile impecuniosity?
A list of hundreds of names could be drawn up under the title "Men Once Worth a Million or More Who Went Broke. " As Thomas Mellon remarked, it is harder to hold onto money than to make it.
The Big Winners in Review
What remains to be said about this heterogeneous collection of names? Some have arrived, some are in the process of arriving (or departing), some are only pseudo- arrivistes.
To return to the Fortune list of thirty-four, taking it at face value and disregarding any of the qualifications offered, most of the men on it are neither builders, inventors, constructors of new-type industries nor job creators. The predominant oil crowd play an enlarged version of the childhood game of finders-keepers under a big tax shelter. They provide little employment, at most pour low-tax high-price oil into a pre-existent world pipeline.
Kaiser and the Browns of Brown and Root, Inc. , are construction men, buoyed up a long part of the way by politically wangled government loans and contracts. Kaiser has shouldered his way heavily into private enterprises of various kinds--aluminum, plastics, cement, steel. Perhaps he has bulldozed a pattern for the future in which government will finance new private enterprises via low-cost loans, contracts, tax schemes and other aids, thereby providing jobs lower down for the multitudes that the old-line monopolists allowed to spawn without reckoning on the ability of the economic system to sustain them.
Stewart Alsop found that all on his Post list but Land had made good in a big way mainly by taking advantage of special government shelters over oil, insurance and real estate. All the oil men--Mecom, Keck, Smith and Abercrombie--get the depletion allowance and are able to take large deductions for "intangible drilling expenses. " "Thus," as Alsop remarks, "an oilman with a good tax lawyer can pay little or no income tax on a real income of millions of dollars. " In real estate, depreciation plays the role of depletion in oil and there is always "mortgaging out. " In insurance, the key word is "reserves"; for in order to build reserves generous tax allowances are made which apply as well to the equity of the owners of insurance companies such as Stone, MacArthur and Ahmanson. The latter, doubling in the building and loan business, is propped up also by government insurance up to $15,000 per individual depositor.
Kettering, as I have noted, was an inventor; Mott and Sloan, engineers; Kennedy, Wolfson and Getty are market operators who, like most of Alsop's list, never made any weighty contribution to the gross national product. Getty became king-size by buying underpriced shares in the Depression. Halliburton, Ludwig and MacKnigbt are company organizers and rationalizers, able to find chinks in an established market. MacArtbur simply offered through mass advertising as little insurance as anyone wished to buy, from $1 per month up, Like the Woolworth plan this one was admirably suited to an economy in which few people have money beyond immediate pressing needs.
All the noninheritors on the Fortune list were born in the United States. Of the twenty-three for whom the information is of record, thirteen were born in small towns or semi-rural areas.
A few started as poor boys, notably H. L. Hunt, who was dirt-poor. But most had comfortable beginnings. Getty's father was rich, Richardson's and Murchison's were well-to-do, Sloan's father was a successful small-businessman and Kennedy's father a prosperous-enough saloonkeeper-politician. In general, those who never entered college appear to have had the more modest beginnings; but except for Hunt the rags-to-riches theme applies to none. At least one married well from a financial point of view, although he was also endowed with technical ability.
A notable pattern emerges in the large number of school dropouts on the list, from early grades to college. Stewart Alsop noticed the same thing in his Saturday Evening Post list of thirteen, of which five are on the Fortune list.
Most of the Fortune men identify themselves educationally as having attended "public schools," which may mean anything from first grade to completing high school. And most of those I have added--Amon G. Carter, Jesse Jones, John J. Raskob, Hugh Roy Cullen, William L. Moody and even A. P. Giannini--had scant schooling. With few exceptions, the fortune-builders of more recent date, like their nineteenth-century forerunners, had little interest in school even when it was available to them. Not especially well-educated or well-read either, they are obviously truants from high culture. Many who weren't high school dropouts were grade-school dropouts.
Educators, trying in desperation to rally popular support for education and mulling over statistics, like to point out to rugged philistines that on the average educated people earn more than the meagerly educated. And this is true when it comes to offering marketable skills and personalities at modest salaries in an existing Establishment that requires ever-increasing skilled personnel for its complex operations. But it has never been true where really big money is concerned. An education can be a severe handicap when it comes to making money.
The reason for this is that in the process of being educated there is always the danger that the individual will acquire scruples, a fact dimly sensed by some of the neo- conservatives who rail against the school system as "Communistic. " These scruples, unless they are casuistically beveled around the edges with great care, are a distinct handicap to the full-fledged moneymaker, who must in every situation be plastically opportunistic. But a person who has had it deeply impressed upon him that he must make exact reports of careful laboratory experiments, must conduct exact computations in mathematics and logic, must produce exact translations and echoes of foreign languages, must write faithful reports of correct readings and must be at least imaginatively aware of the world in its diversity, and who has learned these lessons well, must invariably discover that some element of scrupulosity--even if he hasn't been subject to moral indoctrination--has been impressed on his psyche. If he enters upon money-making in a world bazaar where approximate truths, vague deceptions, sneak maneuvers, half promises and even bald falsehoods are the widely admired and heavily rewarded order of the day he must make casuistic adjustments of his standards. The very process of laboriously making the adjustment, even if he succeeds, puts him at a disadvantage vis-a-vis the unschooled, who need waste no energy on such adjustments, who pick up anything lying around loose as easily as they breathe. Some educated people can't make even a partial adjustment to the market bazaar, and their disgraceful bank accounts show it. They are, as even their wives sometimes kindly inform them, failures, though they are doing something conceded to be useful such as instructing children or enforcing the law. They can inscribe after their names a big "F" and go stand in a corner under a dunce cap as the propaganda dervishes scream about success.
But, so as not to alarm appropriations-conscious educators, mere schooling (which is not the same as an education) may prove no great handicap in the race for money, which is one reason some heavily schooled persons turn out to be pecuniary successes. For many persons dutifully put in the required number of years in a national school system noted for its permissiveness without ever acquiring dangerous scruples. One could cite hundreds of names. Among other things, they learn to cheat handily in examinations-- excellent training for the market, They learn to bluff overworked teachers with verbal balderdash. And they do well subsequently as loose-talking salesmen, jobbers, advertising men, promoters, agents, brokers, morticians, lobbyists, fixers, officeholders and smooth workers in the film and television industries. They all learn to be practical--
that is, judiciously unscrupulous. After all, as any of them can testify truthfully, the world isn't perfect and they piously feel no obligation to alter its skewness. They may even become tycoons, and it is only other tycoons who stand in their way.
An education, it is widely and correctly thought, should prepare the individual for life. But the preparation is not for life as the philistines preconceive it. Educators have prolixly explained what an education is so many thousands of times without denting the popular notion that it is vocational preparation that it would be piling prolixity on prolixity to attempt it again. Put most briefly perhaps, an education is designed solely to humanize the individual, and if it has done that it is a "take. " The idea of an education is to raise the individual above the level of mere animality, or at least to qualify his animality significantly. If such an individual makes out better-than-average financially it may be due to recognition of his worth. But thousands of thoroughly educated people have never been appraised by their contemporaries as worth a living wage. T. S. Eliot, Harvard-schooled and widely hailed as the most significant poet writing in English in the past half century, earned his living as a bank teller and, much later, as a publisher's reader. Financially speaking, Eliot as poet, teller or editor wasn't worth so much as a cuss word. Yet it seems probable that his writings will be appreciatively read long after every single existing American corporation and bank, and the memory thereof, has passed out of existence. Curious. . . .
An education, truth to say, has nothing whatever to do with making or not making money, except perhaps as a hindrance. The educators, in extolling the money-rewarding features of education, are indulging in a benevolent deceit, trying to hornswoggle a public with a peasant view of life to support the schools and perhaps lift themselves by their bootstraps above simple animality. Vocational trainees sometimes get sidetracked into true educational paths.
There is no evidence that any of the men on our list who had a higher education, except the General Motors engineering group, ever made use in their careers of what, if anything, they learned at college. There is little in the careers or expressions of either Getty or Kennedy to reflect the influence of Oxford or Harvard. Each could as well have finished off in a business college just as Raskob did.
Harvard never endorsed either stock market pools or the general conduct involved in such pools. These were strictly extracurricular.
The General Motors men were all technicians and applied their knowledge of technology strictly to making money, not to engineering the best possible cars. Donaldson Brown, who married a Du Pont girl, is credited by Alfred P. Sloan, Jr. , in his memoirs with developing a penetrating method of ascertaining rate of return on investment by company subdivisions, a method taken over as well by Du Pont. 70
Most of the men on the Fortune list, as on Stewart Alsop's list, were unsuitable employees, a facet that Alsop takes note of. Few of these men could fit into a pre- arranged job, except for the General Motors executives. As far as employment was concerned, they were maladjusts, nonorganization men. In whatever brief employment some of them had early in their careers, they were like restless panthers, looking only for a chance to break out and track into the jungle. Again except for the General Motors crowd, who were team workers, nearly all the others mentioned were "loners. " And most of them remained "loners," detached, nongregarious. Exceptions would be found among some of the Texas oil men, although Hunt is very much of a "loner. "
Alsop found other peculiarities among those he interviewed, which apply, with some exceptions, to the Fortune listees. None played golf, supposedly the businessman's game. All were physically restless, standing up, moving about, scratching themselves, drumming their fingers, chain-smoking cigarettes, twiddling and twitching--all of which
may merely have been restiveness at having to submit to an interview. Alsop takes it as a general character trait.
Some who have been in the armed forces made out poorly under military discipline, couldn't take it. John D. MacArthur, Alsop reports, was discharged from the Navy in World War 1, "unsuited to naval discipline. " Despite the many big wars the United States has fought in the lifetime of all these men, none stands forth as a major or minor military figure. Where a Who's Who record is available it shows few in military service even when by age classification one would have expected to find a man in uniform. But some perhaps common deviant characteristic appears to have led the military to pass them by. Money-making and military service do not appear to mix.
As to religion, few on the Fortune list make a point of mentioning it. Two were Jews and one was a conspicuous Catholic, Mr. Kennedy. While a few of the others who do not give such information may be Catholics, the probability is that all thirty-one are at least nominally Protestants or religiously disinterested. Catholics do not appear among money-makers proportional to their numbers in society probably for the same reason that they do not loom large in any department of upper-hierarchical American life except local politics and trade-union leadership: They have been self-segregated from the mainstreams of American life by a clergy apparently afraid that contact with non- Catholics will cause their submissiveness to the Church to diminish. With the history of Europe before us we cannot conclude that Catholics as such are not interested in money and power.
Many of these men, dead or alive, are saluted as philanthropists by newspapers (that carry the advertising of their enterprises) because they have, before or at death, established foundations formally classified as charities under the law. Of these Kennedy, Sloan, Kettering, Kaiser, Benedum, Richardson stand out thus far, although virtually all of them will in the normal course of operations establish foundations. Such action has now become standard procedure in reducing estate taxes and keeping controlling shares either in a family or a friendly group, at the same time previsioning considerable posthumous social influence through the financial patronage the foundation is able to bestow.
Who among the noninheritors has made the deepest national impress? This question is easy to answer and one must say Mr. Kennedy, at second remove, mainly through his children. Although John F. Kennedy was not trained by his father to become what he became, not merely president of the United States but a president fantastically visualizing the United States as something more than a pettifoggers' paradise, the father did not impede him and in many ways must be conceded to have indirectly helped him, as the sire's biographer, Richard J. Whalen, skillfully brings to light. Through JFK, and possibly through his other sons, Mr. Kennedy (and his wife) enters History (that is, he comes under analytical individual consideration of the historians) instead of merely being part of history like his financial contemporaries and the rest of us. Between History and history there is a vast difference: The former invokes the canons of aesthetics and morality; the latter is nonevaluative, shapeless. Mr. Kennedy also made a signal contribution as the aggressive first chairman of the Securities and Exchange Commission.
If we continue beyond the Fortune list we find no significant alteration in these patterns although we do, here and there, run into odd variations in the form of Land, De Golyer and Danforth. These are untypical cases, sports.
As to the general human type of American wealth-builder, new and old, it can be said that he is usually an extrovert, given to little reflectiveness until perhaps he approaches senility. He is more often unschooled than schooled, and unread, and has for the most
part a naive view of the world and his role in it. A man of action, he is compulsive and repetitive in his single-minded acquisitiveness. He simply does not know what else to do. As De Golyer remarks, he substitutes money-making for living and often believes that he is engaged in a great crusade. He rarely, as far as the record shows, has qualms or doubts about himself. He is almost invariably devoid of a sense of humor. Color him grey.
"Beyond certain minima, economic gain is inevitably associated with prestige and status, self-validation called 'success,' opportunities for assertion against others, autonomy from disliked persons, tasks, or situations, and so forth. What gives economics its power to command such energy as is invested in the pursuit of gain is often its instrumental value as a means to some other objective. Money buys more than commodities; it buys psychic gratifications of all sorts-although never so completely as the money-seeker thinks it will. "71
The winner is consequently usually restive. For he evidently feels that with all his wealth he ought to strike a blow for something tremendous. But what? And how? Christianity? Science? World peace? Progress? Education? Free enterprise? Democracy? Health? In many cases he ends up feeling frustrated and morosely retires to some House and Garden paradise to meditate on the freakishness of the world and its people. In no case yet of record has he developed a sense of mission that the world can identify itself with. By his position alone he is alienated. For all he has, in fact (apart from deviants like De Golyer, Land and Danforth), is money.
Three
CRIME AND WEALTH
In the quest for new wealth there are shadier avenues yet to scan. For the organized underworld has been designated by a number of recent observers as the luxuriant seeding ground for new fortunes of menacing portent.
This theory grew out of hearings before the Special Senate Committee to Investigate Crime in Interstate Commerce, May 10, 1950, to May 1, 1951, under the chairmanship of Senator Estes Kefauver of Tennessee. In 1952 Kefauver was the Democratic candidate for vice president of the United States.
The germ of the theory appears in Kefauver's book based on the hearings, Crime in America (1951). With minor variants the story has since developed: Underworld characters with local political protection are acquiring legally established businesses as "fronts" and are snatching working control in various large corporations specially in hotels and hotel chains, motels and motel chains, in divers pleasure resorts and perhaps also in banks. Such characters, it is held, have made a bundle in the underworld-- through gambling operations, houses of prostitution, bootlegging, assassination, smuggling, the narcotics traffic--and they are now pyramiding their illicit gains in the labyrinthine corporate world.
Various dangers loom: They will loot companies from the inside, they will rig markets and defraud the public, they will be better able to procure politicians, they will prey on "legitimate" businessmen. They will turn a happy, honest corporate world into a devil's
den, with consequent demoralization of an orderly society. They will, in short, act like fairly typical businessmen.
As the senator himself put it, "I cannot overemphasize the danger that can lie in the muscling into legitimate fields by hoodlums . . . there was too much evidence before us of unreformed hoodlums gaining control of a legitimate business; then utilizing all his old mob tricks--strong-arm methods, bombs, even murder---to secure advantages over legitimate competitors. All too often such competition either ruins legitimate business men or drives them into emulating or merging with the gangsters.
" The hoodlums also are clever at concealing ownership of their investments in legitimate fields--sometimes, as Longie Zwillman said, through 'trustees' and sometimes by bamboozling respectable businessmen into 'fronting' for them. Virgil Peterson of the Chicago Crime Commission testified that 'hundreds' of hoodlum-owned businesses are successfully camouflaged. He told us of having been consulted by a friend of his who had been offered a $25,000-a-year job to head a 'new corporation. ' Peterson investigated and found that 'the fellow who had contacted him was part and parcel of the Capone Syndicate. " 1
Senator Kefauver said he feared legitimate business would be used as a "front," a
cover for tax-evading illegal operations; that unreliable men would arise in industries
vital to health and safety. "I, for one," he said, "do not like to think of food products
necessary to the health of my children, or of medicine that can mean life or death to a
good many people, coming from plants controlled by gangsters whose code of ethics is
the dollar sign, and who do not care if that dollar sign is stained somewhat with blood. " 2
But the senator nowhere gave definitions of "legitimate" and "respectable" businessmen.
Kefauver showed that mobsters were established on the fringes of seventy different industries, including drug manufacturing, baking, candy-making, food distribution and hotels. 3
While he did not enlarge Kefauver's theory, Robert F. Kennedy, chief counsel of the Select Committee (McClellan Committee) of the United States Senate on Improper Activities in the Labor or Management Field, subsequently attorney general of the United States, and still later senator from New York, did reinforce it in his book based on the McClellan investigation, The Enemy Within (1960). For the investigation found, as Kennedy reports, direct tie-ups between extremely vicious underworld characters, spurious labor unions and various leading corporations. 4
The object of these tie-ups was to prevent effective unionization of employees, a criminal violation of the National Labor Relations Act. Many other crimes, such as murder, were allegedly committed out of sheer exuberance of spirits.
After diplomatically saluting "the majority of American businessmen" as above crookedness and collusion in labor-management negotiations," Kennedy wrote that "we found that with the present-day emphasis on money and material goods many businessmen were willing to make corrupt 'deals' with dishonest union officials in order to gain competitive advantage or to make a few extra dollars. . . . We came across more than fifty companies and corporations that had acted improperly-and in many cases illegally--in dealings with labor unions . . . in the companies and corporations to which I am referring the improprieties and illegalities were occasioned solely by a desire for monetary gain. Furthermore we found that we could expect very little assistance from management groups. Disturbing as it may sound, more often the business people with
whom we came in contact--and this includes some representatives of our largest corporations--were uncooperative. " 5
"By and large," wrote Kennedy, "little accurate information came to us from the business community. We received 150,000 complaints during the Committee's life. Seventy-five per cent of them came from representatives of organized labor, mostly rank and filers. Some came from people outside the labor-management field. Only a handful came from people in the business world. Certainly no investigation was touched off by any voluntary help we received from management. And this was not because management had no information to give. I believe 90 per cent of the corrupt deals between business and labor could be eliminated if business officials would simply talk to proper authorities. " 6 Why business people, as the instigators of the corrupt actions, would do this he didn't say.
"Often," Kennedy related, "we found that corrupt deals involving management were handled through attorneys who played the role of 'middleman,' or, as we came to think of them, 'legal fixers' or 'legal prostitutes. ' More often it was the labor relations consultant who played the 'middleman. '" 7
Kennedy reeled off a list of names of offending companies that reads like a miniature Social Register of big business. "Although I thought I had become case-hardened," Kennedy remarked, "I discovered I still was not shockproof when I studied the results of our investigation of the A. & P. . . " 8
The thesis that the underworld is a direct bridge into new propertied wealth for latecoming frontiersmen is laid down flatly by Professor Daniel Bell, chairman of the department of sociology of Columbia University. 9
"The jungle quality of the American business community, particularly at the turn of the century, was reflected in the mode of 'business' practiced by the coarse gangster elements, most of them from new immigrant families, who were 'getting ahead' just as Horatio Alger had urged. 10
"For crime, in the language of the sociologists, has a 'functional' role in society, and the urban rackets--the illicit activity organized for continuing profit, rather than individual illegal acts--is one of the queer ladders of social mobility in American life. Indeed, it is not too much to say that the whole question of organized crime in America cannot be understood unless one appreciates (1) the distinctive role of organized gambling as a function of a mass-consumption economy; (2) the specific role of various immigrant groups as they, one after another, became involved in marginal business and crime; and (3) the relation of crime to the changing character of the urban political machines. " 11
Crime, in other words, was the road taken by many immigrants, imbued with the Horatio Alger ideal of 100 per cent Americanism to become property holders and escape the repressive wage yoke imposed upon them by foresightedly frugal Anglo- Saxon corporations.
As business became more organized so did racketeering and gambling, until in the 1920's and 1930's it had become "industrial racketeering" through the medium of labor disputes, a fertile field. 12
Leading entrepreneurs here were Arnold Rothstein (shot after a high stakes card game), Louis Lepke Buchalter (executed in Sing Sing), Gurrah Shapiro, Dutch Schultz (assassinated), Jack "Legs" Diamond (assassinated) and Lucky Luciano (deported). Buchalter and Shapiro, as Professor Bell notes, in New York in the 1930's dominated sections of the clothing industries, house painting, fur dressing, flour trucking, etc. "In a highly chaotic and cutthroat industry such as clothing, the racketeer, paradoxically,
played a stabilizing role by regulating competition and fixing prices. When the NRA
came in and assumed this function, the businessman found that what had once been a
quasi-economic service was now pure extortion, and he began to demand police action. " 13
Seeking other worlds to conquer, says Professor Bell, the criminal racketeer shifted his emphasis from production to consumption, mainly gambling, without wholly yielding his interest in the productive side--as his deep involvement in labor racketeering in the 1950's and 1960's attests.
The Kefauver investigation revealed the tentacles of the gambling and vice syndicates; the McClellan investigation disclosed the seamy labor racketeers in full bloom. The latter performed the economic function of keeping labor costs down for the owners (a function performed by the political police in Soviet Russia). The gambling entrepreneurs performed the political-economic function of helping finance surreptitiously the major local political organizations--"machines" to critics--in Boston, Providence, New York, Philadelphia, Pittsburgh, Buffalo, Cleveland, Detroit, Chicago, St. Louis, Kansas City and other large urban areas.
Properly rejecting the Kefauver Committee's idea that a Mafia rules the underworld, Professor Bell points out that the committee failed to understand "(1) the rise of the American Italian community, as part of the inevitable process of ethnic succession, to positions of importance in politics, a process that has been occurring independently but also simultaneously in most cities with large Italian constituencies--New York, Chicago, Kansas City, Los Angeles; (2) the fact that there are individual Italians who play prominent, often leading roles today in gambling and the mobs; and (3) the fact that Italian gamblers and mobsters often possessed 'status' within the Italian community itself and a 'pull' in city politics. " 14
The road of crime, in other words, was taken by some latecoming immigrants trying to become property owners: Italians, East European Jews in the garment trades and Irish. 15 The urban political machines levied on all of these a heavy tariff. 16
In the process many of these men became "legitimate" property holders--'legitimate" here meaning that a court will uphold one's property claim. "Many of the top 'crime' figures" (I don't know why Professor Bell puts crime' in quotation marks, since they were court-certified criminals--F. L. ) now derived their income from "legitimate investments (real estate in the case of Costello, motor haulage and auto dealer franchises [Ford] in the case of Adonis) or from such quasi-legitimate but socially respectable sources as gambling casinos. " 17
One arrives, in short, at the big shots of the underworld, their names paraded anew in the Kefauver and McClellan investigations, and including such "labor leaders" as Jimmy Hoffa, Dave Beek and their henchmen--topsy-turvy Robin Hoods who gleefully robbed the poor for the benefit of the rich. These are men who, it is widely asserted, have traveled the latest highroad to wealth and secretly own large shares in the largest corporations. They have indeed the requisite qualities of ruthlessness and unscrupulousness but lack finesse.
Without harrowing the reader with details of the lengths to which I have gone to verify this notion of the criminal underworld as the source of great new wealth, let me categorically say this: There is nothing to it. While it is no doubt true that people like Costello have accumulated a nest egg of dimensions that might be envied by the common man I doubt that it is very great in the terms under discussion. If Costello or any other underworld character as of 1965 had a net worth of more than $5 million it would be surprising. No available evidence shows great underworld wealth unless Wall Street is located in the underworld.
Senator Kefauver cites incomes of various gambling groups taken from income-tax returns, which the underworld dislikes falsifying since Capone and others were caught at it and jailed for long terms, but though some of these figures are impressive, even if understated, it is only in a small way. They seem in the category of the marginal speculative businessmen scanned toward the end of the previous chapter, at best.
The reason for this low pecuniary estate is simple. The underworld in its public operations--gambling, prostitution, other variants of vice (as distinct from secret operations such as dope peddling)--is subject to "the split. " It must share its receipts (Kefauver estimated the gambling turnover alone at $20 billion a year) with local politicos, and the police from the beat patrolman up to the precinct captain.
This necessity diminishes the net return to the operators who, themselves a group, must also split. I should imagine the net return on total "sales" to be a good deal less than I per cent. On $20 billion (a figure pulled from the air) I per cent is $200 million, and even $200 million is far more than is likely to reach underworld coffers. For in addition to payoffs to winners, the gamblers must make heavy payouts for judicial fixes and lawyers. They must constantly yield tribute to hijackers. And when the residue is split among hundreds of operators there isn't much left for each. The "take" in prostitution is less and subject to a bigger overhead.
Someone who was known to be "on the take" for many years was Mayor Frank Hague of Jersey City, long a power in national councils of the Democratic Party (he might just as well have been a Republican). For Hague the revenue from gambling was steady. As a formal Catholic he frowned on prostitution. At his death he left an estate valued at $5 million. 18 If Hague, starting as a poor youth and never leaving the receiving end, could do no better than that, what must the so-called syndicate heads have made? Even if we allow that Hague spent $5 million additional in high living, his receipts would not have been more than $10 million for a very large, enduring and central gambling-political operation. While a goodly sum, this is not really "big" money. And Hague was not himself a gangster.
According to the newspapers, some criminal--usually Italian, Irish or Jewish-- establishes an organization. Then he shops about for "political protection" and manages to seduce some respectable churchgoing American official with a charming wife and children and a dog, cat and canary. A really decent chap, you know, until sweet-talked and bribed by an agent of the Mafia.
What actually almost always happens is that an established group in business and/or politics, having decided what the prospects are, looks about for a strong-arm man. If he can't be found locally he is imported, as Costello was imported into New Orleans to run slot machines, as Johnny Torrio and Capone, Brooklyn men, were imported into Chicago to dominate vice in general and as Harry Bennett was brought to Detroit by Henry Ford.
Something to notice about nearly all the underworld figures in their public appearances is that they are unsure of themselves. In fact, if they didn't have sponsorship they wouldn't have the assurance to set up extensive public operations. The newspapers require one to believe, for example, that the Anastasia brothers jumped ship and then proceeded autonomously to establish themselves on American soil as general strong-arm men and assassins. If one will only notice one's own uncertainty in a strange city (much less a strange country with a strange language) one will see how unlikely it is that lower-class people who don't know the language would take to large-scale lawbreaking in a strange land. But--if someone in authority convinced them it was all right to break the law, that they would be protected and paid, and if he was able to prove this on numerous touch-and-go occasions--one would produce the pattern of sullen,
defiant, wordless behavior of lower-class thugs at the bar with which the public is familiar.
The core of the Chicago prohibition mobsters, now world famous, was originally recruited by Chicago newspaper publishers who were engaged in literal gun battles for newsstand position--the "Circulation War. " All of the gunplay of the 1920's had a long dress rehearsal before World War I in the newspaper war. The participants learned through the Chicago newspaper attorneys how "the fix" worked and, later under political protection, they functioned the same way in the prohibition gangland wars. 19
Newspapers also purvey the fiction that once an operation has begun another independent comes along and tries to "muscle in," and then gang warfare breaks out. This is seldom true, although some independents (perhaps misled by reading the newspapers) have lent color to the theory, to their own undoing.
Most cases of urban gang warfare in the United States, apart from juvenile gangs, are expressions of factions in the local political party structure. Local branches of the two major parties or factions thereof extend protection to different strong-arm men, in gambling, prostitution, bootlegging, "protecting" small businessmen, and similar enterprises. Out in the field the cohorts of one gang infringe on the supposed territory of another, each catering to the hoi polloi. Formally outside the law, there is no way out for them except to fight or retreat. In some cases, no doubt, there have been retreats. In the known cases, violence has been the arbitrator.
The strong-arm men occasionally trip over the law (though there has not been a single conviction other than for the murder of a newspaperman for hundreds of gang murders in Chicago since World War 1), but rarely are their political protectors laid by the heels. One exception was James J. Hines, Tammany district leader and the political connection for the Dutch Schultz gang, who was convicted and sent to jail in the late 1930's by Thomas E. Dewey, later governor of New York and twice the Republican candidate for president.
Naturally all this affluence has wrought some changes in Rautbord's life. He owns a Rolls-Royce, a big yacht and seventy pairs of cuff links. 66
Hans Fischer, born in Vienna, heads H. Fischer and Associates of Cleveland. A consulting engineer, he came to the, United States in 1939, as yet, alas, a non-American. Around 1950 he had only $4,000 and with only that much was practically an un- American but--such had been his success when the Journal editors looked him over--he, now fully American, was worth $1. 2 million, owned a Cadillac, a Jaguar and a forty- five-foot Chris-Craft, and lived in a big house in Shaker Heights, Ohio, near other true- blue Americans.
But J. W. Walters did somewhat better, possibly because he was American-born and therefore by nature anointed. A Navy veteran driving a truck in 1946, he was looking for a really cheap house, all he could afford. He saw an ad for a "shell" structure at $1,195 and went with borrowed money to buy from a man named Davenport. Instead, he went into partnership with this man. Davenport, evidently a person of little faith or having other worlds to conquer, sold out to Walters in 1948 for $48,000; Walters was then thirty-eight years old.
The lowly enterprise went on to become National Homes Corporation, producer of prefabricated homes, which the Journal men say has made more than $1 million for each of seven persons and left Mr. Walters with a net worth in 1960 of $8,700,000. 67 Walters, who quit school after the twelfth grade, has acquired a 1,700-acre Florida hunting ranch as well as other dazzling properties. National Homes now makes prefabricated apartment buildings, shopping centers and schools as well as individual houses. It will build whole prefabricated towns, and has done so, at the drop of a nail.
But these people, though we salute them as true-blue American enterprisers, are all really small potatoes, hardly worth a feeble cheer from the House Un-American Activities Committee. The new crop, either the one of Fortune, 1952, or the Wall Street Journal, 1962, simply does not rate on the scale of wealth even though its members may be having the time of their lives in their cruisers, jaguars, $50 bats and $160 suits.
The Sweetest-Smelling Real Estate Empire
The New York Times in 1965 introduced two formidable contenders into the arena of big new wealth, as if to replace the void left by the departure of bulky William Zeckendorf.
These new tycoons, said the Times, are Sol Goldman, forty-seven, and Alex Di Lorenzo, Jr. , forty-eight, who have built a real estate empire on a pyramid of mortgage loans.
When the Times studied them in April, 1965, they quietly owned more than twenty office buildings, including the seventy-seven-story Chrysler Building; extensive harbor terminals; a growing flotilla of hotels; various "sprawling" industrial buildings; shopping centers; and large apartment houses. More than 20,000 persons were employed in keeping these properties operative.
Cruising under the firm name of Wellington Associates (presumably it would be unlucky to be Napoleon Associates), they have followed the technique of "mortgaging out"--that is, borrowing enough money with first and second mortgages to cover the full purchase price of a property, literally nothing down. " If, through improvements or other devices, the buyer can increase the rent rolls, he can go to a bank in a year or two and borrow enough money on a new mortgage at lower rates to wipe out the high-interest mortgages, sometimes leaving a surplus above the original purchase price. This surplus is then invested in other properties and the process goes on like a rolling barrage. A neat feature is that the surplus is tax-free because it is technically borrowed money, on which one pays no tax, naturally.
Wellington Associates bought the Chrysler Building in 1942 for $42 million, mostly carried on first and second mortgages charged against them. Some four years later they borrowed $47 million at 5-1/2 per cent from a Wall Street syndicate, which spread the paper around the country, and paid off on the old paper. In the meantime by amortization out of rents they had reduced their original obligation by $3 million, so they had $8 million of technically borrowed nonrepayable tax-free money to play with, the best kind there is.
Now the Chrysler Building alone is producing for them $1. 5 million a year, tax-free, for their investment in other properties.
Proceeding in this way, if nothing goes wrong (such as an interruption in rents or balkiness of the banks), Goldman and Di Lorenzo should in time own all of the United States, cost free. They have already bought more than 250 pieces of property in Manhattan and own more than 450 properties "conservatively estimated," says the Times, to be worth more than $500 million. The equity of the two partners in this chunk is set at about $150 million, a worthy figure. But it could shrink--or expand.
The Times got wind of Wellington Associates because its swift rise had set alarm bells ringing in nearly every investigative agency in the country, including the FBI. The latter was instantly fascinated because of the persistent rumor that underworld money is finding its way into American business, that "bad guys" born in Sicily and other unhallowed places are infiltrating "good guys" with names reminiscent of Astor, Vanderbilt and Rockefeller. No basis whatever for these rumors was found in the Goldman-Di Lorenzo set-up, which emerged smelling as sweet as any real estate empire ever smelled. It appeared, indeed, to be the sweetest-smelling real estate empire that the investigators had ever encountered. 68
The Rising Tide of Wealth
But wealth is apparently rising around us like a tidal wave even as inquiry proceeds. Herman P. Miller, assistant to the Director of the Census Bureau, reports that "The rich among us are flourishing as never before. And not only millionaires, but multi- millionaires. " The figure of 27,000 persons owning $1 million or more of property in 1953, according to the Lampman study, must now be raised to close to 90,000 in 1965, says Miller.
It is this increase in the wealth of wealth-holders that is taken to prove that newcomers are making big money in droves.
"The 90,000 millionaires are a diverse lot," says Miller. "They include men and women, young and old, creators and contrivers, new rich and established rich.
"Since their number is rapidly growing, it suggests that the new millions are largely earned [sic! ] and not simply passed down through inheritance--that is, they come from the creation of goods and services we can all enjoy. A large proportion of today's new millionaires derive their wealth from scientific inventions, home construction, new products and other things that enrich our lives in many ways. " 69
There is nothing in the set of figures presented to justify this disarmingly pleasant conclusion. The simple fact is this: In the general rise in prices holdings previously valued below $1 million are now valued at $1 million or more. No doubt some new earning properties have been created out of inventions and the like but most of these million-dollar-plus properties are owned by the same people who in most cases inherited them. It is not the case, as far as these bare statistics show, that "the new millions are largely earned"; that remark is thrown in from nowhere, with no evidential basis cited. A man worth $200,000 in 1940 may now be worth $2 million and may in five or fifteen years be worth $800,000 or $5 million, depending upon the swing in the economy and the nature of his property.
But it is not the case that there are 90,000 newly moneyed millionaires, 9,000 or even 900. It is clearly incumbent upon anyone who contends this to show it, Some few persons have in the past twenty years come up from nothing to $1 million or more; but they represent only a minor fraction of this phalanx of 90,000, who are simply the old- line upper property holders.
A New String fromTime
But reports such as these are quickly followed by others, all with the same message but a different cast of characters. Thus Time, December 3, 1965, under the title "Millionaires" presented a new list of men who had allegedly made a million or more before they were forty. Editors should notice that there is still to be presented a list of women, like Lucille Ball, who have made a million or more before forty and even of children who have become worth more than $10 million before they are five years old.
Said Time:
"As a land passionately devoted to free enterprise, the U. S. has always been the best place for a man to make his million. The fabled 19th century millionaires . . . all began poor. Despite their often controversial actions, they, like most American millionaires, basically enriched themselves by enriching a growing nation [a statement that might be seriously questioned. -- F. L. ].
"The U. S. still offers countless opportunities for the man who wants to accumulate a personal net worth of $1,000,000 or more--and thousands [sic! ] seize them every year. The number of U. S. millionaires, reports the Federal Reserve Board, has swelled from 40,000 in 1958 to nearly 100,000 at present. How do they do it? In a variety of individual ways, but their common denominator is that they find an economic need and fill it. "
My readers are aware, to the contrary, that nearly all of these 90,000-plus do it by inheriting, with the increasing number of millionaires traceable to the rise in prices.
But Time goes on to present its own meager bottom-of-the-barrel list of new wealthy: Net
Worth*
Arthur J. Decio, 35, Elkhart, Ind. , Skyline Homes $5
million
Charles Bluhdorn, 39, N. Y. C. , Gulf & Western Industries $15
million
Harold Smith Prince, 37, N. Y. C. , Broadway producer $1
million
Arthur Carlsberg, 32, Los Angeles, real estate $5
million
Merlyn Francis Mickelson, 38, Minneapolis, computer parts $47
million
John Diebold, 39, N. Y. C. , management consultant $1
million +
Eugene Ferkauf, 44, N. Y. , Korvette, Inc. , cut-price stores $55
million
Jerry Wolman, 38, Philadelphia, football impresario
"Millions"
Art Modell, 41, Cleveland, football impresario
"Millions"
Michael Mungo, 37, South Carolina, ex-cottonpicker, real estate $2
million
John F. Donahue, 41, securities salesman $1. 5
million
Alvin Weeks, 41, Atlanta, frozen pastries Not
stated
Joseph McVicker, 35, Cincinnati, toys
"Millionaire"
Walter Davis, 42, Texas, trucking $7
million
Ernest Stern, 45, Pittsburgh, theater magnate Not
stated
Robert K. Lifton, 37, N. Y. C. , real estate
$4. 75 million
Fletcher Jones, 34, Los Angeles, computer programme $20
million
Del Coleman, 40, Chicago, jukeboxes Not
stated
James Thomas, 37, Los Angeles, real estate
"Millionaire"
Michael Rafton, ? , Oakland, portable classrooms
"Huge profit"
Charles Stein, 37, Chicago, orange juice
"Millionaire"
Al Lapin, 38, Los Angeles, coffee vending, pancakes
"Rich"
Jerry Lapin, 36, Los Angeles, coffee vending, pancakes
"Rich"
Fred Bailey, 39, Los Angeles, ordnance parts $2
million
Charles Gelman, 33, Michigan, chemist, filter manufacturer $1. 3
million
* Time cites no public record for its figures.
Accepting all these valuations as authentic, what do they prove? Not , surely, that big wealth is new wealth or vice versa. Nobody denies that a few score or even a few hundred men in business ventures make a temporary million or more. The point is that most of these sums mentioned are chicken feed and the larger figures might require some further examination. Again, how many of these will survive economic downdrafts? How many will follow William Zeckendorf into sterile impecuniosity?
A list of hundreds of names could be drawn up under the title "Men Once Worth a Million or More Who Went Broke. " As Thomas Mellon remarked, it is harder to hold onto money than to make it.
The Big Winners in Review
What remains to be said about this heterogeneous collection of names? Some have arrived, some are in the process of arriving (or departing), some are only pseudo- arrivistes.
To return to the Fortune list of thirty-four, taking it at face value and disregarding any of the qualifications offered, most of the men on it are neither builders, inventors, constructors of new-type industries nor job creators. The predominant oil crowd play an enlarged version of the childhood game of finders-keepers under a big tax shelter. They provide little employment, at most pour low-tax high-price oil into a pre-existent world pipeline.
Kaiser and the Browns of Brown and Root, Inc. , are construction men, buoyed up a long part of the way by politically wangled government loans and contracts. Kaiser has shouldered his way heavily into private enterprises of various kinds--aluminum, plastics, cement, steel. Perhaps he has bulldozed a pattern for the future in which government will finance new private enterprises via low-cost loans, contracts, tax schemes and other aids, thereby providing jobs lower down for the multitudes that the old-line monopolists allowed to spawn without reckoning on the ability of the economic system to sustain them.
Stewart Alsop found that all on his Post list but Land had made good in a big way mainly by taking advantage of special government shelters over oil, insurance and real estate. All the oil men--Mecom, Keck, Smith and Abercrombie--get the depletion allowance and are able to take large deductions for "intangible drilling expenses. " "Thus," as Alsop remarks, "an oilman with a good tax lawyer can pay little or no income tax on a real income of millions of dollars. " In real estate, depreciation plays the role of depletion in oil and there is always "mortgaging out. " In insurance, the key word is "reserves"; for in order to build reserves generous tax allowances are made which apply as well to the equity of the owners of insurance companies such as Stone, MacArthur and Ahmanson. The latter, doubling in the building and loan business, is propped up also by government insurance up to $15,000 per individual depositor.
Kettering, as I have noted, was an inventor; Mott and Sloan, engineers; Kennedy, Wolfson and Getty are market operators who, like most of Alsop's list, never made any weighty contribution to the gross national product. Getty became king-size by buying underpriced shares in the Depression. Halliburton, Ludwig and MacKnigbt are company organizers and rationalizers, able to find chinks in an established market. MacArtbur simply offered through mass advertising as little insurance as anyone wished to buy, from $1 per month up, Like the Woolworth plan this one was admirably suited to an economy in which few people have money beyond immediate pressing needs.
All the noninheritors on the Fortune list were born in the United States. Of the twenty-three for whom the information is of record, thirteen were born in small towns or semi-rural areas.
A few started as poor boys, notably H. L. Hunt, who was dirt-poor. But most had comfortable beginnings. Getty's father was rich, Richardson's and Murchison's were well-to-do, Sloan's father was a successful small-businessman and Kennedy's father a prosperous-enough saloonkeeper-politician. In general, those who never entered college appear to have had the more modest beginnings; but except for Hunt the rags-to-riches theme applies to none. At least one married well from a financial point of view, although he was also endowed with technical ability.
A notable pattern emerges in the large number of school dropouts on the list, from early grades to college. Stewart Alsop noticed the same thing in his Saturday Evening Post list of thirteen, of which five are on the Fortune list.
Most of the Fortune men identify themselves educationally as having attended "public schools," which may mean anything from first grade to completing high school. And most of those I have added--Amon G. Carter, Jesse Jones, John J. Raskob, Hugh Roy Cullen, William L. Moody and even A. P. Giannini--had scant schooling. With few exceptions, the fortune-builders of more recent date, like their nineteenth-century forerunners, had little interest in school even when it was available to them. Not especially well-educated or well-read either, they are obviously truants from high culture. Many who weren't high school dropouts were grade-school dropouts.
Educators, trying in desperation to rally popular support for education and mulling over statistics, like to point out to rugged philistines that on the average educated people earn more than the meagerly educated. And this is true when it comes to offering marketable skills and personalities at modest salaries in an existing Establishment that requires ever-increasing skilled personnel for its complex operations. But it has never been true where really big money is concerned. An education can be a severe handicap when it comes to making money.
The reason for this is that in the process of being educated there is always the danger that the individual will acquire scruples, a fact dimly sensed by some of the neo- conservatives who rail against the school system as "Communistic. " These scruples, unless they are casuistically beveled around the edges with great care, are a distinct handicap to the full-fledged moneymaker, who must in every situation be plastically opportunistic. But a person who has had it deeply impressed upon him that he must make exact reports of careful laboratory experiments, must conduct exact computations in mathematics and logic, must produce exact translations and echoes of foreign languages, must write faithful reports of correct readings and must be at least imaginatively aware of the world in its diversity, and who has learned these lessons well, must invariably discover that some element of scrupulosity--even if he hasn't been subject to moral indoctrination--has been impressed on his psyche. If he enters upon money-making in a world bazaar where approximate truths, vague deceptions, sneak maneuvers, half promises and even bald falsehoods are the widely admired and heavily rewarded order of the day he must make casuistic adjustments of his standards. The very process of laboriously making the adjustment, even if he succeeds, puts him at a disadvantage vis-a-vis the unschooled, who need waste no energy on such adjustments, who pick up anything lying around loose as easily as they breathe. Some educated people can't make even a partial adjustment to the market bazaar, and their disgraceful bank accounts show it. They are, as even their wives sometimes kindly inform them, failures, though they are doing something conceded to be useful such as instructing children or enforcing the law. They can inscribe after their names a big "F" and go stand in a corner under a dunce cap as the propaganda dervishes scream about success.
But, so as not to alarm appropriations-conscious educators, mere schooling (which is not the same as an education) may prove no great handicap in the race for money, which is one reason some heavily schooled persons turn out to be pecuniary successes. For many persons dutifully put in the required number of years in a national school system noted for its permissiveness without ever acquiring dangerous scruples. One could cite hundreds of names. Among other things, they learn to cheat handily in examinations-- excellent training for the market, They learn to bluff overworked teachers with verbal balderdash. And they do well subsequently as loose-talking salesmen, jobbers, advertising men, promoters, agents, brokers, morticians, lobbyists, fixers, officeholders and smooth workers in the film and television industries. They all learn to be practical--
that is, judiciously unscrupulous. After all, as any of them can testify truthfully, the world isn't perfect and they piously feel no obligation to alter its skewness. They may even become tycoons, and it is only other tycoons who stand in their way.
An education, it is widely and correctly thought, should prepare the individual for life. But the preparation is not for life as the philistines preconceive it. Educators have prolixly explained what an education is so many thousands of times without denting the popular notion that it is vocational preparation that it would be piling prolixity on prolixity to attempt it again. Put most briefly perhaps, an education is designed solely to humanize the individual, and if it has done that it is a "take. " The idea of an education is to raise the individual above the level of mere animality, or at least to qualify his animality significantly. If such an individual makes out better-than-average financially it may be due to recognition of his worth. But thousands of thoroughly educated people have never been appraised by their contemporaries as worth a living wage. T. S. Eliot, Harvard-schooled and widely hailed as the most significant poet writing in English in the past half century, earned his living as a bank teller and, much later, as a publisher's reader. Financially speaking, Eliot as poet, teller or editor wasn't worth so much as a cuss word. Yet it seems probable that his writings will be appreciatively read long after every single existing American corporation and bank, and the memory thereof, has passed out of existence. Curious. . . .
An education, truth to say, has nothing whatever to do with making or not making money, except perhaps as a hindrance. The educators, in extolling the money-rewarding features of education, are indulging in a benevolent deceit, trying to hornswoggle a public with a peasant view of life to support the schools and perhaps lift themselves by their bootstraps above simple animality. Vocational trainees sometimes get sidetracked into true educational paths.
There is no evidence that any of the men on our list who had a higher education, except the General Motors engineering group, ever made use in their careers of what, if anything, they learned at college. There is little in the careers or expressions of either Getty or Kennedy to reflect the influence of Oxford or Harvard. Each could as well have finished off in a business college just as Raskob did.
Harvard never endorsed either stock market pools or the general conduct involved in such pools. These were strictly extracurricular.
The General Motors men were all technicians and applied their knowledge of technology strictly to making money, not to engineering the best possible cars. Donaldson Brown, who married a Du Pont girl, is credited by Alfred P. Sloan, Jr. , in his memoirs with developing a penetrating method of ascertaining rate of return on investment by company subdivisions, a method taken over as well by Du Pont. 70
Most of the men on the Fortune list, as on Stewart Alsop's list, were unsuitable employees, a facet that Alsop takes note of. Few of these men could fit into a pre- arranged job, except for the General Motors executives. As far as employment was concerned, they were maladjusts, nonorganization men. In whatever brief employment some of them had early in their careers, they were like restless panthers, looking only for a chance to break out and track into the jungle. Again except for the General Motors crowd, who were team workers, nearly all the others mentioned were "loners. " And most of them remained "loners," detached, nongregarious. Exceptions would be found among some of the Texas oil men, although Hunt is very much of a "loner. "
Alsop found other peculiarities among those he interviewed, which apply, with some exceptions, to the Fortune listees. None played golf, supposedly the businessman's game. All were physically restless, standing up, moving about, scratching themselves, drumming their fingers, chain-smoking cigarettes, twiddling and twitching--all of which
may merely have been restiveness at having to submit to an interview. Alsop takes it as a general character trait.
Some who have been in the armed forces made out poorly under military discipline, couldn't take it. John D. MacArthur, Alsop reports, was discharged from the Navy in World War 1, "unsuited to naval discipline. " Despite the many big wars the United States has fought in the lifetime of all these men, none stands forth as a major or minor military figure. Where a Who's Who record is available it shows few in military service even when by age classification one would have expected to find a man in uniform. But some perhaps common deviant characteristic appears to have led the military to pass them by. Money-making and military service do not appear to mix.
As to religion, few on the Fortune list make a point of mentioning it. Two were Jews and one was a conspicuous Catholic, Mr. Kennedy. While a few of the others who do not give such information may be Catholics, the probability is that all thirty-one are at least nominally Protestants or religiously disinterested. Catholics do not appear among money-makers proportional to their numbers in society probably for the same reason that they do not loom large in any department of upper-hierarchical American life except local politics and trade-union leadership: They have been self-segregated from the mainstreams of American life by a clergy apparently afraid that contact with non- Catholics will cause their submissiveness to the Church to diminish. With the history of Europe before us we cannot conclude that Catholics as such are not interested in money and power.
Many of these men, dead or alive, are saluted as philanthropists by newspapers (that carry the advertising of their enterprises) because they have, before or at death, established foundations formally classified as charities under the law. Of these Kennedy, Sloan, Kettering, Kaiser, Benedum, Richardson stand out thus far, although virtually all of them will in the normal course of operations establish foundations. Such action has now become standard procedure in reducing estate taxes and keeping controlling shares either in a family or a friendly group, at the same time previsioning considerable posthumous social influence through the financial patronage the foundation is able to bestow.
Who among the noninheritors has made the deepest national impress? This question is easy to answer and one must say Mr. Kennedy, at second remove, mainly through his children. Although John F. Kennedy was not trained by his father to become what he became, not merely president of the United States but a president fantastically visualizing the United States as something more than a pettifoggers' paradise, the father did not impede him and in many ways must be conceded to have indirectly helped him, as the sire's biographer, Richard J. Whalen, skillfully brings to light. Through JFK, and possibly through his other sons, Mr. Kennedy (and his wife) enters History (that is, he comes under analytical individual consideration of the historians) instead of merely being part of history like his financial contemporaries and the rest of us. Between History and history there is a vast difference: The former invokes the canons of aesthetics and morality; the latter is nonevaluative, shapeless. Mr. Kennedy also made a signal contribution as the aggressive first chairman of the Securities and Exchange Commission.
If we continue beyond the Fortune list we find no significant alteration in these patterns although we do, here and there, run into odd variations in the form of Land, De Golyer and Danforth. These are untypical cases, sports.
As to the general human type of American wealth-builder, new and old, it can be said that he is usually an extrovert, given to little reflectiveness until perhaps he approaches senility. He is more often unschooled than schooled, and unread, and has for the most
part a naive view of the world and his role in it. A man of action, he is compulsive and repetitive in his single-minded acquisitiveness. He simply does not know what else to do. As De Golyer remarks, he substitutes money-making for living and often believes that he is engaged in a great crusade. He rarely, as far as the record shows, has qualms or doubts about himself. He is almost invariably devoid of a sense of humor. Color him grey.
"Beyond certain minima, economic gain is inevitably associated with prestige and status, self-validation called 'success,' opportunities for assertion against others, autonomy from disliked persons, tasks, or situations, and so forth. What gives economics its power to command such energy as is invested in the pursuit of gain is often its instrumental value as a means to some other objective. Money buys more than commodities; it buys psychic gratifications of all sorts-although never so completely as the money-seeker thinks it will. "71
The winner is consequently usually restive. For he evidently feels that with all his wealth he ought to strike a blow for something tremendous. But what? And how? Christianity? Science? World peace? Progress? Education? Free enterprise? Democracy? Health? In many cases he ends up feeling frustrated and morosely retires to some House and Garden paradise to meditate on the freakishness of the world and its people. In no case yet of record has he developed a sense of mission that the world can identify itself with. By his position alone he is alienated. For all he has, in fact (apart from deviants like De Golyer, Land and Danforth), is money.
Three
CRIME AND WEALTH
In the quest for new wealth there are shadier avenues yet to scan. For the organized underworld has been designated by a number of recent observers as the luxuriant seeding ground for new fortunes of menacing portent.
This theory grew out of hearings before the Special Senate Committee to Investigate Crime in Interstate Commerce, May 10, 1950, to May 1, 1951, under the chairmanship of Senator Estes Kefauver of Tennessee. In 1952 Kefauver was the Democratic candidate for vice president of the United States.
The germ of the theory appears in Kefauver's book based on the hearings, Crime in America (1951). With minor variants the story has since developed: Underworld characters with local political protection are acquiring legally established businesses as "fronts" and are snatching working control in various large corporations specially in hotels and hotel chains, motels and motel chains, in divers pleasure resorts and perhaps also in banks. Such characters, it is held, have made a bundle in the underworld-- through gambling operations, houses of prostitution, bootlegging, assassination, smuggling, the narcotics traffic--and they are now pyramiding their illicit gains in the labyrinthine corporate world.
Various dangers loom: They will loot companies from the inside, they will rig markets and defraud the public, they will be better able to procure politicians, they will prey on "legitimate" businessmen. They will turn a happy, honest corporate world into a devil's
den, with consequent demoralization of an orderly society. They will, in short, act like fairly typical businessmen.
As the senator himself put it, "I cannot overemphasize the danger that can lie in the muscling into legitimate fields by hoodlums . . . there was too much evidence before us of unreformed hoodlums gaining control of a legitimate business; then utilizing all his old mob tricks--strong-arm methods, bombs, even murder---to secure advantages over legitimate competitors. All too often such competition either ruins legitimate business men or drives them into emulating or merging with the gangsters.
" The hoodlums also are clever at concealing ownership of their investments in legitimate fields--sometimes, as Longie Zwillman said, through 'trustees' and sometimes by bamboozling respectable businessmen into 'fronting' for them. Virgil Peterson of the Chicago Crime Commission testified that 'hundreds' of hoodlum-owned businesses are successfully camouflaged. He told us of having been consulted by a friend of his who had been offered a $25,000-a-year job to head a 'new corporation. ' Peterson investigated and found that 'the fellow who had contacted him was part and parcel of the Capone Syndicate. " 1
Senator Kefauver said he feared legitimate business would be used as a "front," a
cover for tax-evading illegal operations; that unreliable men would arise in industries
vital to health and safety. "I, for one," he said, "do not like to think of food products
necessary to the health of my children, or of medicine that can mean life or death to a
good many people, coming from plants controlled by gangsters whose code of ethics is
the dollar sign, and who do not care if that dollar sign is stained somewhat with blood. " 2
But the senator nowhere gave definitions of "legitimate" and "respectable" businessmen.
Kefauver showed that mobsters were established on the fringes of seventy different industries, including drug manufacturing, baking, candy-making, food distribution and hotels. 3
While he did not enlarge Kefauver's theory, Robert F. Kennedy, chief counsel of the Select Committee (McClellan Committee) of the United States Senate on Improper Activities in the Labor or Management Field, subsequently attorney general of the United States, and still later senator from New York, did reinforce it in his book based on the McClellan investigation, The Enemy Within (1960). For the investigation found, as Kennedy reports, direct tie-ups between extremely vicious underworld characters, spurious labor unions and various leading corporations. 4
The object of these tie-ups was to prevent effective unionization of employees, a criminal violation of the National Labor Relations Act. Many other crimes, such as murder, were allegedly committed out of sheer exuberance of spirits.
After diplomatically saluting "the majority of American businessmen" as above crookedness and collusion in labor-management negotiations," Kennedy wrote that "we found that with the present-day emphasis on money and material goods many businessmen were willing to make corrupt 'deals' with dishonest union officials in order to gain competitive advantage or to make a few extra dollars. . . . We came across more than fifty companies and corporations that had acted improperly-and in many cases illegally--in dealings with labor unions . . . in the companies and corporations to which I am referring the improprieties and illegalities were occasioned solely by a desire for monetary gain. Furthermore we found that we could expect very little assistance from management groups. Disturbing as it may sound, more often the business people with
whom we came in contact--and this includes some representatives of our largest corporations--were uncooperative. " 5
"By and large," wrote Kennedy, "little accurate information came to us from the business community. We received 150,000 complaints during the Committee's life. Seventy-five per cent of them came from representatives of organized labor, mostly rank and filers. Some came from people outside the labor-management field. Only a handful came from people in the business world. Certainly no investigation was touched off by any voluntary help we received from management. And this was not because management had no information to give. I believe 90 per cent of the corrupt deals between business and labor could be eliminated if business officials would simply talk to proper authorities. " 6 Why business people, as the instigators of the corrupt actions, would do this he didn't say.
"Often," Kennedy related, "we found that corrupt deals involving management were handled through attorneys who played the role of 'middleman,' or, as we came to think of them, 'legal fixers' or 'legal prostitutes. ' More often it was the labor relations consultant who played the 'middleman. '" 7
Kennedy reeled off a list of names of offending companies that reads like a miniature Social Register of big business. "Although I thought I had become case-hardened," Kennedy remarked, "I discovered I still was not shockproof when I studied the results of our investigation of the A. & P. . . " 8
The thesis that the underworld is a direct bridge into new propertied wealth for latecoming frontiersmen is laid down flatly by Professor Daniel Bell, chairman of the department of sociology of Columbia University. 9
"The jungle quality of the American business community, particularly at the turn of the century, was reflected in the mode of 'business' practiced by the coarse gangster elements, most of them from new immigrant families, who were 'getting ahead' just as Horatio Alger had urged. 10
"For crime, in the language of the sociologists, has a 'functional' role in society, and the urban rackets--the illicit activity organized for continuing profit, rather than individual illegal acts--is one of the queer ladders of social mobility in American life. Indeed, it is not too much to say that the whole question of organized crime in America cannot be understood unless one appreciates (1) the distinctive role of organized gambling as a function of a mass-consumption economy; (2) the specific role of various immigrant groups as they, one after another, became involved in marginal business and crime; and (3) the relation of crime to the changing character of the urban political machines. " 11
Crime, in other words, was the road taken by many immigrants, imbued with the Horatio Alger ideal of 100 per cent Americanism to become property holders and escape the repressive wage yoke imposed upon them by foresightedly frugal Anglo- Saxon corporations.
As business became more organized so did racketeering and gambling, until in the 1920's and 1930's it had become "industrial racketeering" through the medium of labor disputes, a fertile field. 12
Leading entrepreneurs here were Arnold Rothstein (shot after a high stakes card game), Louis Lepke Buchalter (executed in Sing Sing), Gurrah Shapiro, Dutch Schultz (assassinated), Jack "Legs" Diamond (assassinated) and Lucky Luciano (deported). Buchalter and Shapiro, as Professor Bell notes, in New York in the 1930's dominated sections of the clothing industries, house painting, fur dressing, flour trucking, etc. "In a highly chaotic and cutthroat industry such as clothing, the racketeer, paradoxically,
played a stabilizing role by regulating competition and fixing prices. When the NRA
came in and assumed this function, the businessman found that what had once been a
quasi-economic service was now pure extortion, and he began to demand police action. " 13
Seeking other worlds to conquer, says Professor Bell, the criminal racketeer shifted his emphasis from production to consumption, mainly gambling, without wholly yielding his interest in the productive side--as his deep involvement in labor racketeering in the 1950's and 1960's attests.
The Kefauver investigation revealed the tentacles of the gambling and vice syndicates; the McClellan investigation disclosed the seamy labor racketeers in full bloom. The latter performed the economic function of keeping labor costs down for the owners (a function performed by the political police in Soviet Russia). The gambling entrepreneurs performed the political-economic function of helping finance surreptitiously the major local political organizations--"machines" to critics--in Boston, Providence, New York, Philadelphia, Pittsburgh, Buffalo, Cleveland, Detroit, Chicago, St. Louis, Kansas City and other large urban areas.
Properly rejecting the Kefauver Committee's idea that a Mafia rules the underworld, Professor Bell points out that the committee failed to understand "(1) the rise of the American Italian community, as part of the inevitable process of ethnic succession, to positions of importance in politics, a process that has been occurring independently but also simultaneously in most cities with large Italian constituencies--New York, Chicago, Kansas City, Los Angeles; (2) the fact that there are individual Italians who play prominent, often leading roles today in gambling and the mobs; and (3) the fact that Italian gamblers and mobsters often possessed 'status' within the Italian community itself and a 'pull' in city politics. " 14
The road of crime, in other words, was taken by some latecoming immigrants trying to become property owners: Italians, East European Jews in the garment trades and Irish. 15 The urban political machines levied on all of these a heavy tariff. 16
In the process many of these men became "legitimate" property holders--'legitimate" here meaning that a court will uphold one's property claim. "Many of the top 'crime' figures" (I don't know why Professor Bell puts crime' in quotation marks, since they were court-certified criminals--F. L. ) now derived their income from "legitimate investments (real estate in the case of Costello, motor haulage and auto dealer franchises [Ford] in the case of Adonis) or from such quasi-legitimate but socially respectable sources as gambling casinos. " 17
One arrives, in short, at the big shots of the underworld, their names paraded anew in the Kefauver and McClellan investigations, and including such "labor leaders" as Jimmy Hoffa, Dave Beek and their henchmen--topsy-turvy Robin Hoods who gleefully robbed the poor for the benefit of the rich. These are men who, it is widely asserted, have traveled the latest highroad to wealth and secretly own large shares in the largest corporations. They have indeed the requisite qualities of ruthlessness and unscrupulousness but lack finesse.
Without harrowing the reader with details of the lengths to which I have gone to verify this notion of the criminal underworld as the source of great new wealth, let me categorically say this: There is nothing to it. While it is no doubt true that people like Costello have accumulated a nest egg of dimensions that might be envied by the common man I doubt that it is very great in the terms under discussion. If Costello or any other underworld character as of 1965 had a net worth of more than $5 million it would be surprising. No available evidence shows great underworld wealth unless Wall Street is located in the underworld.
Senator Kefauver cites incomes of various gambling groups taken from income-tax returns, which the underworld dislikes falsifying since Capone and others were caught at it and jailed for long terms, but though some of these figures are impressive, even if understated, it is only in a small way. They seem in the category of the marginal speculative businessmen scanned toward the end of the previous chapter, at best.
The reason for this low pecuniary estate is simple. The underworld in its public operations--gambling, prostitution, other variants of vice (as distinct from secret operations such as dope peddling)--is subject to "the split. " It must share its receipts (Kefauver estimated the gambling turnover alone at $20 billion a year) with local politicos, and the police from the beat patrolman up to the precinct captain.
This necessity diminishes the net return to the operators who, themselves a group, must also split. I should imagine the net return on total "sales" to be a good deal less than I per cent. On $20 billion (a figure pulled from the air) I per cent is $200 million, and even $200 million is far more than is likely to reach underworld coffers. For in addition to payoffs to winners, the gamblers must make heavy payouts for judicial fixes and lawyers. They must constantly yield tribute to hijackers. And when the residue is split among hundreds of operators there isn't much left for each. The "take" in prostitution is less and subject to a bigger overhead.
Someone who was known to be "on the take" for many years was Mayor Frank Hague of Jersey City, long a power in national councils of the Democratic Party (he might just as well have been a Republican). For Hague the revenue from gambling was steady. As a formal Catholic he frowned on prostitution. At his death he left an estate valued at $5 million. 18 If Hague, starting as a poor youth and never leaving the receiving end, could do no better than that, what must the so-called syndicate heads have made? Even if we allow that Hague spent $5 million additional in high living, his receipts would not have been more than $10 million for a very large, enduring and central gambling-political operation. While a goodly sum, this is not really "big" money. And Hague was not himself a gangster.
According to the newspapers, some criminal--usually Italian, Irish or Jewish-- establishes an organization. Then he shops about for "political protection" and manages to seduce some respectable churchgoing American official with a charming wife and children and a dog, cat and canary. A really decent chap, you know, until sweet-talked and bribed by an agent of the Mafia.
What actually almost always happens is that an established group in business and/or politics, having decided what the prospects are, looks about for a strong-arm man. If he can't be found locally he is imported, as Costello was imported into New Orleans to run slot machines, as Johnny Torrio and Capone, Brooklyn men, were imported into Chicago to dominate vice in general and as Harry Bennett was brought to Detroit by Henry Ford.
Something to notice about nearly all the underworld figures in their public appearances is that they are unsure of themselves. In fact, if they didn't have sponsorship they wouldn't have the assurance to set up extensive public operations. The newspapers require one to believe, for example, that the Anastasia brothers jumped ship and then proceeded autonomously to establish themselves on American soil as general strong-arm men and assassins. If one will only notice one's own uncertainty in a strange city (much less a strange country with a strange language) one will see how unlikely it is that lower-class people who don't know the language would take to large-scale lawbreaking in a strange land. But--if someone in authority convinced them it was all right to break the law, that they would be protected and paid, and if he was able to prove this on numerous touch-and-go occasions--one would produce the pattern of sullen,
defiant, wordless behavior of lower-class thugs at the bar with which the public is familiar.
The core of the Chicago prohibition mobsters, now world famous, was originally recruited by Chicago newspaper publishers who were engaged in literal gun battles for newsstand position--the "Circulation War. " All of the gunplay of the 1920's had a long dress rehearsal before World War I in the newspaper war. The participants learned through the Chicago newspaper attorneys how "the fix" worked and, later under political protection, they functioned the same way in the prohibition gangland wars. 19
Newspapers also purvey the fiction that once an operation has begun another independent comes along and tries to "muscle in," and then gang warfare breaks out. This is seldom true, although some independents (perhaps misled by reading the newspapers) have lent color to the theory, to their own undoing.
Most cases of urban gang warfare in the United States, apart from juvenile gangs, are expressions of factions in the local political party structure. Local branches of the two major parties or factions thereof extend protection to different strong-arm men, in gambling, prostitution, bootlegging, "protecting" small businessmen, and similar enterprises. Out in the field the cohorts of one gang infringe on the supposed territory of another, each catering to the hoi polloi. Formally outside the law, there is no way out for them except to fight or retreat. In some cases, no doubt, there have been retreats. In the known cases, violence has been the arbitrator.
The strong-arm men occasionally trip over the law (though there has not been a single conviction other than for the murder of a newspaperman for hundreds of gang murders in Chicago since World War 1), but rarely are their political protectors laid by the heels. One exception was James J. Hines, Tammany district leader and the political connection for the Dutch Schultz gang, who was convicted and sent to jail in the late 1930's by Thomas E. Dewey, later governor of New York and twice the Republican candidate for president.
