No More Learning

It is not unusual in history for the prejudices of a ruling class to prevail over a society as law, but it is the general supposition that the United States is sharply divorced from such a state of affairs. The supposition, however, is mistaken. Operatively the United States is not so new a model in the world as commonly thought.
The question now is: Are other such elite decisions made and imposed? Other Finpolitan Elite Decisions
A casuist might counter what has been shown with this response: It is true that an effective decision has been made by the financial elite against Jews, Negroes and sometimes Catholics but this does not prove that similar decisions of sweeping effect are imposed. All that has been shown is that it is possible to impose such decisions and that one has indeed been imposed.
It is necessary, then, to show that the same sort of decision-making takes place in various momentous areas whenever the finpolitans feel their vital interests are concerned. It is not denied that other people make decisions, that there is a formal governmental structure for decision-making, as when President Truman decided in person to drop atomic bombs on Japan or President Johnson decided after consultation only with the joint Chiefs of Staff to involve the United States in futile large-scale warfare in Vietnam.
What is asserted is that often, in contravention or supplementation of formal government, effective, informal and momentous decisions are made by the financial elite without consulting anyone else. These decisions pragmatically have the force of law. They enable certain things to happen, prevent other things from happening. Furthermore, these decisions relate to fundamental dollars-and-cents areas in the life of the American people.
Our next area for consideration will be that of regulation of the corporations, long a vexing subject.
Many laws have been placed on the books for the ostensible purpose of regulating corporations, and they do regulate the corporations in those respects in which the corporations resign themselves to being regulated. Among these laws are the Sherman Anti-Trust Act as amended, the Clayton Act and various others that can be read about in a wide literature devoted to describing, analyzing and criticizing the anti-trust laws.
The proclaimed purpose of these laws is to preserve competition. Supplementing the work of the courts in applying these laws is the Federal Trade Commission and other quasi-judicial regulatory bodies.
Yet, despite token prosecutions under these laws and repeated investigations and disclosures by Congress and the regulatory agencies, competition dwindles steadily in American economic life. Fewer and fewer companies, as we have seen, control wider and wider areas of economic activity, more and more jobs. Except on the margins, small, independent owner-operated businesses are being slowly squeezed out of existence, nearly everybody is being forced to work for the corporations--or not to work at all.
As Professor Sutherland of Indiana University has pointed out, the token regulation of corporations follows the same lines as the probation system for juvenile delinquents, who are irresponsibles of tender years. The corporation like the delinquent is found to be doing something forbidden by law and is hailed before the court or commission. Light punishment and a suspended sentence are prescribed for both, and from each is exacted a promise not to repeat the forbidden act. In fact, each is enjoined against a repetition and is told that if it does repeat it will be called back and--now--seriously
treated; the delinquent will be sent to jail, the corporation could be fined for contempt of court. This last proviso is a criminal sanction, held in reserve.
But the corporation, unlike the juvenile, may offend against some other law, and may indeed be a constant offender over the legal spectrum, as many have been. If the juvenile delinquent did this he would be locked up for a long stretch.
Despite the continuous outcry about antitrust law enforcement it was demonstrated to the country recently in The Great Electrical Industry Case that the big enterprises are no more impressed by the government than are gangsters by a "fixed" police force. It will also be recalled that those officers who were convicted and fined and either made to serve thirty days in jail, or given suspended sentences, felt greatly put upon because they had done nothing that was not being done throughout every industry.
Not all monopolistic trusts break the law so precisely as the electrical industry brazenly did, carefully touching all the illegal bases, and those that do are careful to avoid having the proof as available as it was in the electrical industry case. The same situation prevails, there is strong reason to believe, in many industries but the judicial proof is not at hand or is not sought.
The laws usually, except in the case of vague charges like obscenity and blasphemy, state precisely what series of acts constitute the offense and under what conditions. Evidence must show that these acts and conditions were plainly present. In the case of something so complicated as a conspiracy to restrain trade, it is often difficult to muster the requisite evidence.
Not many open-and-shut convictions, therefore, have taken place under the antitrust laws. And they have not been much of a deterrent, as the electrical-industry case showed.
But, as we have seen, monopoly proceeds to establish itself also in many ways not stylistically forbidden by law, as in the case of heterogeneous or conglomerate mergers. Here we see companies in one central industry gobbling up companies in all sorts of directly unrelated industries, finally producing a giant finpolity of massive proportions with much concentrated economic and political power. There is up to this writing no law whatever against such combinations, which have the effect of giving a small group of owners and controllers monopolistic control over huge sectors of the economic system itself.
The antitrust laws did not apply at all to the public utility holding companies which had acquired operating companies all over the country and were "milking" them for excessive service charges, which were passed on to the public in the form of higher rates. The participants favor mergers because they broaden opportunities for screened internal, intra-divisional lucrative transactions, all ultimately affecting the prices paid by the public. Prices in the wake of the merger movement, as anyone can see, do not go down; they go up, and up, and up.
Instead of proving monopoly now, so much of it having been shown in hundreds of court cases, Federal Trade Commission hearings, congressional investigations and a voluminous scholarly literature devoted to the subject, the burden of proof has shifted to the other side. What must now be done as far as a public defense of the big corporations is concerned is to show a single clear instance of free competition on the upper corporate circuit. One doubts that this can be shown.
Now, it will be noticed that virtually all the leading stockholders, all the leading executives and all the leading lawyers of (1) big corporations that have been convicted in open court of monopoly or restraint of trade or related practices, (2) big corporations that have consented under threat of judicial proceedings to desist from certain practices,
(3) big corporations that have been shown in congressional and Federal Trade Commission investigations to be monopolistic or quasi-monopolistic and (4) big corporations that have been found guilty in open court of breaking other laws and ordered either to desist or fined--all these leading stockholders, executives and lawyers are members of the restricted clubs of the finpolitan elite.
If it could be shown as positively that they were all members of the Communist Party everybody would agree that the corporate practices were unquestionably part of a subversive Communist plot, directed from Moscow. The cry of "subversive conspiracy" would be raised from coast to coast.
There is, of course, no "plot. " There are certain shared attitudes and ways of doing business in a small continually consulting group, and these are reflected in the public behavior of the corporations. In a group committed to pecuniary aggrandizement as a major aim in life there will, naturally, be calculated breaking of rules made by plebeian outsiders who are, by definition, cranks, screwballs and crackpots.
The dominant feeling in the clubs, one may surmise from publications owned and religiously patronized by club members, is basic opposition to any and all effective antitrust laws. For regulation of the corporations by government agencies amounts to "interference" in private business affairs, one of the worst sins government can commit in the finpolitan view. Less bad, to be sure, is purely token regulation, which is mere insistence upon a principle, but even it is bad enough. "Hands off the corporations" is the covert club slogan vis-a`-vis the government. No club member would seriously disagree with it.
Still Other Finpolitan Decisions
In the clubs, too, are matured various campaigns to influence public opinion with a view to making it possible for basically accommodating government to modify policies. As such campaigns number into the hundreds, there will be mentioned here only the postwar campaign to remove price controls, which were very irksome to the corporations. The case was loudly made throughout the press that the economy would do much better with the controls removed. They were removed and the economy moved on, as predicted by experts, into endlessly troublesome inflation. Leading club people, such as Henry Ford II, spoke out in this campaign. But as profits outpaced the inflation, and eventually outpaced lower taxes, the decision to remove price controls was correct from the finpolitan point of view. The populace as a whole, however, grew poorer and proceeded to run over its neck into personal debt.
Here we may ask: Did the populace want higher prices? Does it ever?
Another type of case is this: It is shown by the government that some huge consolidation is clearly illegal and the Department of Justice calls for its termination under the threat of submitting the issue to the courts, whose ruling is a foregone conclusion. The offending party thereupon sets its agents to work on Congress with a view to getting the law changed so as to permit the particular consolidation, and succeeds in its efforts. This, of course, takes power, especially as many congressmen initially opposed to passing the enabling legislation must be won over. But, apparently so strong is the case for the consolidation, or the radiant power of money, that even the most antitrust congressmen finally agree.
Such a case was in 1965 and 1966 provided by the giant Manufacturers Trust Company of New York (Kirby), which had merged with the competing Hanover Bank and Trust Company and had absorbed the many directly competing Hanover branches into its system. The more the Department of Justice studied this merger, undertaken
without anyone's by-your-leave, the more it was convinced that it violated the applicable law all around. The Department served notice it was going to the courts.
Efforts thereupon began with Congress, which in 1966 passed the enabling legislation that permitted this and some other challenged bank mergers to stand.
Here is a clear case of a corporate decision that was made in violation of the law, with the law later changed in order to permit the initial elite-level decision to stand.
Again, many persons, some in Congress, made pointed note of how rapidly Congress (after the Supreme Court ordered Du Pont to divest itself of improperly held General Motors shares) acted to exempt the recipients of the General Motors distribution from a capital gains tax. The oldest and largest holders, owners of the greatest capital gains, were the Du Ponts themselves. Many observers thought it would have been more seemly if Congress had at least dragged its feet (as it ordinarily does) before passing this special bill. But congressional leaders, it seemed, were anxious in this matter to give especially rapid service, thus showing profound deference. Had Congress not acted as it did the Internal Revenue Service would have reached out for all the taxes it could get in the situation, as it usually does whether gains have been made legally or illegally.
So here is a case of another after-the-fact law being passed to facilitate top elitists in holding on to gains made out of what the Supreme Court considered a legally dubious situation.
Controlling Police Actions in Personal Affairs
Private elite decision-making extends to more personal matters involving the violation of the law, literally to murder. For the elite decision-making process can interfere with and prevent investigations and prosecutions for murder.
Cleveland Amory notes that in the case of at least seven notorious "Society" murders since 1920 the investigations were quashed "for the sake of the families. " 33 The greatest amount of publicity had attended all these cases, and yet investigations fizzled out. The killings were all "unsolved. "
The pattern in every case was of wealthy, black-sheep philanderers or cut-ups-rebels- who were variously shot, stabbed or bludgeoned, sometimes in the proximity of other people, often in peculiar, veiled circumstances.
While the plea of dropping investigations "for the sake of the family" has a sentimental appeal, in all the cases the waywardness of the victims was known to family and social set and in some instances had been bruited about in the tabloids. News about the black sheep would hardly be novel or unduly shocking to family or friends.
But a broader reason for quashing the investigations is found, perhaps, in the idea that ventilating all the circumstances would tend to indict a broad class of moneyed people in the eyes of the populace, which retains certain illusions about the gentry. The painstaking presentation of evidence in court, then blazoned in the circulation-hungry tabloids, and the sketching in of sordid background high jinks, would tend to document many doubts about the aristocratic pretensions of the moneyed "social leaders. "
There is no suggestion here that initial steps to quash investigations were taken in any of the metropolitan clubs--although they could have been--or that the police were the initiators of negative action. The police, as professionals, are normally inclined to proceed with investigations. Nor, in any of the cases, is it necessary to suppose that any of the families in any of the cases initiated the negative action.
The mechanics of these affairs are, in general, as follows: After the crime, with the police beginning to set up their lines of investigation, prominent individuals in the same social set, with at least the consent of the family (which could rightfully insist upon full
investigation) get in touch with the leading politician or politicians upon whom the police are dependent for their jobs. The right politician, responsive to the halo of money, tells the chief of police: "Drop this investigation, for the sake of the grief- stricken family. The guy got what he deserved anyhow and the family knows it. "
Here the police instincts are satisfied on two counts: first, on sentimental grounds (and most police are basically conventionally sentimental) and, second, on retributional grounds. Lost in the shuffle is the fact that someone, no doubt of high social position, has committed murder and is about to get away with it, law or no law.
Now, in the case of most murders, the victim has a family; and in many cases the family is as sick of the victim as any Society Family of its black sheep. But this does not deter police from delving into every aspect of his career that might point to his murderer. Even if it is thought the victim got precisely what he deserved, the police probe in every direction, and family now be damned. For the family involved is not an Important Family.
Whatever one thinks of all this, one must agree that the police in such quashed cases act in response to an elite decision.
Congressional Endorsement of Elite Decisions
Elite decisions are most often, perhaps, implemented by legislative bodies, Congress or the state legislatures. It would take hundreds of pages to show all of these in detail. Here I shall take space only to mention two conclusive examples, leaving Congress for scrutiny until later.
In the early 1960's there were before Congress two proposals, one to terminate tax- free expense account privileges of corporation executives and another to enforce by law greater truth in advertising. After some minor trimming with respect to the first, much to the disgust of the New York Times editorial board, which favored an end to the tax privileges, the tax-free fringe benefits were allowed to stand virtually unchanged. In the second instance, with newspapers and magazines taking a hand behind the inspiriting slogan of "freedom of the press," the call for more stringent policing of misleading advertising claims was defeated. Similarly, the cigarette industry succeeded in having watered down the anti-cancer warning proposed for cigarette packages.
Even though the outcome was determined in Congress it can hardly be doubted the decisions were made on high, for special interests, and were simply validated in congressional horse trading.
Who in the country, apart from the corporations, corporation executives and pleasure resorts, want these executives to have untaxed expense-account privileges, which amount to a hidden, untaxed raise in pay? The ordinary citizen cannot deduct the cost of carfare to or lunch on his job even though these are clearly expenses in his way of doing business.
Again, who in the country aside from advertisers and their publications and other outlets will stand up in favor of free and easy deception in advertising?
Both of these are clearly elite decisions carried out against what would be the true wishes of nearly all people if the issue were ever effectively submitted to them.
Let us recall another among many salient cases wherein Congress obliged. In 1948, as mentioned earlier, Congress changed the inheritance tax law so that half of a married person's estate would be untaxed--the marital deduction. As most people are married, they no doubt favor anything that favors the marital state, and "marital deduction" has a fine, solid, homebuilding ring. Who would be so abandoned as to oppose a marital deduction?
Again, as we live under the principle of equality before the law, it is well to notice that this law applies to everyone--provided only that he have a taxable estate, which means that it does not in fact apply to about 95 per cent of people.
In the present law the first $60,000 in any estate is tax free. Thus, if a married man dies and leaves a net estate of $100,000, only $40,000 of it was taxable before the revision of the law and only $20,000 after the revision. In each case only a small tax was paid.
But after the law was revised a married man who left an estate of $100 million was subject, first, to the deduction of $60,000 of taxable estate and then of $50 million! As of 1966, the estate would have paid a tax under the pre-1948 law of $75,342,000. But under the revised law such an estate would pay only $36,149,000! This represents a saving of $40 million, worth going to some trouble to obtain.
Cui bono (Who benefits? ) was a Roman principle used for determining the instigator of an action. Could anyone claim that the decision to revise this tax law, of appreciable benefit to very, very few people, was the consequence of some pluralist process? The country was not even aware that the law was being revised in this sleight-of-hand fashion, thus tending to preserve the very large estates and giving a minor tax benefit to small taxable estates.
The decision to revise this law was obviously taken among some wealthy discussants, possibly in one of the clubs, and the assignment to procure its revision was obviously given to some legislative representative of the elite.
Not only do the finpolitan elite make decisions such as the foregoing, mostly in their clubs, but they make all other decisions deemed relevant to, their vital interests--on taxes, wages, prices, price controls, interest rates, ethnic and religious employment policies, investment expansion or contraction, the evaluation of public personalities in the mass media, etc. , etc. Hence the propriety of referring to them as a ruling class.
But they don't, it will be said, make the decisions on war or peace. This is usually true, although they did make the decision to involve the country in World War I, a decision fraught with many troublesome consequences for themselves and the world. But at other times they are usually not heard on the question of war or peace, which they leave to constitutional officers, because they are ready to play their cards either way. Whether there is war or peace, they adjust their profit enterprises to the situation and make out very well in either case. No doubt, like most people, particularly in the age of catastrophic weapons, they prefer peace. But if constitutionally formal decision makers decide for war they interpose no visible objection. They are, however, always interested in "defense" contracts.
None of these decisions is made conspiratorially. All are arrived at after purely informal discussion, although now and then leading figures may retire to some private club room when delicate subject matter is to be broached. But the general atmosphere in the clubs is quite free and easy, open and aboveboard, with no hint of conspiracy afoot. These matters are just part of the ordinary course of finpolitan affairs, like shop talk in any professional or vocational club. New ways of contriving mergers, avoiding taxes or circumventing labor unions amount to so much club chit-chat, but one should always note that club chit-chat on various matters becomes translated into external effective action in society. If club members happen to feel that Jews are not suitable as corporation executives it just so happens, without any fuss or noise, that Jews do not become corporation executives. Smooth, smooth. . . .
Everything about club decisions is in this way informal, offhand, in a low key-- unhurried, unhysterical, gentlemanly. The high pressure atmosphere of the corporation sales meetings is noticeably lacking. *
(*Here, if not elsewhere, the judicious reader may pause and ask himself: "How can a writer, and an outsider at that, be so sure projects are handled so easily on the upper strata? " The answer is: one turns to entirely credible, literal reports. Thus, George Santavana, long a professor of philosophy at Harvard and for many yeares an intimate friend of Charles A. Strong, son-in-law of John D. Rockefeller, report's an incident in the first decade of this century at Rockefeller's Lakewood, New Jersey, between-seasons residence: "One day when I had mentioned Spain, he (Rockefeller) asked me, after a little pause, what was the population of Spain. I said I believed it was then nineteen millions. There was another pause, this time rather longer, and then he said, half to himself : 'I must tell them at the office that they don't sell enough oil in Spain. They must look the matter up. '" George Santayana, Persons and Places: The Middle Span, Vol. II, Charles Scribner's Sons, N. Y. , 1945, p. 134.
Santayana makes this penetrating observation about Rockefeller: "He was beyond comParing himself with his competitors; he compared himself with himself. " Ibid. )
As it seems to me, it has been shown that the finpolitan elite unilaterally makes momentous decisions that in one way or the other, in contexts large or small, are imposed on the country whenever the elite feels its vital interests are affected. Where it does not see its vital interests involved, either collectively or singly, it simply stands aside and lets others decide in issues such as, say, whether or not a new school should be built or whether a park should be located here or there. The finpolitans have little interest in such details and allow anyone who presses to make the decision.
There may be some, however, who will say that I haven't proved my case. Although many other supporting instances could be mentioned in this chapter, it should be evident that for those determined not to accept the clearly warranted conclusion there would be no admission that the case was proved if instance were piled on instance in detailed profusion for hundreds of pages.
One either intelligently sees the force of the proof offered or goes on muttering idiotically forever, no matter how much evidence is adduced, "Not proven, not proven. "
Toward a Domestic Kremlinology
Since World War II and the upthrust of Russia there have emerged "Russian Institutes" in various of the universities, devoted to studying all things Russian. Some of the scholars focus directly on the ruling group in the Kremlin, attempting at a distance, amid considerable difficulty, to deduce what is going on at the top. They pore over Russian newspapers, study the order of precedence of names of officials, examine budgets, make note of who appears and who does not appear at diplomatic receptions, analyze Russian jokes, and subject every conceivable aspect of Kremlin affairs to minute scrutiny.
Many problems challenge attention: Who is the No. 1 man, who is No. 2 and what is the likely line of succession? What are the rivalrous groups within the top leadership and what policies does each stand for? What is the current dominant policy? What are the temperaments of the top men--irascible, bland, suspicious, etc. ?
With this in mind, it may be said that a purely domestic variety of Kremlinology or American finpology could well be developed as a subsection to university departments of political science.
What is the main current orientation of the finpols? What are their alternate policies in the event of a variety of possible occurrences?
Who, if anyone, is the chief arbiter of the finpols? If they have no chief arbiter do they have a committee, a sort of sub-executive committee of the ruling class; or may any accredited person take a hand?
This sub-executive committee, if it exists, has how many members--five, eleven, twenty-six" Where, if it exists, does it meet0at The Links, The Knickerbocker Club or in one of the suites at the Waldorf Astoria Hotel? What does it call itself, if it answers to a name?
Who is the top man or is there collective leadership? What are the respective orders of priority among Richard King Mellon, Crawford Greenewalt and, say, David Rockefeller? Do these ever consult? Does Nelson Rockefeller join them with an admonitory word? Is anyone else ever consulted? Where do they go? What do they say? Do their jokes, if any, have hidden meanings of national or world significance?
Or, if they do exchange views, is such exchanging done through underlings? What, in other words, is the procedure, always assuming there is some sort of at least informal procedure?
The answers to these questions I do not know. That would be something for finpologists to determine. Not to know the answers is not to know what is taking place in an important sector of American government.
But we do already possess certain deductions in finpology analogous to those in Kremlinology in our knowledge of how to determine who is moving to the top in the corporations. As E. Digby Baltzell and Osborn Elliott tell us, one can spot the Coming Men in the corporations by their admission to the metropolitan clubs. This is as good as seeing a name unaccountably moved up nearer the top in a list of officials published in Pravda and Izvestia. Some corporate vice president, not a member of the clubs, suddenly is made a member. We know enough now to know he is next in line for executive vice president or president.
Again, we know where to look for who really counts. We look to the metropolitan clubs. There we find future Cabinet officers and diplomatic negotiators. If I have arranged the clubs in their right order of priority we know in what laver of eminence personalities are to be found. Some other finpologist might want to dispute the point. Some, I know, would have their reasons for rating The Brook and the Racquet and Tennis ahead of the Metropolitan Club. They should make their reasons known and we might, as the Kremlinologists do, thrash it all out in a weekend seminar at Aspen financed by the Ford Foundation.
It is more difficult today than it was thirty-five years ago, it seems to me, to determine precisely where the center of gravity in all this lies. Perhaps there is now no center of gravity and perhaps the issue of dominance in finpolity is being left in abeyance or quietly fought out behind the scenes. Is there, as in the Kremlin, a behind-the-scenes struggle for power?
Thirty-five years ago, prior to the disruption caused by the Depression and the New Deal, any knowledgeable Wall Streeter could have named the inner executive committee in the exact order of precedence: J. P. Morgan (or 23 Wall Street), John D. Rockefeller I (or 26 Broadway) and Andrew W. Mellon of Pittsburgh. Anything these three agreed on happened as they said it would, including sometimes as in 1916-1917 the decision to enter the war.
One thing they agreed upon basically: not to meddle in each other's respective domains. None wished to tangle at close quarters with either of the others.
But 23 Wall Street, without downrating the others, made its words felt over the most varied domain. That was where newsmen went for tips on what was likely to happen--in Washington, in London, in Paris, at the Federal Reserve. If no tips were available there, the pickings were apt to become slim; although sometimes Winthrop Aldrich at the Rockefellers' Chase Bank, only figuratively at 26 Broadway, might be able to give some special insight.
But when Aldrich spoke, newsmen understood that although the words were his the dramatic line was surely approved by "Big John," doddering along the golf course at Ormond Beach and manically handing out shiny dimes to everyone who came near. J. P. Morgan II rarely spoke. In his place spoke Thomas W. Lamont, the eminence grise of the firm, whose mind perceived so many aspects to any simple question that he could, if he had wished (which he rarely did), have discoursed with visitors for hours about them. Mellon, except when he was Secretary of the Treasury, rarely bothered to cue any outsider into his thinking.
But Morgan's, 23 Wall Street, was the center of the action, a fact often alleged but rarely shown. For example: A. P. Giannini, the self-erected San Francisco banking tycoon, in 1928 bought control of the 116-year-old Bank of America, of New York, from Ralph Jonas and associates, paying $510 a share for 35,000 of 65,000 outstanding shares. He then absorbed the Bowery East River National Bank and the Commercial Exchange National Bank and formed the Bancamerica Corporation as a securities- underwritirig affiliate.
But before he bought the Bank of America Giannini needed the consent of J. P. Morgan and Company.
"I don't want it unless I have the consent of 'The Corner,'" Giannini told his agent.
"I can get that consent," the agent said.
A meeting was arranged between Giannini and Morgan.
"I'll see Seward Prosser and the Federal Reserve officials at once," the New York tycoon told him. "You will certainly be welcomed into the banking picture here. " 34
Said Seward Prosser, chairman of the New York Clearing House and president of the Bankers Trust Company, to Giannini:
"We don't favor ownership of banks by holding corporations. However, we'll be glad to welcome you to the Street if you will agree to do away with all but twenty per cent of your holdings of this consolidated bank. " 35
Giannini agreed reluctantly. While he was distributing this stock, says his biographer, he was informed that an official of the commercial bank-controlled Federal Reserve Bank of New York, speaking for the chairman, had said the Reserve Bank would not transmit to the Federal Reserve Board in Washington the application for trust powers unless Bancitaly Corporation of San Francisco agreed to divest itself of every share it owned of Bank of America in New York.
Giannini immediately went to Washington, where he was told by Roy Young, governor of the Reserve Board, that the Board had no legal right to take over the trust department. Whereupon Giannini refused to distribute the remainder of the stock and went into the market to buy back what he had sold.
"If you don't conform to our wishes here," said Francis D. Bartow, a Morgan partner, to Giannini back in New York, "we must ask you to take your various accounts out of J. P. Morgan and Company. Right or wrong, you do as you're told down here. "
"The hell I will," retorted Giannini. "If you boys want a fight I'll see that you get it. " 36
The next day, reports Julian Dana, a meeting was arranged with Jackson Reynolds, head of the First National Bank, a Morgan satellite. "Reynolds, always an admirer of Giannini, had a word of caution for his ear. 'You have made such a tremendous success that I'm not trying to give you advice on what you should do, A. P. ,' said Reynolds frankly. 'You know your own business better than I do. You may have been badly treated--have all the law on your side. But if I were you I'd take my orders and say nothing. If you don't--well, they'll knock you down and walk all over you. '
"'They can't do that to a red-blooded California boy,' said A. P. coolly. 'If they try it they'll have the biggest damn scrap on their hands they ever tackled. '" 37
Several years later Giannini, by rallying his stockholders, fought back a complicated attempt by Morgan associates to take over his giant Transamerica Corporation from the inside. The story is told in detail by Giannini's biographer. 38
Morgan dominance, so thorough that no outsider could enter Wall Street without Morgan consent (gained at a price) was broken by a host of New Deal banking laws that shifted control over many key financial matters to Washington--to the Federal Reserve Board, which had previously been informally circumvented by the Federal Reserve Bank of New York, to the Securities and Exchange Commission and other agencies. Morgan power thereafter declined; in its day it was great.
This is the way it was, at any rate, up to the date that A. P. Giannini successfully challenged it and until the Depression and New Deal laws undermined it. The Morgan word in Wall Street and far beyond, without the consent of Congress or any president, was law. Morgan's ran Wall Street, not in the sense that it initiated whatever went on down there but in the sense that it could veto anything it didn't like. Mellon and Rockefeller stayed out of its way; only A. P. Giannini was foolish and lucky enough to put the Morgan power to the final test, when Morgan's was under other pressures.
Says Elliott V. Bell, a one-time member of the staff of the New York Times (writing in 1938) and more recently chairman of the executive committee of McGraw-Hill Publishing Company and a director of the Chase Manhattan Bank, the New York Life Insurance Company, the New York Telephone Company, the Tri-Continental Corporation and other stratospheric entities:
"The position of the House of Morgan is unique and in those days [prior to the New Deal] its right to leadership was undisputed. The basis of the Morgan power is not easy to explain. It is not a large bank, as Wall Street banks go. A dozen other institutions have much larger resources. True, the firm exercises a strong influence over a number of these larger banks--the so-called Morgan banks--but it has never been established to what extent that influence is based on financial control. The sheer money power of the Corner is, of course, great; but my own belief is that this is a minor factor in the firm's leadership. What really counts is not so much its money as its reputation and brains. . . .
"But to get back to the Corner. It is not a mere bank; it is an institution. It has become a symbol of Wall Street itself, viewed variously as a predatory creature, exercising a 'spider-web' control over most of the banking and business resources of the country, or, at the other extreme, as a semiphilanthropic organization whose benign ministrations cause great banks and corporations to flourish, giving employment to millions of workers and causing the stocks of 'widows and orphans' to rise in value and give off dividends.
"There was a time, still within the memory of many in Wall Street, when financial titans booted the stock market about to satisfy their own feuds or ambitions; a time when the elder J. P. Morgan could call a handful of bankers into his awe-inspiring presence and bark out orders that would stop a panic. There was a time, much more recent, when government turned first to Wall Street's leaders for advice and means in meeting economic problems; when it almost seemed as though Wall Street regulated Washington.
"In the early years of the depression it was not unusual for one of the big bankers to tell me that he had just been talking to President Hoover on the telephone about this or that proposal to accelerate prosperity's coming around the corner. The comments on these consultations were often by no means flattering to the Chief Executive. " 39
Although the Rockefellers and Morgan partners never tangled and sedulously kept to their own back yards as far as they were each concerned, Mr. Bell relates succinctly the Rockefeller thrust that really undid Morgan's. John D. Rockefeller, actually, had never liked the bullying elder Morgan.
This thrust was administered in 1933 by Winthrop W. Aldrich, then head of the Chase Bank, when he publicly proposed precisely those banking reforms that struck at the heart of the Morgan financial empire and which were later enacted into law: notably the elimination of joint investment and deposit banking.
"In openly challenging the Morgan system," says Mr. Bell, "Mr. Aldrich displayed at its most daring his flair for anticipating events. Probably few people realized at that time, despite the attendant collapse of the banking system, how greatly the power and prestige of the Morgan firm had been impaired and how much it was to be clipped in the events that were to come. Mr. Aldrich by his action made certain that the searchlight of the Senate investigation (already bearing upon his own bank) should be turned with full force upon the Morgans. "
What has been shown here, now, is what once was and is no more. But the crucial question is: What, if anything, has replaced the old order behind the scenes, if it has been replaced?
To believe that all the strings have been moved to Washington would be too naive, although elected officials now do unquestionably have more to say about the country than they had prior to the New Deal. But they don't appear to have enough say-so to open all opportunities in the economic and social system to Jews--or Negroes, Puerto Ricans, Mexican-Americans or intellectual independents--or to stop the continuing concentration of more and more assets into fewer and fewer hands. One assumes, as they don't oppose it, that they tacitly consent to all of these as well as other practices such as informal publication censorship.
The finpols we do know, after actions by Presidents Kennedy and Johnson, can no longer dictate prices; they must at least get acquiescence from Washington, which appears to have moved into a closer partnership with finpolity whether the finpols like it or not. They can no longer dictate interest rates either.
As long as affairs proceed more or less smoothly, this unsolemnized partnership will no doubt continue: Money talks. But when, as and if matters get out of hand and crises strike, it will again be a case of each for himself. While the Crown and the Baronage appear to be honeymooning just now in the Welfare-Warfare State it is probable that in some great crisis analogous to the Great Depression they will find they are pulling in different directions, have different basic interests.
Should that happen, should the finpols find they are once again confronted by pubpols with overwhelming problems on their hands, what will happen? Assuming that the crisis
is not too great it seems that the pubpols, always able to wrap themselves in the flag and point to the apostolic succession since George Washington, will have the edge. The finpols are at their best in behind-the-scenes maneuvering. When public questions must be openly dealt with the pubpols are able to make use of the vast (if temporary in the, life of every pubpol) reserve powers conferred upon them by the Constitution.
What will happen, though, if the pubpols in charge are abject servitors of the finpols, their sincere admirers? What happens to pubpols who follow too slavishly the finpol script was shown by Herbert Hoover. They expire in futility and the national situation deteriorates. Sooner or later (and for the sake of the public one hopes it is always sooner) the pubpols must be guided by the remorseless logic of the situation as it confronts them and must address it forthrightly in terms of the values their culture has provided them.
The newspapers, largely owned, controlled or patronized with advertising by the finpols do, with the emphasis on Washington affairs, practice pubpology assiduously. Not much in the goings, comings and doings, even private thinking, of the pubpols escapes minute scrutiny and repeated review. It would be too much to expect these same finpolitan newspapers to turn the spotlight of critical attention on their esteemed friends, the finpols. But what the newspapers don't do, perhaps some nonconformist political scientists might do.
Very possibly what we have today at the top is not a tight little committee that hands out the "party line" of finpolity. The leading clubs appear to function more as a Committee of the Whole, with no personality presently thrusting itself forward. They function, not as an open Vatican Council nor as an organization under a pope, but more as the secretive Roman Curia; though always very, very informally. Their determinations, however, are far-reaching and penetrating, having the operative force on true believers of a papal decree.
Nine
THE GREAT TAX SWINDLE
If the propertied elite can enforce basic socio-political decisions--such as denying
employment in the labyrinthine corporate bureaucracy to large numbers of qualified people on irrational ethnic grounds when the basic laws do not support such discrimination--the experience of history would suggest that they would go farther and also deal themselves enormous tax advantages. For down through history the dominant classes, groups, factions, clans, interests or political elites have always been scrupulously prudent in avoiding taxes at the expense of the lower orders. The aristocracy of France before the French Revolution, for example, gave itself virtually total tax exemption. The burden of supporting a profligate royal court with its thousands of noble pensioners was therefore laid upon commoners, thus supplying not a little fuel for the onrushing tidal wave of blood. 1
It would be foolish to contend that there is a propertied elite in the United States and then not be able to show that this elite accords itself fantastic tax privileges down to and
including total exemption. And, true enough, the large-propertied elements in the United States see to it that they are very lightly taxed--many with $5 million or more of steady income often paying no tax at all for many years while a man with a miserable $2,000 income, perhaps after years of no income, denies his family medical or dental care in order to pay tax!
Taxes "are a changing product of earnest efforts to have others pay them. In a society where the few control the many, the efforts are rather simple. Levies are imposed in response to the preferences of the governing groups. Since their well-being is equated with the welfare of the community, they are, inclined to burden themselves as lightly as possible. Those who have little to say are expected to pay. Rationalizations for this state of affairs are rarely necessary. It is assumed that the lower orders will be properly patriotic. " 2 And, as anyone may ascertain any day, aggressively expressed patriotism increases markedly in intensity, readily crossing the borderline into spontaneous violence, the further one looks down the socio-economic and cultural scales into the lower middle class and downward.
There is a fundamental view, widely shared and often overtly expressed in schools and in the mass media, that the American socio-political system is, if not completely fair, as fair to everybody as the ingenuity of man can devise. This belief is monumentally false, as analysis of the tax structure alone discloses. 3
What Is to Be Proved
Prosecutors at the opening of a case in the law courts customarily state to judge and jury what they intend to prove. In adopting this procedure here, let it be said that it will be proved beyond the shadow of a doubt:
1. That the American propertied elite with the connivance of a malleable, deferential Congress deals itself very substantial continuing tax advantages at the expense of the vast majority of the population.
2. That the national tax burden is largely shouldered, absolutely and relatively, by the politically illiterate nonmanagerial labor force rather than by big property owners or by upper-echelon corporate executives (who are often tax free).
3. That the resultant tax structure is such that it intensifies the abject and growing poverty of some 25 to 35 per cent of the populace (about whom latter-day pubpols theatrically wring their hands), and grossly cheats more than 95 per cent in all.
Quite an order, the judicious reader will no doubt say to himself. But let such a reader armor himself in skepticism and let us consider the proof.
Some Preliminary Remarks
While the American propertied element is not ordinarily completely tax exempt it is subject in general to extremely low taxes. In many salient areas it is absolutely tax exempt, like prerevolutionary French aristocrats. This happy condition derives, as Eisenstein often points out, from special obscurely worded congressional dispensations. The situation, far from being mixed or a matter of shading, is absolutely black arid white. The United States is widely supposed to have a graduated tax system, based on ability to pay, but there is very little actual graduation in the system and what graduation there is turns out to be against the impecunious. *
(* I prefer the somewhat pretentious-sounding "impecunious" to the simpler "poor man" because it is semantically cleaner, less streaked with the crocodile tears of latter-day politicians and professional social workers. A poor mian, after all, is only a man without money and is often very little different in cultural attainment or outlook from many beneficiaries of multiple trust funds. He does not wear a halo; worse, he is never likely to. The recreations of a bayou Negro are little different from those of many denizens of Fifth and Park Avenues; each hunts, fishes, copulates, eats, sleeps, swims and boats and neither is much
of a reader, thinker or patron. The main social difference between them is money and its lack. The defensive idea of some sociologists that there is a "poverty culture," insuring the continued poverty through generations of its participants even though they were given trust funds, must be rejected as untenable. What is called the "poverty culture" is merely the reactive creation of impecunious people rejected for one reason or the other, often arbitrary, from the labor force as unsuitable. But if they were given an ample regular income without the performance of any labor, like members of the trust-fund cult, they would quickly emerge from this "culture," perhaps to comport themselves like. "Beverly Hillbillies" or Socialites. )
It is not being urged that the results to be shown were obtained through some centralized secret plot of bloated capitalists and paunchy cigar-smoking politicians. For it would indeed take a confidently jocund group of autocrats to deliberately plan the existing tax structure-what conservative tax-expert Representative Wilbur Mills, Democrat of Arkansas, in a bit of judicious understatement has called a "House of Horrors. " The late Senator Walter George of Georgia (never regarded as a friend of the common man) called the present scale of exemptions "a very cruel method by which the tax upon the people in the low-income brackets has been constantly increased. "4 Senator Barry Goldwater of Arizona, no liberal, radical, or starryeyed reformer, said "the whole tax structure is filled with loopholes"; Senator Douglas of Illinois, a liberal and a professional economist, asserted that the loopholes have become "truck holes. " 5 Referring to the fantastic depletion allowance, conservative Senator Frank Lausche of Ohio, no extremist or reformer of any kind, said: "It is a fraud, it is a swindle, and it ought to be stopped. " 6
One is, therefore, in fairly sedate baby-kissing company if one says (perhaps overcautiously) that the tax structure is a pullulating excrescence negating common sense, a parody of the gruesomely ludicrous, a surrealist zigzag pagoda of pestilent greed, a perverse thing that makes the prerevolutionary French system seem entirely rational. One takes it that Congressman Mills had something like this in mind with his "House of Horrors. "
Representative Mills in further explication of his "House of Horrors" characterization said the tax laws are "a mess and a gyp," with some taxpayers treated as coddled "pets" and others as "patsies. "
But the tax laws would have been no surprise or cause for consternation to someone like Karl Marx with his doctrine that government is inherently the executive committee of a ruling class. Indeed, they document that dictum--if not to the hilt--then a good distance up the blade.
One can apply to the present American system the exact words of French Finance Minister Calonne in 1787 on the soon-to-be-destroyed French system; "One cannot take a step in this vast kingdom without coming upon different laws, contradictory customs, privileges, exemptions, immunities from taxation, and every variety of rights and claims; and this general lack of harmony complicates administration, disturbs its course, impedes its machinery, and increases expense and disorganization on all sides. " 7
To refer to this system, then, as another but bigger Banana Republic is not merely a bit of misplaced literary hyperbole.
The American tax system is the consequence of diligent labors by diversified parties of major property interest working down through the years to gain their ends. Two congressional committees of seemingly over-easy virtue have been their target.