The tendency is natural and the result
unexceptionable
insofar as it makes wartime organization easier.
Brady - Business as a System of Power
Needless to say, the form in which the Labour Govern- ment proposed industrial reorganization was not far removed from that proposed by a private enterprise, as may be shown by the nature and quality of the remarks and criticisms made at the time in business circles.
56 See pp. 183-86.
57 Britain's Industrial Future (London, 1938), the Report of the Liberal Industrial Inquiry; see in particular Books II and III. In its conclusions it refers to "the growth of cooperative self-government, which is the true aim of industrial policy" (p. 466).
? BRITAIN'S"FEUDALISTICSYSTEM" 181
and organisation lies somewhere between the individual and the modern State. I suggest, therefore, that progress lies in the growth and the recognition of semi-autonomous bodies within the State . . . a return, it may be said, towards medieval conceptions of separate autonomies. " ^^ Later he was to become even more ex- plicit when, on the eve of the outbreak of the Second World War which he had forecast so many years before, he declared that an "amalgam of private capitalism and State Socialism . . . is the
^^
only practicable recipe for present conditions. "
Just how far State control was to reach in this British version of
National Socialism it is hard to gather from the writings of Mr. Keynes or his contemporaries, but clearly self-government in busi- ness under the auspices of a regime determined "to make the pri- vate property system work better" ^? (italics in original) is en route to the goal. All of which does not prove, of course, that all British business is in favor either of the abandonment of "free competi- tion" and "laissez faire" on the one hand, nor of the particular forms under which they cede control to central policy-controlling bodies on the other. An examination of any of the numerous pro- posals for control in any given industry will put the reader's mind at rest on that score. ^^ But what is clear, is that the center of gravity has shifted in this direction, and that on the present showing there will shortly be no alternative to the British business man except to make the most of it.
RELATIONS TO THE GOVERNMENT: WAR TIMES
British war organization rests squarely on the associational ma- chinery evolved over the peacetime interlude. A recent issue of the
58 True, the "criterion of action" of each "is solely the public good as they under- stand it" but what public-relations counselor would oflEer any other explanation of any given act of any represented business? See J. M. Keynes, The End of Laissez- Faire (London, 1926), pp. 41-42.
59 Debate between J. M. Keynes and Mr. Kingsley-Martin on "Democracy and Efficiency," New Statesman and Nation, Jan. 28, 1939. Mr Keynes hopes that this amalgam in defense of "private property and capitalism" will be "liberal," so that he may refer to it as "liberal socialism," and by "liberal" he means nonmonopolisti- cally organized capitalism. Mr. Keynes has not been called a "semanticist. "
60 Idem.
61 See discussions relating to the establishment of the Petroleum, Cotton, and Ship- ping Control Boards in recent issues of The Economist, and New Statesman and Na- tion, and similar sources.
? i82 BRITAIN'S 'FEUDALISTIC SYSTEM**
Economist refers to this as the Conservative program which comes to rest in a
set of notions that sees its ideal of an economic system in an orderly organisation of industries, each ruled feudally from above by the busi- ness firms already established in it, linked in associations and confedera- tions and, at the top, meeting on terms of sovereign equality such other Estates of the Realm as the Bank of England and the Government. Each British industry, faithful to the prescription, has spent the past decade in delimiting its fief, in organising its baronial courts, in secur- ing and entrenching its holdings and in administering the legal powers of self-government conferred on it by a tolerant State. This is the order of ideas that has transformed the trade association from a body of doubt- ful legality, a conspiracy in restraint of trade, into a favoured instru- mentality of the State, until membership in such a body has become as necessary to the business man who wishes to be successful as an old school tie has been to the ambitious Conservative politicians. It is the order of ideas that led to the Import Duties Act being drafted in such a way as to put a premium on self-seeking monopolies and a discount on the public interest; that turned "high profits and low turn-over" into the dominant slogan of British business; that raised the level of British costs to the highest in the world. It is a set of ideas that is ad- mirable for obtaining security, "orderly development" and remunera- tive profits for those already established in the industry--at the cost of an irreducible body of general unemployment. It is emphatically not a set of ideas that can be expected to yield the maximum of production, or to give the country wealth in peace and strength in war. ^^
In an earlier issue ^^ the Economist pointed out that this comes out simply to mean that
under the cover of wartime needs, the principle of Self-government of Industry has been given an official blessing. This is, in effect, merely the expansion and continuation of the Industrial policy that has been pur- sued by the Conservative Government for the past eight years, for in their hands control has nearly always meant the conferment of legal privileges on the organized producers already established in the indus- try . . . industries are being encouraged to control themselves. ^*
62 "A Check on Production," Economist, June 15, 1940.
63 "The Economic Front," Economist, Dec. 9, 1939.
S64 While government officials are thinking of post war planning, comments ISlew
Statesman and Nation (March 8, 1941), "the hard-faced men from the Midlands quietly get on with their job, Mr. Bevin and the other Socialist leaders utter blood- curdling threats, but the monopoly interests (just as in America under the NRA) are taking steps to safeguard their interests. We are to have planning--that is the present so-called controls, which are merely a glorified form of private monopolies
? BRITAIN'S "FEUDALISTIC SYSTEM' 83
In contrast to the last war, when "the controllers were selected in the main from outside the industry to be controlled," in "this war industry is controlling itself. " This "feudalistic system of cartel control" it illustrates with a list of controllers appointed by the two
^^
leading war-control ministries:
Ministry of Supply
Commodity
Aluminium
Alcohol, molasses and solvents
Cotton Flax
Hemp
Iron and Steel
Head Controller
Hon. G. Cunliffe Mr. A. V. Board
Sir Percy Ashley Sir H. Lindsay
Mr. J. S. Ferrier {Deputy)
Principal business interests or previous occupation
Director, British Alu- minium Company, Ltd. Chairman, British In- dustrial Solvents, Ltd. ; Director, Distillers Co. Ltd. , and International Sugar and Alcohol Co. , Ltd.
Member of Import Du- ties Advisory Committee Director of the Imperial Institute
Director, Wm. F. Mal- colm & Co. , Ltd. (flax, hemp and jute mer- chants)
Mr. A. M. Landauer Landauer & Co. (Hemp and fibre merchants)
Sir A. Duncan
Chairman, British Iron and Steel Federation; Member of Supply Coun- cil
the Italian fascist economy--impossible to unscramble. Unfortunately the influence of Trade Union leaders is exerted--unwittingly--in the same direction to the ulti- mate disadvantage of those whose interests they think they represent. But the record of the Duce's system surely does not invite imitation. "
<<5 "The Economic Front," Economist, Dec. 9, 1939.
run on a restrictive basis, are to be maintained. .
private monopolies fighting to win by State compulsion as big a share of the total real income for as little service as possible. " Another writer in the same issue adds, "If this so-called self-government of industry is permitted to crystallize itself we shall be gravely prejudicing the problem of reconstruction. We shall find that we have lost our liberty to choose between a return to a competitive system and the establishment of a planned economic system. We shall be confronted with a strongly entrenched co-operative organization of industry on a restrictionist basis--not unlike
. .
What we shall get is a set of
? i84 BRITAIN'S "FEUDALISTIC SYSTEM
Commodity
Jute
Leather
Non-ferrous metals
Paper
Silk and artificial silks
Sulphuric acid fer- tilizers
Head Controller
Mr. G. Malcolm
Dr. E. C. Snow Capt. O. Lyttelton
Mr. A. Ralph Reed
Principal business interests or previous occupation
Director, Ralli Bros. , Ltd. (Merchant bank- ers)
United Tanners' Feder- ation
Chairman, Anglo-Orien- tal & General Investment Trust, Ltd. ; chairman or director of various tin and other non-ferrous metal companies; man- aging director, British Metal Corporation, Ltd.
Chairman and managing director, Albert E. Reed & Co. , Ltd. (paper manu- facturers), and chairman of other paper compa- nies
Timber
Mr. Howard Cun- Director, Scottish Agri- ningham cultural Industries, Ltd.
Major A. I. Harris Louis Bamberger & Sons (timber importers); Past- President, Timber Trade
Association
Mr. H. O. Hambleton Wm. Frost and Co. (Silk throwsters)
Mr. F. C. O. Speyer
Director, Imperial Chemicals Industries, I. C. I. (Fertilizer and Synthetic Products) Ltd. , (delegate). International Nitrogen Association, Ltd. , Scottish Agricul- tural Industries, Ltd. (Subsidiary of Imperial Chemical Industries)
Mr. N. Garrod Thom- as
? Commodity
Wool
Head Controller Principal business interests or previous
occupation
Sir H. B. Schackleton Taylor, Schackleton k Co. (weavers); Hon. Pres- ident, Bradford Manu- facturers' Federation; chairman, Wool Tex- tile Delegation; presi- dent. Woolen & Worsted
BRITAIN'S "FEUDALISTIC SYSTEM 185
Butter
Cereals and cereal products
Feeding stufiEs Tea
Canned fish
Meat and livestock
Ministry of Foods Mr. H. E. Davis
Sir Alan Anderson
Sir Bruce Burt Sir Hubert Can-
Mr. Dan Tobey
Sir Francis Boys
Trades Federation
London Manager of Do- minion of New Zealand Dairy Sales Division Chairman, Anderson, Green & Co. (shipbro- kers and managers); member of Royal Com- mission on Wheat Sup- plies, 1914-19
Indian Agricultural Service
Late managing director, Balmer, Lawrie and Co. , Ltd. , controlled by Law- rie (Alex. ) 8c Co. , Ltd. , managing agents to tea estate companies Chairman, companies controlled by Associated Canners, Ltd. (subsidi- ary. Lever Brothers & Unilever, Ltd. ); direc- tor. Associated Canners, Ltd.
Vice-chairman, Livestock Commission; Member Bacon Development Board; Director and
? i86 BRITAIN'S Commodity
FEUDALISTIC SYSTEM'
Bacon and ham
Dried fruits
Sugar
Imported eggs
Potatoes
Oils and fats Condensed milk
Mr. J. F. Bodinnar
Mr. A. E. Gough (Designate)
Col. F. C. C. Balfour (Chairman of Board)
Mr. J. A. Peacock
Capt. J. M. Mollett (Designate)
Mr. Herbert Davis
Mr. E. W. Brown
Head Controller
Principal business interests or previous occupation
Vice-chairman, New Zea- land Refrigerating Co. ,
Ltd. , 1923-33 Chairman, Bacon Mar- keting Board; Member, Bacon Development Board; Deputy-chair- man, various bacon com- panies
Managing Director, Overseas Farmers Co- operative Federation, Ltd.
Chairman of Sugar Com- mission; formerly Sudan Political Service Director and Secretary, Nurdin & Peacock, Ltd. (provision, egg and but- ter importers) Chairman, Potato Mar- keting Board
Director of Lever Bros, and Unilever, Ltd. Director of Napier, Brown & Co. , Ltd. (sugar merchants)
The Economist finds ^^ that for all practical purposes these Head Controllers can be said to be the direct representatives of the lead- ing trade association or the allied nuclei of trade associations dom- inant in its field. Such an arrangement would seem, then, to be merely the wartime adaptation of a program ^^ which calls for a
<<6 "In this war-time organization of control the representative board of trade as- sociation is, it is true, replaced (usually) by the single controller. But the principle stands: industries are being encouraged to control themselves. " Ibid.
67 "This method of proceeding is . . . in line with the present Government's pre- war record. It is a continuation of the policy of handing over powers to such bodies as the colliery-owners, the Iron and Steel Federation, and the shipowners, and other capitalist groups which have been given authority to control production and prices, or to distribute public subsidies, or to impose levies for eliminating "redundant" plant, or what not. The present Government is pre-eminently a capitalist Govern-
? BRITAIN'S"FEUDALISTICSYSTEM" 187
centrally controlled "plutodemocracy," a sort of "new feudal sys- tem, with the British market, instead of the British land, parcelled out among the barons. " ^^
Another example treated by the Economist (Feb. 15, 1941) as typical and symptomatic of the extent to which organized British business is taking advantage of the war situation to further con- solidate monopolistic controls, is given by the development of the "Retailers' Front. " It is worth quoting at length:
Associations of retail traders have grown very much in strength since the war started. Indeed, within their own ranks, it is often said that a few months of war have brought them nearer to their objectives than many years of hard work in peacetime. The reason is not far to seek. These associations aim to speak for entire trades with a single voice in accord- ance with a common policy; and the control of supplies and regulation of prices by the Government have brought home to "independent" re- tailers the need of some spokesman or intermediary between them and the authorities. Individual traders are in no position to make constant approaches to public departments and official committees for informa- tion or to bombard these bodies with complaints and suggestions. So in every branch of trade, they flock into associations in search of aid or shelter.
The tendency is natural and the result unexceptionable insofar as it makes wartime organization easier. In war economy cooperative groups can undoubtedly exercise useful functions. But some of the conse- quences must be suspect. The direction of these associations is always quasi-monopolistic domination of their trades, and in wartime this trend is encouraged in many ways. In every business scarcity and the limitations of supplies check newcomers. Prices tend to go up, and price cutters--hitherto the chief obstacles to the associations* j>olicy of keep- ing prices up--fare badly. The associations wax while their rivals wane.
Moreover, the various associations work together. Representations on any question relating to, say, retail tobacconists will possibly be made, not only by their own associations, but also by the associations, unions and federations, local and national, of confectioners, newsagents, hotels and restaurants and off-license holders--perhaps even with the backing of that active general body, the Retail Distributors Association. Each trade is a hierarchy, beginning with the local or district organization and rising to a National Council or Federation, and as all these hierar-
raent, and almost its one idea in matters of economic policy has been to endow the big capitalist associations and combines with authority over the consumers. " New Statesman and Nation, April 2, 1938.
88 "The New Feudalism," Economist, April 2, 1938.
? i88 BRITAIN'S "FEUDALISTIC SYSTEM"
chies interlock in their activities, it means that horizontally, as well as vertically, over the whole field of retailing they exercise a nation-wide power in pursuit of aims which are often by no means national. (R)^
As policy coordinator for this swiftly unfolding and cartel-like apparatus of trade associations, given an added fillip for more rapid extension of their powers and influence in the current national emergency, the Federation of British Industries takes on a new and far-reaching significance. Commanded at the top by a small coterie of officials who are drawn chiefly from large concerns or from concerns under the influence or control of the giants in their respective fields, and with both officials and controlling concerns bound together by an infinity of interconnections--personal, fam- ily, and institutional
--
vested with political powers of propaganda and coercion, this is the
into a tightly meshed business oligarchy
British pattern in the making; in trend, at least, it does not seem very different from that already dominant in states formally com- mitted to the "corporate idea. " The eventuality remains to be seen.
69 "Retailers' Front," Economist, Feb. 15, 1941, pp. 206-7.
? Chapter VI
THE AMERICAN WAY: 'BUSINESS SELF-REGIMENTATION''
THE ORIGIN of the National Association of Manufacturers stems
from a decade of combinations par excellence. Between 1890
and 1900 more and larger combinations took place than in the
entire preceding history of this country. This is true whether one
directs attention to mere number of consolidations, number of
workmen employed, or amount of capital involved. A speaker
arguing for a federal law of incorporation before the National As-
sociation of Manufacturers in 1904 summarized the amazing rec-
^
ord:
Statistics show that in the decade between i860 and 1870 only two in- dustrial trusts, formed by the combination of formerly competing con- cerns, had been created, and that with a total capitalization of only thirteen millions of dollars. In the next decade between 1870 and 1880, four more were formed, with a capitalization of one hundred and thirty- five million dollars. Between 1880 and 1890 eighteen more were formed, with a capitalization of two hundred twenty-eight millions of dollars; while the last census shows one hundred eighty-three combinations with a capitalization of $3,619,039,200 . . . In 1902 it is claimed that there were 213 combinations, with a capitalization of seven billions of dollars; while now it is claimed that there are nearly 1,000 industrial combina- tions, not including railroads, with a nominal capitalization of $9,000,- 000,000. 2
McCrary, "Another View of National Incorporation Needs," American
1 Alvin
Industries, Oct. 1, 1904, p. 13.
J.
2 ". . . by 1904 the trusts controlled fully two-fifths of the manufacturing capital of the country. " Henry R. Seager and Charles A. Gulick, Trust and Corporation Problems (New York, 1929), p. 61. These authors define trusts somewhat more nar- rowly than the speaker before the NAM, their total estimated "trust" capitalization of 1904 being given as $5,000,000,000.
? igo THE AMERICAN WAY
THE HISTORICAL SETTING: A TREND TOWARDS MONOPOLY
Few fields of business activity escaped this flight from "free competition" entirely. In one form or another--corporate con- solidations, pools, gentlemen's agreements, interlocking direc- torates--the larger movement affected the leading branches of in- dustry, commerce, finance, and transportation. Though in line with trends reaching back through the preceding decades, the process was so swift and so far-reaching that it appeared to many that shortly it must engulf the whole of the American economic system. As the facts became generally known clamor against the trusts mounted, for it seemed that when, of the outstanding com- binations, "26 controlled 80 per cent or more of the aggregate pro- duction in their fields; 57, 60 per cent or more; and 78, 50 per cent or more," ^ it was time that all classes sit up and take notice of the revolutionary changes being brought about in the American eco- nomic scene.
Smaller businessmen throughout the country concurred in the antitrust movement. But although then, as now,* the bulk of the complaints looking toward legislative and judicial action against the trusts emanated from affected business circles, businessmen showed little inclination to organize to such an end. Leaving these matters to the government, they chose, instead, to pool their re- sources so as to present a united front in promoting more extensive aid and grants of privilege from the political authorities which would prove of common value to them all. Thus arose, along with, and at first entirely independent of, the large combinations, the trade-association movement. The "trusts" had dramatized the ad- vantages of massed and centrally directed economic power. The trade associations hoped not to level down the trusts, but to "de- mocratize" analogous privileges for the business community as a whole.
>> Idem.
4 "It is business men and business men alone who file practically all the complaints with my division, and it is for business men that the anti-trust laws must be enforced. " Thurman W. Arnold, Assistant Attorney General of the United States in an address before the American Bar Association, San Francisco, July lo, 1939. Release of the Temporary National Economic Committee (TNEC).
? THE AMERICAN WAY 191
This covert and loose form of combination, commonly termed in American business circles "business cooperation" was entirely in keeping with the anticompetitive spirit of the times. It was further stimulated by the fact that the more open type of collusive action, the "pool," was quickly driven from the field as a result of federal antitrust prosecutions. Since the "pool" was the Ameri- canized form of the cartel, this country was "saved . . . from the European cartel system," ^ the better to allow trade associations to grow more slowly into the exercise of powers and influence which in many respects now reach far beyond those of all except the more advanced cartels abroad. ^
In this mushroom growth of new forms of business "self- regimentation," ^ the National Association of Manufacturers oc- cupied from its inception in 1895 a central, and in some respects a commanding, position. It was by all odds the largest, most carefully laid out, and the most enduring of the looser forms of business organization established for the specific purpose of centralizing, unifying, coordinating, and more effectively focusing policies re- lating to the business system as a whole. Others had preceded it, but with typically much smaller industrial coverage and with much narrower range of interests. ^ It was the peculiar role of the NAM
to undertake the coordination of the efforts of all business associa- tions--existing, subsequently organized, and special-purpose--in the entirety of manufacturing industries of the whole United States.
THE CHANGING PROGRAM FOR INDUSTRIAL COORDINATION
The original statement of principles given out by the National Association of Manufacturers provided a precis for all that was to
5 See Thurman Arnold, "The Anti-Trust Laws, Their Past and Future," address over the Columbia Broadcasting System, Aug. 19, 1939. Released by TNEC.
6 As shown, for example, in Federal investigation of the National Electric Light Association (now the Edison Electrical Institute) and the National Lumber Manu-
facturers' Association. See also statements by Dr. Theodore
sultant of the TNEC (release of the TNEC, Jan. 15, 1940) and Professor Clair Wil- cox (New York Times, Jan. 20, 1940) at the Cartel Hearings before the TNEC.
7 This is the expression used by Thurman Arnold in his various speeches dealing with what is commonly called "cooperation" by businessmen.
8 Such as the various associations established to fight organized labor, e. g. , the Stove Founder's National Defense Association, an outgrowth of the National As-
J.
Kreps, Economic Con-
? THE AMERICAN WAY
follow: "The general objects and purposes for which the said cor- poration is formed are the promotion of the industrial interests of the United States, the betterment of the relations between em- ployer and employee, the education of the public in the principles of individual liberty and the ownership of property, the support of legislation in furtherance of those principles and opposition to legislation in derogation thereof. " ^ According to later spokesmen, it has fulfilled this declaration of principles almost to the limits of desire. Speaking at the Thirty-Fourth Annual Meeting of the NAM, October, 1929, President Edgerton evaluated its achievements in colorful encomium:
In eighteen hundred ninety-five near both the geographic and popu- lation centers of the United States, there occurred an event which though unheralded was even then generally recognized as of momen- tous importance to the nation. But its more complete significance re- quired and has received the dispassionate testimony of history. At that auspicious time and appropriate place, the National Association of Manufacturers, fathered by necessity and summoned by conscious op- portunity, sprang exultantly like Minerva from the forehead of Jove into immediately useful existence. Notice was thus given to the world for the first time that the American manufacturing industry had come of age, and that it could and thereafter would speak with one voice on every occasion of common defense and on all occasions pertaining to its general welfare.
At our birth in 1895 there was scarcely a handful of industrial associ- ations of any size or character in the United States. Those in existence were almost exclusively trade organizations formed primarily for de- fense against the rising cloud of labor trade unions. Ours was the first and has continued to be the only general organization of manufacturers exclusively embracing all trades, conditions, sections, and sizes of indus- trial units. We have witnessed and often assisted at birth of nearly every state association, of practically all the associations, and of many of the special organizations now serving particular trade, geographic, or other homogeneous groups. ^*^
sociation of Stove Manufacturers, which was founded in 1886 as an antiunion em- ployers' association. Similar were the American Newspaper Publishers' Association and the United Typothetae of America, both founded in 1887.
9 Constitution and By-Laws of the National Association of Manufacturers of the United States, Article II, Section I.
10 Proceedings, 34th Annual Meeting of the National Association of Manufacturers (Oct. , 1929), pp. 14-15. Italics mine.
192
? THE AMERICAN WAY 193
The age was one of organization, "an age," said President Kirby in 1911,^^ "when but little can be accomplished except through organization; an age when organization must cope with organiza- tion. . . . " All businessmen must join them, and join as many of them as they could. The NAM was to serve as the "mother of asso- ciations," that all American industry might be organized from cen- ter to circumference. But at the center was to stand the NAM, functioning as a central policy-pressure and policy-forming body for all organized activity, irrespective of the angle or the nature of the interest at stake. As a more recent brochure puts it, the NAM is dedicated to promotion of "Unit Thinking and Unit Acting on the Part of American Industry. " ^^ It represents "The Nation's In- dustry--Organized," ^^ or "The Nation's Industry Synchro- nized," ^* the better to promote "the universalization of those sav- ing principles of American Industry--the right of those who own property to control it. " ^^ Its spokesmen think of control of prop- erty as it relates to all things and with respect to all men, classes, interests, and principles.
The Association has accomplished its ends sometimes by direct pressure of organized lobbies, sometimes by the aid of propaganda, and sometimes by the further organization of business interests along special trade, regional, or industrial lines. ^(R) And its history traces the evolution of efforts to round out its program of cen- tralizing common business policies to their full social, economic, and political implications.
In accordance with changes in the general economic and politi- cal scene, its major emphasis has shifted from time to time. Thus, at the beginning, the Association was primarily concerned with the dual objectives of tariff protection at home and promotion of fa- vorable markets abroad. It held to this dominating interest until
1903, when, under the influence of a wave of strikes and trade-
11 Proceedings, i6th Annual Convention (May, 1911), pp. 65-87.
12 NAM, Pamphlet, 1935. is NAM, Pamphlet, 1923.
14 NAM, Pamphlet, "Being a Brief History of the National Association of Manu-
facturers," undated.
15 Speech delivered by President John E. Edgerton, and published in the NAM Pro-
ceedings, Oct. , 1929.
16 For comprehensive discussion of these activities see LaFollette Committee Re-
ports, Parts 17, 18, and 19, and Report No. 6, Part 6.
? THE AMERICAN WAY
union activity, and through the direction of its new president David M. Parry, it shifted its efforts to combating trade unions and advancing the plan of the open shop. Although it did not abandon its original interest, but steadily increased its pressure for favorable tariff legislation, more active government aid in the expansion of foreign markets, and similar aims,^^ its activities were largely dom- inated by the problem of trade-union expansion until the United States entered the World War.
With the war and its aftermath, interests began to broaden out more nearly in line with the general agenda of the original state- ment of principles. The influence of the war on the NAM's con- ception of its role in the national economic picture was especially profound and far-reaching. As in all belligerent countries, war con- trol in the United States was exercised primarily through the inter- mediation of businessmen and business organization. Businessmen held the principal control offices and made the key administrative decisions in economic affairs. ^^ And in all their activities they nat- urally and habitually turned to their own organizations for the instrumentation of policies--policies which combined, so happily, patriotic performance of a critical "public duty" with lucrative gains to the trades and industries which the businessmen repre-
17 Specifically, such as the following: "home markets should be retained" and "for- eign relations . . . extended in every direction and manner not inconsistent there- with"; the "principle of reciprocity" should be applied wherever possible; there should be a "judicious system of subsidies of our merchant marine"; the Nicaraguan (and later the Panama) Canal should be constructed by the Federal Government; natural and artificial waterways "should be improved and extended. " NAM pamphlet, "The Nation's Industry Synchronized. "
18 Aside from the regular governmental and war departments, the following were the principal war control agencies: Food Administration, presided over by Herbert Hoover, a mining industrialist; Fuel Administration, presided over by Harry A. Garfield, former President of the Cleveland Chamber of Commerce and Director of the Cleveland Trust Co. ; War Industries Board, directed by Bernard Baruch, a Wall Street financier and stock-market operator; War Trade Board, directed by Vance McCormick, of the family associated with the International Harvester Co. In all these boards and committees, and throughout all leading offices in the regular federal machinery primarily concerned with the war and not filled by regular staff, business- men predominated, made the decisions, gave the orders, set the prices, determined legitimate costs, and set allowable profit margins--in industries which they controlled or dominated in their private capacities, and out of which most of their concerns achieved large, and in a few cases, colossal earnings. See the summary report of the Nye Committee on the Munitions Industry, 74th Congress, 2d Session, Report No. 944, Part 4.
194
? THE AMERICAN WAY
sented and which must now supply the necessary goods and serv- ices. ^^
During the war days two leading ideas struck root in the business community which were destined to exercise growing influence in the postwar years. The first of these was the conception of uni- versal organization of all business enterprise into all-inclusive and appropriate trade and industrial associations. The War Emergency and Reconstruction Conference was held by the Chamber of Com- merce of the United States -^ in December, 1918, and was par- ticipated in actively by representatives of the NAM. A "Resolution on trade associations" adopted by the conference summarized the point: "This conference heartily approves the plan of organizing each industry in the country in a representative national trade as- sociation and expresses the belief that every dealer, jobber, manu- facturer, and producer of raw materials should be a member of the national organization in his trade and cordially support it in its work. " 21
The second, and related idea came subsequently to be known by the slogan "self-government in industry," meaning specifically that any such organization of trade, commerce, and industry should be autonomous, interdependent, self-regulating. The idea was dis- cussed extensively in the literature of the day, and gave rise to a series of trade-practice agreements according to which the govern- ment was to turn over the governance of economic affairs, trade by trade, and industry by industry, to public-spirited business leaders.
19 "The record of the war service committees," said Mr. Sibley, President of the Chamber of Commerce of the United States in an address before the Trade Associa- tion Executives in New York City, Jan. 28, 1936, "is one of lasting achievement. " Business and government learned for the first time to work together "in tinie of emergency" and the businessman within his own industry "found himself in the position of working cooperatively. " From pamphlet material published by the Chamber of Commerce of the United States.
An attempt was made at an Atlantic City convention, called shortly after the close of the war, to organize the various industry "war service committees," of which there were nearly 400, into a single organization to perpetuate in peace times the controls, and promote habits of "working together," etc. , with which these organized business groups had become familiar in the emergency of war. The proposal contained most of the leading ideas subsequently incorporated into NRA.
20 The National Association of Manufacturers participated actively in the organi- zation of the Chamber of Commerce of the United States, though at times policies of the two central organizations seems to have been in rather serious conflict.
21 Sibley, in his address of Jan. 28, 1936.
195
? 196 THE AMERICAN WAY
Though finally discouraged by an adverse judgment of the Attor- ney General that such "agreements" might be in violation of the Anti-Trust acts,^- the idea persisted and, under the active support of the Department of Commerce and its vigorous secretary, Mr. Hoover, became a sort of theme-song of the "New Economic Era. "
Correlative with these new interests, and largely under the stim- ulus of the labor difficulties and the "deportations delirium" of the immediate postwar period, many of the leading trade associations evolved a new labor program. Designed primarily to keep the "open shop"--sometimes known as the "American Plan," sometimes la- beled "management relations," or "industrial relations," or "per- sonnel relations"--the drive found its principal expression in ac- tive and widespread promotion of company unions. The leadership in this movement was quickly taken by the NAM. ^^
The idea underlying its "Open Shop Committee" was that the "American Plan" of no trade unions, and "free bargaining" be- tween employer and employee (sometimes organized in company unions), would bring "industrial peace" throughout the nation. By these methods "harmony between labor and capital" was to be achieved "cooperatively," just as "self-government in industry" was to bring about uniformity in business practices while elevating these to a moral plane which would no longer require govern- mental regulation.
The great depression, which broke in the fall of 1929, brought this rosy-colored dream world of the New Economic Era to a rude close. In the midst of the ensuing confusion, the New Deal was born; offering, as many believed, a thoroughly rational set of com- promises, it set grimly to the task of reconciling what soon proved to be at bottom irreconcilable conflicts of interest. NRA took over Mr. Hoover's revamped wartime idea of "self-government in in- dustry" (a quasi-monopolistic notion) and tried to wed it to Presi- dent Roosevelt's Jeffersonian conception of a felicitous economic paradise--an honest competitive system. It quickly appeared that
22 They were not, however, discontinued entirely. The FTC has continued down to the present time to organize "trade practice agreements," though under the guise of devices for eliminating "unfair" and "dishonest" trade practices. See TNEC Monograph No. 34.
23 See Albion Guilford Taylor, Labor Policies of the National Association of Manufacturers (University of Illinois Studies in the Social Sciences, Urbana, 111. , 1928).
? THE AMERICAN WAY
the Codes served to transform the leading trade associations into cartel-like bodies endowed with extraordinary and far-reaching powers which came directly into conflict with previous antitrust legislation. And, at the same time that they appeared to offer a carte blanche to various forms of collusive action undertaken by these central agencies, Article 7a gave a tremendous stimulus to antipathetic labor organization. Once deflation had overtaken the flight of fancy which envisioned every man and all classes putting their shoulders to the wheel on behalf of a common aim (recovery and the general welfare) in an emergency of peace, disillusionment returned; it was accompanied by a new wave of strikes and lock- outs and by a more virulent phase of both commercial and labor warfare.
The program and the mood of the National Association of Manu- facturers shifted accordingly. If we properly interpret their litera- ture, though happy about the adoption of their pet idea, "self- government in business," ^* they had smelled a rat in the New Deal program from the outset. Smelled it and pointed it out. But with the new formulation of the issues, symbolized in the mass expansion of the labor movement, all problems seemed transmuted into political and ideological terms.
The National Association of Manufacturers began to move into the picture with a new set of working objectives. Rather, one should say, with an old set of objectives seen in a quite new per- spective. ^^ This perspective called for a greatly expanded program of public relations. Beginning with a small allocation of some $36,500 in 1934, within four years the "public information pro- gram" had increased to $793,043 in 1937, or from 7. 2 percent of the nam's total budget to 55. 1 percent. ^^ Astonishing as this shift in emphasis may appear, the figures tell only a small part of the story. The totals here cited involve only out-of-pocket expenditures of the NAM; most of the "information" was disseminated through
24 See the series of bulletins issued in 1934 by the NAM (jointly with the National Industrial Conference Board) and entitled "Industrial Self-Government. "
25 Referring to the labor program in a letter to Evart C. Stevens, President of the International Silver Company, on June 22, 1936, Colby M. Chester, President of the NAM said that "in 1903 the Association adopted a set of principles which is still officially our 'Bible' in this field. " The same is true of other declared principles.
56 See pp. 183-86.
57 Britain's Industrial Future (London, 1938), the Report of the Liberal Industrial Inquiry; see in particular Books II and III. In its conclusions it refers to "the growth of cooperative self-government, which is the true aim of industrial policy" (p. 466).
? BRITAIN'S"FEUDALISTICSYSTEM" 181
and organisation lies somewhere between the individual and the modern State. I suggest, therefore, that progress lies in the growth and the recognition of semi-autonomous bodies within the State . . . a return, it may be said, towards medieval conceptions of separate autonomies. " ^^ Later he was to become even more ex- plicit when, on the eve of the outbreak of the Second World War which he had forecast so many years before, he declared that an "amalgam of private capitalism and State Socialism . . . is the
^^
only practicable recipe for present conditions. "
Just how far State control was to reach in this British version of
National Socialism it is hard to gather from the writings of Mr. Keynes or his contemporaries, but clearly self-government in busi- ness under the auspices of a regime determined "to make the pri- vate property system work better" ^? (italics in original) is en route to the goal. All of which does not prove, of course, that all British business is in favor either of the abandonment of "free competi- tion" and "laissez faire" on the one hand, nor of the particular forms under which they cede control to central policy-controlling bodies on the other. An examination of any of the numerous pro- posals for control in any given industry will put the reader's mind at rest on that score. ^^ But what is clear, is that the center of gravity has shifted in this direction, and that on the present showing there will shortly be no alternative to the British business man except to make the most of it.
RELATIONS TO THE GOVERNMENT: WAR TIMES
British war organization rests squarely on the associational ma- chinery evolved over the peacetime interlude. A recent issue of the
58 True, the "criterion of action" of each "is solely the public good as they under- stand it" but what public-relations counselor would oflEer any other explanation of any given act of any represented business? See J. M. Keynes, The End of Laissez- Faire (London, 1926), pp. 41-42.
59 Debate between J. M. Keynes and Mr. Kingsley-Martin on "Democracy and Efficiency," New Statesman and Nation, Jan. 28, 1939. Mr Keynes hopes that this amalgam in defense of "private property and capitalism" will be "liberal," so that he may refer to it as "liberal socialism," and by "liberal" he means nonmonopolisti- cally organized capitalism. Mr. Keynes has not been called a "semanticist. "
60 Idem.
61 See discussions relating to the establishment of the Petroleum, Cotton, and Ship- ping Control Boards in recent issues of The Economist, and New Statesman and Na- tion, and similar sources.
? i82 BRITAIN'S 'FEUDALISTIC SYSTEM**
Economist refers to this as the Conservative program which comes to rest in a
set of notions that sees its ideal of an economic system in an orderly organisation of industries, each ruled feudally from above by the busi- ness firms already established in it, linked in associations and confedera- tions and, at the top, meeting on terms of sovereign equality such other Estates of the Realm as the Bank of England and the Government. Each British industry, faithful to the prescription, has spent the past decade in delimiting its fief, in organising its baronial courts, in secur- ing and entrenching its holdings and in administering the legal powers of self-government conferred on it by a tolerant State. This is the order of ideas that has transformed the trade association from a body of doubt- ful legality, a conspiracy in restraint of trade, into a favoured instru- mentality of the State, until membership in such a body has become as necessary to the business man who wishes to be successful as an old school tie has been to the ambitious Conservative politicians. It is the order of ideas that led to the Import Duties Act being drafted in such a way as to put a premium on self-seeking monopolies and a discount on the public interest; that turned "high profits and low turn-over" into the dominant slogan of British business; that raised the level of British costs to the highest in the world. It is a set of ideas that is ad- mirable for obtaining security, "orderly development" and remunera- tive profits for those already established in the industry--at the cost of an irreducible body of general unemployment. It is emphatically not a set of ideas that can be expected to yield the maximum of production, or to give the country wealth in peace and strength in war. ^^
In an earlier issue ^^ the Economist pointed out that this comes out simply to mean that
under the cover of wartime needs, the principle of Self-government of Industry has been given an official blessing. This is, in effect, merely the expansion and continuation of the Industrial policy that has been pur- sued by the Conservative Government for the past eight years, for in their hands control has nearly always meant the conferment of legal privileges on the organized producers already established in the indus- try . . . industries are being encouraged to control themselves. ^*
62 "A Check on Production," Economist, June 15, 1940.
63 "The Economic Front," Economist, Dec. 9, 1939.
S64 While government officials are thinking of post war planning, comments ISlew
Statesman and Nation (March 8, 1941), "the hard-faced men from the Midlands quietly get on with their job, Mr. Bevin and the other Socialist leaders utter blood- curdling threats, but the monopoly interests (just as in America under the NRA) are taking steps to safeguard their interests. We are to have planning--that is the present so-called controls, which are merely a glorified form of private monopolies
? BRITAIN'S "FEUDALISTIC SYSTEM' 83
In contrast to the last war, when "the controllers were selected in the main from outside the industry to be controlled," in "this war industry is controlling itself. " This "feudalistic system of cartel control" it illustrates with a list of controllers appointed by the two
^^
leading war-control ministries:
Ministry of Supply
Commodity
Aluminium
Alcohol, molasses and solvents
Cotton Flax
Hemp
Iron and Steel
Head Controller
Hon. G. Cunliffe Mr. A. V. Board
Sir Percy Ashley Sir H. Lindsay
Mr. J. S. Ferrier {Deputy)
Principal business interests or previous occupation
Director, British Alu- minium Company, Ltd. Chairman, British In- dustrial Solvents, Ltd. ; Director, Distillers Co. Ltd. , and International Sugar and Alcohol Co. , Ltd.
Member of Import Du- ties Advisory Committee Director of the Imperial Institute
Director, Wm. F. Mal- colm & Co. , Ltd. (flax, hemp and jute mer- chants)
Mr. A. M. Landauer Landauer & Co. (Hemp and fibre merchants)
Sir A. Duncan
Chairman, British Iron and Steel Federation; Member of Supply Coun- cil
the Italian fascist economy--impossible to unscramble. Unfortunately the influence of Trade Union leaders is exerted--unwittingly--in the same direction to the ulti- mate disadvantage of those whose interests they think they represent. But the record of the Duce's system surely does not invite imitation. "
<<5 "The Economic Front," Economist, Dec. 9, 1939.
run on a restrictive basis, are to be maintained. .
private monopolies fighting to win by State compulsion as big a share of the total real income for as little service as possible. " Another writer in the same issue adds, "If this so-called self-government of industry is permitted to crystallize itself we shall be gravely prejudicing the problem of reconstruction. We shall find that we have lost our liberty to choose between a return to a competitive system and the establishment of a planned economic system. We shall be confronted with a strongly entrenched co-operative organization of industry on a restrictionist basis--not unlike
. .
What we shall get is a set of
? i84 BRITAIN'S "FEUDALISTIC SYSTEM
Commodity
Jute
Leather
Non-ferrous metals
Paper
Silk and artificial silks
Sulphuric acid fer- tilizers
Head Controller
Mr. G. Malcolm
Dr. E. C. Snow Capt. O. Lyttelton
Mr. A. Ralph Reed
Principal business interests or previous occupation
Director, Ralli Bros. , Ltd. (Merchant bank- ers)
United Tanners' Feder- ation
Chairman, Anglo-Orien- tal & General Investment Trust, Ltd. ; chairman or director of various tin and other non-ferrous metal companies; man- aging director, British Metal Corporation, Ltd.
Chairman and managing director, Albert E. Reed & Co. , Ltd. (paper manu- facturers), and chairman of other paper compa- nies
Timber
Mr. Howard Cun- Director, Scottish Agri- ningham cultural Industries, Ltd.
Major A. I. Harris Louis Bamberger & Sons (timber importers); Past- President, Timber Trade
Association
Mr. H. O. Hambleton Wm. Frost and Co. (Silk throwsters)
Mr. F. C. O. Speyer
Director, Imperial Chemicals Industries, I. C. I. (Fertilizer and Synthetic Products) Ltd. , (delegate). International Nitrogen Association, Ltd. , Scottish Agricul- tural Industries, Ltd. (Subsidiary of Imperial Chemical Industries)
Mr. N. Garrod Thom- as
? Commodity
Wool
Head Controller Principal business interests or previous
occupation
Sir H. B. Schackleton Taylor, Schackleton k Co. (weavers); Hon. Pres- ident, Bradford Manu- facturers' Federation; chairman, Wool Tex- tile Delegation; presi- dent. Woolen & Worsted
BRITAIN'S "FEUDALISTIC SYSTEM 185
Butter
Cereals and cereal products
Feeding stufiEs Tea
Canned fish
Meat and livestock
Ministry of Foods Mr. H. E. Davis
Sir Alan Anderson
Sir Bruce Burt Sir Hubert Can-
Mr. Dan Tobey
Sir Francis Boys
Trades Federation
London Manager of Do- minion of New Zealand Dairy Sales Division Chairman, Anderson, Green & Co. (shipbro- kers and managers); member of Royal Com- mission on Wheat Sup- plies, 1914-19
Indian Agricultural Service
Late managing director, Balmer, Lawrie and Co. , Ltd. , controlled by Law- rie (Alex. ) 8c Co. , Ltd. , managing agents to tea estate companies Chairman, companies controlled by Associated Canners, Ltd. (subsidi- ary. Lever Brothers & Unilever, Ltd. ); direc- tor. Associated Canners, Ltd.
Vice-chairman, Livestock Commission; Member Bacon Development Board; Director and
? i86 BRITAIN'S Commodity
FEUDALISTIC SYSTEM'
Bacon and ham
Dried fruits
Sugar
Imported eggs
Potatoes
Oils and fats Condensed milk
Mr. J. F. Bodinnar
Mr. A. E. Gough (Designate)
Col. F. C. C. Balfour (Chairman of Board)
Mr. J. A. Peacock
Capt. J. M. Mollett (Designate)
Mr. Herbert Davis
Mr. E. W. Brown
Head Controller
Principal business interests or previous occupation
Vice-chairman, New Zea- land Refrigerating Co. ,
Ltd. , 1923-33 Chairman, Bacon Mar- keting Board; Member, Bacon Development Board; Deputy-chair- man, various bacon com- panies
Managing Director, Overseas Farmers Co- operative Federation, Ltd.
Chairman of Sugar Com- mission; formerly Sudan Political Service Director and Secretary, Nurdin & Peacock, Ltd. (provision, egg and but- ter importers) Chairman, Potato Mar- keting Board
Director of Lever Bros, and Unilever, Ltd. Director of Napier, Brown & Co. , Ltd. (sugar merchants)
The Economist finds ^^ that for all practical purposes these Head Controllers can be said to be the direct representatives of the lead- ing trade association or the allied nuclei of trade associations dom- inant in its field. Such an arrangement would seem, then, to be merely the wartime adaptation of a program ^^ which calls for a
<<6 "In this war-time organization of control the representative board of trade as- sociation is, it is true, replaced (usually) by the single controller. But the principle stands: industries are being encouraged to control themselves. " Ibid.
67 "This method of proceeding is . . . in line with the present Government's pre- war record. It is a continuation of the policy of handing over powers to such bodies as the colliery-owners, the Iron and Steel Federation, and the shipowners, and other capitalist groups which have been given authority to control production and prices, or to distribute public subsidies, or to impose levies for eliminating "redundant" plant, or what not. The present Government is pre-eminently a capitalist Govern-
? BRITAIN'S"FEUDALISTICSYSTEM" 187
centrally controlled "plutodemocracy," a sort of "new feudal sys- tem, with the British market, instead of the British land, parcelled out among the barons. " ^^
Another example treated by the Economist (Feb. 15, 1941) as typical and symptomatic of the extent to which organized British business is taking advantage of the war situation to further con- solidate monopolistic controls, is given by the development of the "Retailers' Front. " It is worth quoting at length:
Associations of retail traders have grown very much in strength since the war started. Indeed, within their own ranks, it is often said that a few months of war have brought them nearer to their objectives than many years of hard work in peacetime. The reason is not far to seek. These associations aim to speak for entire trades with a single voice in accord- ance with a common policy; and the control of supplies and regulation of prices by the Government have brought home to "independent" re- tailers the need of some spokesman or intermediary between them and the authorities. Individual traders are in no position to make constant approaches to public departments and official committees for informa- tion or to bombard these bodies with complaints and suggestions. So in every branch of trade, they flock into associations in search of aid or shelter.
The tendency is natural and the result unexceptionable insofar as it makes wartime organization easier. In war economy cooperative groups can undoubtedly exercise useful functions. But some of the conse- quences must be suspect. The direction of these associations is always quasi-monopolistic domination of their trades, and in wartime this trend is encouraged in many ways. In every business scarcity and the limitations of supplies check newcomers. Prices tend to go up, and price cutters--hitherto the chief obstacles to the associations* j>olicy of keep- ing prices up--fare badly. The associations wax while their rivals wane.
Moreover, the various associations work together. Representations on any question relating to, say, retail tobacconists will possibly be made, not only by their own associations, but also by the associations, unions and federations, local and national, of confectioners, newsagents, hotels and restaurants and off-license holders--perhaps even with the backing of that active general body, the Retail Distributors Association. Each trade is a hierarchy, beginning with the local or district organization and rising to a National Council or Federation, and as all these hierar-
raent, and almost its one idea in matters of economic policy has been to endow the big capitalist associations and combines with authority over the consumers. " New Statesman and Nation, April 2, 1938.
88 "The New Feudalism," Economist, April 2, 1938.
? i88 BRITAIN'S "FEUDALISTIC SYSTEM"
chies interlock in their activities, it means that horizontally, as well as vertically, over the whole field of retailing they exercise a nation-wide power in pursuit of aims which are often by no means national. (R)^
As policy coordinator for this swiftly unfolding and cartel-like apparatus of trade associations, given an added fillip for more rapid extension of their powers and influence in the current national emergency, the Federation of British Industries takes on a new and far-reaching significance. Commanded at the top by a small coterie of officials who are drawn chiefly from large concerns or from concerns under the influence or control of the giants in their respective fields, and with both officials and controlling concerns bound together by an infinity of interconnections--personal, fam- ily, and institutional
--
vested with political powers of propaganda and coercion, this is the
into a tightly meshed business oligarchy
British pattern in the making; in trend, at least, it does not seem very different from that already dominant in states formally com- mitted to the "corporate idea. " The eventuality remains to be seen.
69 "Retailers' Front," Economist, Feb. 15, 1941, pp. 206-7.
? Chapter VI
THE AMERICAN WAY: 'BUSINESS SELF-REGIMENTATION''
THE ORIGIN of the National Association of Manufacturers stems
from a decade of combinations par excellence. Between 1890
and 1900 more and larger combinations took place than in the
entire preceding history of this country. This is true whether one
directs attention to mere number of consolidations, number of
workmen employed, or amount of capital involved. A speaker
arguing for a federal law of incorporation before the National As-
sociation of Manufacturers in 1904 summarized the amazing rec-
^
ord:
Statistics show that in the decade between i860 and 1870 only two in- dustrial trusts, formed by the combination of formerly competing con- cerns, had been created, and that with a total capitalization of only thirteen millions of dollars. In the next decade between 1870 and 1880, four more were formed, with a capitalization of one hundred and thirty- five million dollars. Between 1880 and 1890 eighteen more were formed, with a capitalization of two hundred twenty-eight millions of dollars; while the last census shows one hundred eighty-three combinations with a capitalization of $3,619,039,200 . . . In 1902 it is claimed that there were 213 combinations, with a capitalization of seven billions of dollars; while now it is claimed that there are nearly 1,000 industrial combina- tions, not including railroads, with a nominal capitalization of $9,000,- 000,000. 2
McCrary, "Another View of National Incorporation Needs," American
1 Alvin
Industries, Oct. 1, 1904, p. 13.
J.
2 ". . . by 1904 the trusts controlled fully two-fifths of the manufacturing capital of the country. " Henry R. Seager and Charles A. Gulick, Trust and Corporation Problems (New York, 1929), p. 61. These authors define trusts somewhat more nar- rowly than the speaker before the NAM, their total estimated "trust" capitalization of 1904 being given as $5,000,000,000.
? igo THE AMERICAN WAY
THE HISTORICAL SETTING: A TREND TOWARDS MONOPOLY
Few fields of business activity escaped this flight from "free competition" entirely. In one form or another--corporate con- solidations, pools, gentlemen's agreements, interlocking direc- torates--the larger movement affected the leading branches of in- dustry, commerce, finance, and transportation. Though in line with trends reaching back through the preceding decades, the process was so swift and so far-reaching that it appeared to many that shortly it must engulf the whole of the American economic system. As the facts became generally known clamor against the trusts mounted, for it seemed that when, of the outstanding com- binations, "26 controlled 80 per cent or more of the aggregate pro- duction in their fields; 57, 60 per cent or more; and 78, 50 per cent or more," ^ it was time that all classes sit up and take notice of the revolutionary changes being brought about in the American eco- nomic scene.
Smaller businessmen throughout the country concurred in the antitrust movement. But although then, as now,* the bulk of the complaints looking toward legislative and judicial action against the trusts emanated from affected business circles, businessmen showed little inclination to organize to such an end. Leaving these matters to the government, they chose, instead, to pool their re- sources so as to present a united front in promoting more extensive aid and grants of privilege from the political authorities which would prove of common value to them all. Thus arose, along with, and at first entirely independent of, the large combinations, the trade-association movement. The "trusts" had dramatized the ad- vantages of massed and centrally directed economic power. The trade associations hoped not to level down the trusts, but to "de- mocratize" analogous privileges for the business community as a whole.
>> Idem.
4 "It is business men and business men alone who file practically all the complaints with my division, and it is for business men that the anti-trust laws must be enforced. " Thurman W. Arnold, Assistant Attorney General of the United States in an address before the American Bar Association, San Francisco, July lo, 1939. Release of the Temporary National Economic Committee (TNEC).
? THE AMERICAN WAY 191
This covert and loose form of combination, commonly termed in American business circles "business cooperation" was entirely in keeping with the anticompetitive spirit of the times. It was further stimulated by the fact that the more open type of collusive action, the "pool," was quickly driven from the field as a result of federal antitrust prosecutions. Since the "pool" was the Ameri- canized form of the cartel, this country was "saved . . . from the European cartel system," ^ the better to allow trade associations to grow more slowly into the exercise of powers and influence which in many respects now reach far beyond those of all except the more advanced cartels abroad. ^
In this mushroom growth of new forms of business "self- regimentation," ^ the National Association of Manufacturers oc- cupied from its inception in 1895 a central, and in some respects a commanding, position. It was by all odds the largest, most carefully laid out, and the most enduring of the looser forms of business organization established for the specific purpose of centralizing, unifying, coordinating, and more effectively focusing policies re- lating to the business system as a whole. Others had preceded it, but with typically much smaller industrial coverage and with much narrower range of interests. ^ It was the peculiar role of the NAM
to undertake the coordination of the efforts of all business associa- tions--existing, subsequently organized, and special-purpose--in the entirety of manufacturing industries of the whole United States.
THE CHANGING PROGRAM FOR INDUSTRIAL COORDINATION
The original statement of principles given out by the National Association of Manufacturers provided a precis for all that was to
5 See Thurman Arnold, "The Anti-Trust Laws, Their Past and Future," address over the Columbia Broadcasting System, Aug. 19, 1939. Released by TNEC.
6 As shown, for example, in Federal investigation of the National Electric Light Association (now the Edison Electrical Institute) and the National Lumber Manu-
facturers' Association. See also statements by Dr. Theodore
sultant of the TNEC (release of the TNEC, Jan. 15, 1940) and Professor Clair Wil- cox (New York Times, Jan. 20, 1940) at the Cartel Hearings before the TNEC.
7 This is the expression used by Thurman Arnold in his various speeches dealing with what is commonly called "cooperation" by businessmen.
8 Such as the various associations established to fight organized labor, e. g. , the Stove Founder's National Defense Association, an outgrowth of the National As-
J.
Kreps, Economic Con-
? THE AMERICAN WAY
follow: "The general objects and purposes for which the said cor- poration is formed are the promotion of the industrial interests of the United States, the betterment of the relations between em- ployer and employee, the education of the public in the principles of individual liberty and the ownership of property, the support of legislation in furtherance of those principles and opposition to legislation in derogation thereof. " ^ According to later spokesmen, it has fulfilled this declaration of principles almost to the limits of desire. Speaking at the Thirty-Fourth Annual Meeting of the NAM, October, 1929, President Edgerton evaluated its achievements in colorful encomium:
In eighteen hundred ninety-five near both the geographic and popu- lation centers of the United States, there occurred an event which though unheralded was even then generally recognized as of momen- tous importance to the nation. But its more complete significance re- quired and has received the dispassionate testimony of history. At that auspicious time and appropriate place, the National Association of Manufacturers, fathered by necessity and summoned by conscious op- portunity, sprang exultantly like Minerva from the forehead of Jove into immediately useful existence. Notice was thus given to the world for the first time that the American manufacturing industry had come of age, and that it could and thereafter would speak with one voice on every occasion of common defense and on all occasions pertaining to its general welfare.
At our birth in 1895 there was scarcely a handful of industrial associ- ations of any size or character in the United States. Those in existence were almost exclusively trade organizations formed primarily for de- fense against the rising cloud of labor trade unions. Ours was the first and has continued to be the only general organization of manufacturers exclusively embracing all trades, conditions, sections, and sizes of indus- trial units. We have witnessed and often assisted at birth of nearly every state association, of practically all the associations, and of many of the special organizations now serving particular trade, geographic, or other homogeneous groups. ^*^
sociation of Stove Manufacturers, which was founded in 1886 as an antiunion em- ployers' association. Similar were the American Newspaper Publishers' Association and the United Typothetae of America, both founded in 1887.
9 Constitution and By-Laws of the National Association of Manufacturers of the United States, Article II, Section I.
10 Proceedings, 34th Annual Meeting of the National Association of Manufacturers (Oct. , 1929), pp. 14-15. Italics mine.
192
? THE AMERICAN WAY 193
The age was one of organization, "an age," said President Kirby in 1911,^^ "when but little can be accomplished except through organization; an age when organization must cope with organiza- tion. . . . " All businessmen must join them, and join as many of them as they could. The NAM was to serve as the "mother of asso- ciations," that all American industry might be organized from cen- ter to circumference. But at the center was to stand the NAM, functioning as a central policy-pressure and policy-forming body for all organized activity, irrespective of the angle or the nature of the interest at stake. As a more recent brochure puts it, the NAM is dedicated to promotion of "Unit Thinking and Unit Acting on the Part of American Industry. " ^^ It represents "The Nation's In- dustry--Organized," ^^ or "The Nation's Industry Synchro- nized," ^* the better to promote "the universalization of those sav- ing principles of American Industry--the right of those who own property to control it. " ^^ Its spokesmen think of control of prop- erty as it relates to all things and with respect to all men, classes, interests, and principles.
The Association has accomplished its ends sometimes by direct pressure of organized lobbies, sometimes by the aid of propaganda, and sometimes by the further organization of business interests along special trade, regional, or industrial lines. ^(R) And its history traces the evolution of efforts to round out its program of cen- tralizing common business policies to their full social, economic, and political implications.
In accordance with changes in the general economic and politi- cal scene, its major emphasis has shifted from time to time. Thus, at the beginning, the Association was primarily concerned with the dual objectives of tariff protection at home and promotion of fa- vorable markets abroad. It held to this dominating interest until
1903, when, under the influence of a wave of strikes and trade-
11 Proceedings, i6th Annual Convention (May, 1911), pp. 65-87.
12 NAM, Pamphlet, 1935. is NAM, Pamphlet, 1923.
14 NAM, Pamphlet, "Being a Brief History of the National Association of Manu-
facturers," undated.
15 Speech delivered by President John E. Edgerton, and published in the NAM Pro-
ceedings, Oct. , 1929.
16 For comprehensive discussion of these activities see LaFollette Committee Re-
ports, Parts 17, 18, and 19, and Report No. 6, Part 6.
? THE AMERICAN WAY
union activity, and through the direction of its new president David M. Parry, it shifted its efforts to combating trade unions and advancing the plan of the open shop. Although it did not abandon its original interest, but steadily increased its pressure for favorable tariff legislation, more active government aid in the expansion of foreign markets, and similar aims,^^ its activities were largely dom- inated by the problem of trade-union expansion until the United States entered the World War.
With the war and its aftermath, interests began to broaden out more nearly in line with the general agenda of the original state- ment of principles. The influence of the war on the NAM's con- ception of its role in the national economic picture was especially profound and far-reaching. As in all belligerent countries, war con- trol in the United States was exercised primarily through the inter- mediation of businessmen and business organization. Businessmen held the principal control offices and made the key administrative decisions in economic affairs. ^^ And in all their activities they nat- urally and habitually turned to their own organizations for the instrumentation of policies--policies which combined, so happily, patriotic performance of a critical "public duty" with lucrative gains to the trades and industries which the businessmen repre-
17 Specifically, such as the following: "home markets should be retained" and "for- eign relations . . . extended in every direction and manner not inconsistent there- with"; the "principle of reciprocity" should be applied wherever possible; there should be a "judicious system of subsidies of our merchant marine"; the Nicaraguan (and later the Panama) Canal should be constructed by the Federal Government; natural and artificial waterways "should be improved and extended. " NAM pamphlet, "The Nation's Industry Synchronized. "
18 Aside from the regular governmental and war departments, the following were the principal war control agencies: Food Administration, presided over by Herbert Hoover, a mining industrialist; Fuel Administration, presided over by Harry A. Garfield, former President of the Cleveland Chamber of Commerce and Director of the Cleveland Trust Co. ; War Industries Board, directed by Bernard Baruch, a Wall Street financier and stock-market operator; War Trade Board, directed by Vance McCormick, of the family associated with the International Harvester Co. In all these boards and committees, and throughout all leading offices in the regular federal machinery primarily concerned with the war and not filled by regular staff, business- men predominated, made the decisions, gave the orders, set the prices, determined legitimate costs, and set allowable profit margins--in industries which they controlled or dominated in their private capacities, and out of which most of their concerns achieved large, and in a few cases, colossal earnings. See the summary report of the Nye Committee on the Munitions Industry, 74th Congress, 2d Session, Report No. 944, Part 4.
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sented and which must now supply the necessary goods and serv- ices. ^^
During the war days two leading ideas struck root in the business community which were destined to exercise growing influence in the postwar years. The first of these was the conception of uni- versal organization of all business enterprise into all-inclusive and appropriate trade and industrial associations. The War Emergency and Reconstruction Conference was held by the Chamber of Com- merce of the United States -^ in December, 1918, and was par- ticipated in actively by representatives of the NAM. A "Resolution on trade associations" adopted by the conference summarized the point: "This conference heartily approves the plan of organizing each industry in the country in a representative national trade as- sociation and expresses the belief that every dealer, jobber, manu- facturer, and producer of raw materials should be a member of the national organization in his trade and cordially support it in its work. " 21
The second, and related idea came subsequently to be known by the slogan "self-government in industry," meaning specifically that any such organization of trade, commerce, and industry should be autonomous, interdependent, self-regulating. The idea was dis- cussed extensively in the literature of the day, and gave rise to a series of trade-practice agreements according to which the govern- ment was to turn over the governance of economic affairs, trade by trade, and industry by industry, to public-spirited business leaders.
19 "The record of the war service committees," said Mr. Sibley, President of the Chamber of Commerce of the United States in an address before the Trade Associa- tion Executives in New York City, Jan. 28, 1936, "is one of lasting achievement. " Business and government learned for the first time to work together "in tinie of emergency" and the businessman within his own industry "found himself in the position of working cooperatively. " From pamphlet material published by the Chamber of Commerce of the United States.
An attempt was made at an Atlantic City convention, called shortly after the close of the war, to organize the various industry "war service committees," of which there were nearly 400, into a single organization to perpetuate in peace times the controls, and promote habits of "working together," etc. , with which these organized business groups had become familiar in the emergency of war. The proposal contained most of the leading ideas subsequently incorporated into NRA.
20 The National Association of Manufacturers participated actively in the organi- zation of the Chamber of Commerce of the United States, though at times policies of the two central organizations seems to have been in rather serious conflict.
21 Sibley, in his address of Jan. 28, 1936.
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Though finally discouraged by an adverse judgment of the Attor- ney General that such "agreements" might be in violation of the Anti-Trust acts,^- the idea persisted and, under the active support of the Department of Commerce and its vigorous secretary, Mr. Hoover, became a sort of theme-song of the "New Economic Era. "
Correlative with these new interests, and largely under the stim- ulus of the labor difficulties and the "deportations delirium" of the immediate postwar period, many of the leading trade associations evolved a new labor program. Designed primarily to keep the "open shop"--sometimes known as the "American Plan," sometimes la- beled "management relations," or "industrial relations," or "per- sonnel relations"--the drive found its principal expression in ac- tive and widespread promotion of company unions. The leadership in this movement was quickly taken by the NAM. ^^
The idea underlying its "Open Shop Committee" was that the "American Plan" of no trade unions, and "free bargaining" be- tween employer and employee (sometimes organized in company unions), would bring "industrial peace" throughout the nation. By these methods "harmony between labor and capital" was to be achieved "cooperatively," just as "self-government in industry" was to bring about uniformity in business practices while elevating these to a moral plane which would no longer require govern- mental regulation.
The great depression, which broke in the fall of 1929, brought this rosy-colored dream world of the New Economic Era to a rude close. In the midst of the ensuing confusion, the New Deal was born; offering, as many believed, a thoroughly rational set of com- promises, it set grimly to the task of reconciling what soon proved to be at bottom irreconcilable conflicts of interest. NRA took over Mr. Hoover's revamped wartime idea of "self-government in in- dustry" (a quasi-monopolistic notion) and tried to wed it to Presi- dent Roosevelt's Jeffersonian conception of a felicitous economic paradise--an honest competitive system. It quickly appeared that
22 They were not, however, discontinued entirely. The FTC has continued down to the present time to organize "trade practice agreements," though under the guise of devices for eliminating "unfair" and "dishonest" trade practices. See TNEC Monograph No. 34.
23 See Albion Guilford Taylor, Labor Policies of the National Association of Manufacturers (University of Illinois Studies in the Social Sciences, Urbana, 111. , 1928).
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the Codes served to transform the leading trade associations into cartel-like bodies endowed with extraordinary and far-reaching powers which came directly into conflict with previous antitrust legislation. And, at the same time that they appeared to offer a carte blanche to various forms of collusive action undertaken by these central agencies, Article 7a gave a tremendous stimulus to antipathetic labor organization. Once deflation had overtaken the flight of fancy which envisioned every man and all classes putting their shoulders to the wheel on behalf of a common aim (recovery and the general welfare) in an emergency of peace, disillusionment returned; it was accompanied by a new wave of strikes and lock- outs and by a more virulent phase of both commercial and labor warfare.
The program and the mood of the National Association of Manu- facturers shifted accordingly. If we properly interpret their litera- ture, though happy about the adoption of their pet idea, "self- government in business," ^* they had smelled a rat in the New Deal program from the outset. Smelled it and pointed it out. But with the new formulation of the issues, symbolized in the mass expansion of the labor movement, all problems seemed transmuted into political and ideological terms.
The National Association of Manufacturers began to move into the picture with a new set of working objectives. Rather, one should say, with an old set of objectives seen in a quite new per- spective. ^^ This perspective called for a greatly expanded program of public relations. Beginning with a small allocation of some $36,500 in 1934, within four years the "public information pro- gram" had increased to $793,043 in 1937, or from 7. 2 percent of the nam's total budget to 55. 1 percent. ^^ Astonishing as this shift in emphasis may appear, the figures tell only a small part of the story. The totals here cited involve only out-of-pocket expenditures of the NAM; most of the "information" was disseminated through
24 See the series of bulletins issued in 1934 by the NAM (jointly with the National Industrial Conference Board) and entitled "Industrial Self-Government. "
25 Referring to the labor program in a letter to Evart C. Stevens, President of the International Silver Company, on June 22, 1936, Colby M. Chester, President of the NAM said that "in 1903 the Association adopted a set of principles which is still officially our 'Bible' in this field. " The same is true of other declared principles.
