Ausschuss zur
Untersuchung
der Erzeugungs- und
Absatzbedingungen der deutschen Wirtschaft.
Absatzbedingungen der deutschen Wirtschaft.
Brady - Business as a System of Power
The plan, it seemed, was prematurel
25 This was especially true of NRA, largely an adaptation of Mr. Hoover's Trade Practice conventions, in turn based directly on war control ideas.
? 310 POLITICAL POLICIES
THE "slant" of the HIERARCHICAL OR "scalar" PRINCIPLE
So far as structure and control factors are concerned, trade associ- ations and their Spitzenverhdnde tend to be modeled after the pat- tern of the typical large-scale corporation. The managerial hier- archy of command and subordination follows typically the "line" or "military" form of organization: any necessary breakdown in function and staff is so dovetailed into the "line" of authority as to take maximum advantage of expert counsel and whatever prin- ciples of decentralization of management may be appropriate in each separate case. Policy-making power lies typically in the direc- torial and managerial ranks, and is not subject to check from be- low. So far as concerns the lower reaches of the hierarchy of com- mand and the labor that performs the functions which management directs, the system is completely authoritarian (antidemocratic); all duties and responsibilities are fixed from above except when counter-organization of labor or other organized special interest groups may be able to force concessions via governmental or direct- action pressure.
More recently, as has been outlined in numerous places,^^ man- agement has succeeded in largely freeing itself from owner or investor control. Conversely, labor is increasingly able to make its voice heard and its power felt only so far as it operates under the protection of government. The trade union may be the power that forces the government to act, but without government intervention the trade union finds itself increasingly unable effectively to make its influences felt or even to recruit its members. A first condition to trade-union bargaining power is favorable law. That is to say, even in labor relations organized business finds itself facing the government.
Free in large part of direct investor control,^^ managements which for one reason or another are primarily interested in execu- tive and not in larger policy matters, may be able greatly to ration-
26 See the works of such authors as Berle, Means, Bonbright, Gordon, and others, referred to in Chapter VII.
27 Here again government takes the place of the disenfranchised. Something the equivalent of the Securities and Exchange Commission is now to be found in most capitalist countries.
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311
alize productive operations where formerly such changes were in- hibited by investor interest in higher returns. ^(R) But even where this proves both possible and, from the point of view of manage- ment, desirable, management now largely swings free from all direct controls other than those which may be imposed upon it by governmental authority; this fact will and apparently does mean that the executive and managerial end will be handled by paid functionaries, the better to allow the leading figures within these ranks to focus the massed power of their pendulous corporations upon larger issues of policy. Business leadership not only acquires political interests, but it turns to the political arena already backed by enormous, fully mobilized, and easily focused power. There are but few good modern parallels for this situation in the field of in-
ternal-pressure politics. For most apt comparison one must turn to the massed and personally manipulable powers of ancient and tribal armies of legionaries and retainers, or to the medieval bar- onry of the crusading knights.
So far as this picture holds, the appropriate medium for express- ing, and the machinery for canalizing and focusing, the social and political power of management is the trade association and its Spitzenverbdnde. To the extent that paid functionaries in the hier- archy of management are enabled to handle matters on an authori- tative but expert or "civil service" basis (because they have been recruited from an especially trained and ideologically precondi-
tioned corps), to that extent will policy matters be the more com- pletely funneled through supra-managerial apparatus organized for this specific purpose. Such rationalization, simplification, and centralization as may on occasion be attempted within these latter bodies become, thus, merely problems of efficient organization ^^ of largely, if not primarily, political bodies.
28 A number of railroad reorganizations (e. g. , the New York, New Haven and Hartford) have greatly improved operations, road, rolling stock, and service facili- ties which cannot possibly--except perhaps in the very long run--benefit stockhold- ers. For all practical purposes the roads are run expertly, the compromise now being not between owner-income interests and public service demands--the ICC keeping an ever watchful eye on affairs--but between career-management and public service, the ICC now regarding prospective changes with a friendlier attitude.
29 In many cases, perhaps making the rule and not the exceptions, career men run associations, and much association activity seems a by-product of expansion of point- less tasks and "services," bureaucratically overstaffed and incompetently run by
? 312 POLITICAL POLICIES
But the question of how far and in what ways rational organiza- tion of the productive properties underlying management, or the manipulative machinery lying over these directorial levels, may be afiEected by the new functional segregation is somewhat beside the point at present. It is doubtful if the run of recent improvements below the upper layers is as great as one might be led to suspect at first. ^^ But the significant point is that trade associations and their Spitzenverbdnde are largely, if not in many cases exclusively, poli- tical-pressure bodies. This remains true even in those cases where trade associations act as coordinating bodies for cartels, or where they themselves have taken on cartel functions. The records are, of course, unsatisfactory, since here as elsewhere they leave next to no traces, such collusive practices as they may resort to proceeding by rules known from times immemorial within inner political party circles, and not by the etiquette of written statements and formal contracts. ^^ Secrecy, long the essence of national diplomacy, becomes entirely natural and normal, as the Spitzenverband be- comes a politically potent pressure group.
But the main concern of the supra-managerial business organiza- tions is not, strictly speaking, economic. Even where it is so, the issues at stake are increasingly burdened with social, philosophical, and political problems. That this is true can readily be substanti- ated by any reader who will take the trouble to leaf through a few thousand pages of trade-association literature, or who can find time to sit in on a few hundred of their congresses and conventions. What he will find is that the issues relate predominately, at some remove or other, to known, felt, or feared challenges by labor or
functionaries whose main efforts are devoted to proving to a gullible membership that the completely or primarily useless is of overwhelming importance.
80 See the records of plant reorganizations reproduced in the pages of the Bulletin of the International Management Institute (now defunct).
81 Thus, when the author of the TNEC Monograph No. i8. Trade Association Survey, dealing with trade associations in the United States, finds little ground for the belief that trade associations have "engaged in collusive restraints of trade," he cites as proof not evidence, but the lack of it! Which is only to say that he has con- fused not only the nature of trade-association activity, but also the nature of such collusion and of its characteristic proofs. The evidence of NRA might have disabused the author, who was familiar with its practices, of this naive interpretation. But if nothing else, he might have turned to a brief review of the last year's crop of anti- trust indictments for proof that the very reverse was true. Political machines rarely keep vouchers or reduce understandings to the written form, as Lincoln Steffens was not the first to discover, nor Clarence Darrow (cf. his review of NRA) the last.
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313
other groups--operating independently or through regular poli- tical channels--to the tenets underlying the capitalistic system as a whole.
As political-pressure bodies, the trade associations and their Spitzenverbdnde will be found responsible to their membership on the principle of representation, de jure or de facto according to property holdings and clique groupings. In practice, except per- haps for some of the associations representing smaller businesses,^^ clearly most of them are as closely controlled by a few of the busi- ness giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel. That is to say, where the structure of organization and methods of control recognized in constitution and by-laws do not permit--which typically they do--centralized, self-perpetuating control, the Realpolitik of power and clique effects a like result. This picture is so well accepted in association circles throughout the world and is so typical and general as to seem clearly beyond dispute in point of fact.
Both above and below the level of corporate managerial circles, the "scalar chain" or principle of graduated hierarchical controls obtains. Leadership, so far as the respective underlying hierarchy of command and subordination is concerned, is typically self- appointed, self-perpetuating, and autocratic. In the submanagerial zones, this leadership impinges on the nonproperty interests of labor and the general public. But in the supra-managerial zones it bears largely, and in some respects exclusively, on business interests in general. Authority in both ranges from the top down, and re- sponsibility from the bottom up. Below, authority coordinates the non- or but partially-property minded in an operative complex policy being predetermined and given. Above, authority coordi- nates big and little business in a policy complex forged as a by- product of the Realpolitik practiced by their own self-appointed general staffs. The same individuals, the same groups and cliques, the same interests dominate in each sphere; in each the principle of
82 Although the evidence seems to indicate dearly that many of the leading small businessmen's associations have been formed on the initiative of the large. This is the case with many of the British associations, and with the vast network of trade or "guild" associations which have sprung into existence in Japan over the past five years.
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organization, relating as it does to policy issues, is that of an inher- ently undemocratic, authoritarian hierarchy. And in neither is it the property interest of the bulk of the corporate property holders which dominates the stage. Yet the issues are increasingly of a "system-defending" or ideological character which reach to the "roots of domination" in a capitalistically organized world.
THE CONTENT OF THE NEW OUTLOOK
Contrary to certain implications of current usage, "totalitarian- ism," like "bureaucracy," is not necessarily undesirable if it is taken to mean a social-psychological outlook possessing at once a coherent unifying philosophy and a general program of action which comprehend the totality of organized social life. In this sense, even democracy, as a theoretically coherent web of postulates, free- doms, and qualified restraints, is "totalitarian. " But the question naturally arises as to what the aim and content of a general doc- trinal and programmatic position may be, when it appears that its formulators are responsible neither to the general public nor even to the property interests upon whose sanctions their authoritative powers rest. And how understand--how, indeed, even begin to formulate--a program when it seems impossible to define the in- terests to be promoted?
The difficulty, however, is more apparent than real. The leading managerial and directorial figures within the inner business sancta are real, not fictitious people, and they are drawn from, or have been absorbed into, the upper layers of wealth and income whose stakes it is their function to defend. ^^ Under current conditions, they are called upon to defend these general interests in an environ- ment wherein the issues are increasingly so drawn as to appear in some sense or other to jeopardize the whole system of evolving status and special-class privilege whose mobilized resources they have acquired "emergency powers" to command. And for the open- ing struggle they have largely fought themselves free of the pro- cedural and other forms of red tape imposed upon them by law under the general business rule of "live and let live"--in a vast
33 It is at this point that Burnham's Managerial Revolution flies off at a danger- ous tangent and leads him to an analysis as misleading as it is superficially plausible.
314
POLITICAL POLICIES
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315
political environment hostile to undue centralization of naked economic power. It cannot be forgotten that the world of relatively small-scale middle-class business of the not distant past, out of whose rich gleanings the great monopoly-oriented economic em- pires of the present gathered their first strengths, feared arbitrary political authority above all else. In limiting the state to laissez faire, they were careful to see that its functions were so defined as to make the state the specialized guardian of its own duty not to interfere as the tool of any hostile interest.
The history of government regulation of business has been pri- marily the history of attempts of small business to employ govern- ment to defend their interests against the encroachments of busi- ness monopolies,^* and of the latter to wrest the initiative from the small. ^^ The business giants, operating to an increasing extent in these matters through trade associations and their Spitzenverhdnde, seem to have found an effective means for neutralizing this opposi- tion, and to be in a fair way to the achievement of a "unified" and "harmonious" outlook of the business world vis-a-vis labor and any other challenging interest.
Real conflicts of interests within the business world have not been eliminated by these means, but to some degree they have been coordinated. Such successes as the various Spitzenverhdnde seem to have achieved in their legislative and allied efforts in the several capitalistic countries seem to stem in large part from the fact that they have been able to act as though business were united in bringing their collective pressures to bear upon government. It holds as a corollary to this that the bitterest and most ruthless at- tacks will be made upon those businesses large or small which re- fuse to play the game according to the new rules. The more "self- government in business," the more quickly the "price cutter," the business "alien," or any other footloose tycoon will be brought to
3* The vast and overwhelming bulk of complaints against the exercise of monopoly controls coming into the United States Department of Justice's Anti-Trust Division come, as Mr. Arnold has frequently pointed out, from business circles. The pressure for enactment of state and federal antitrust controls, as--for that matter--the bulk of the business regulatory machinery, emanates from similar circles.
35 As, for example, in the bulk of the resale price maintenance laws, agricultural marketing-agreement enabling acts, etc. , now to be found on the statute books of most capitalistic countries.
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? 3i6 POLITICAL POLICIES
heel by any means at the disposal of the central direction. The more complete the authority and the more centralized the power to act, the more quickly and drastically such action will be taken. ^^
Thus, there slowly emerges an apparent single view, a seeming common cause, and appearance of a general business "harmony," the semblance of a certain common business social philosophy which takes on form and content step by step with the growth and expansion of the centralized influence of the great peak associa- tions. ^^ And in proportion as this seeming internal unification takes place in organized business, one finds slowly being evolved parallel ideas vis-^-vis all other interests which, however and by whichever route they may come in conflict with any given business or aspect of business control, have no alternative but to appear to challenge the business world as a whole. Given comprehensive organization --the common ideal of the trade association all over the world this posture of affairs appears inevitable in the very nature of the case. If conflicting interests, as, for example, in the case of labor, are organized on an equally comprehensive basis, the effect will be thrown in much sharper relief. And it is an effect that has gradually become universally evident throughout the capitalistic world of the last half century.
How do the trade, employer, and business Spitzenverbdnde then proceed to meet challenges which they are led to interpret as in con- flict with the tenets underlying the capitalistic world as such? By somewhat varying routes, organized business amongst the several capitalistic countries has arrived at pretty much a common set of solutions. For the sake of brevity, and because they recapitulate a part of what has been said above, these may be summarized as follows:
3<< Consequently, the ejection or strategic demotion from the central councils of a Hjalmar Schacht, a Herr Thyssen or a Robert Stewart, not to mention the Jews when the opportune moment comes, becomes thoroughly understandable and a matter of course. Whoever does not play according to the accepted rules will be thrown out, just as whoever is weak will be absorbed in the strategies that lead to business mergers, and their expulsion or absorption is proof not of the weakness" but of the strength of organized business.
37 Which does not mean, of course, that the old conflicts do not exist, but that in a certain sense they have been "domesticated. " It is noteworthy that in the United States the growth of centralized business organization has been paralleled by both increasing concern over the fate of small business, and by its increased mortality (see the Prologue of the TNEC reports). In both Germany and Italy, the plight of little business, long before the outbreak of war, was becoming steadily worse.
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317
Control over popular organizations: the company union is father to the idea of universal, comprehensive, all-inclusive business-controlled joint labor-employer membership federations, of which the German Labor Front and the Italian General Confederation of Labor ^^ are the highest development to date. Similar ideas have run through the literature of American, French, and British business. An attempt was made to set up such a body in the United States in 1912; the Federation of British Industries was originally intended to include both labor and employers. The programs of De Mun, Harmel, and the French Social Catholic movement evolved similar ideas before the turn of the twentieth century ^^; the new French industrial re- organization plans follow similar lines. The ideas and patterns of the company union are applied wherever any other form of popular organization--of farmers, consumers, little businessmen, profession- als, women--has struck root. The idea is everywhere and in all coun- tries the same: mass organization centered around the ideologies of the upper business and social hierarchies and controlled by the self- appointed and self-perpetuating "natural" leaders from those ranks. The militarization of employer-employee relations: by a reassertion of authority in the hands of the employer similar to that which ob- tains in the army. This can be read from all complaints in the litera- ture of the Spitzenverbdnde and their subsidiary bodies when faced with effective labor protest, as in the events centered around the Bri- tish General Strike in 1926, the movements of the French Popular Front centered in the Matignon Agreement of June, 1936, the rise of the CIO in the United States and complaints demanding modifica- tion of the National Labor Relations Board, and in the successes of German, Italian, and Japanese employers, scored on the initiation of Fascist-type systems. A corollary is the militarization of legislative (substitution of the "edict" for statute law) and judicial (through the procedures of martial law) powers, with the consequent disappear- ance of the line between civil and military, the discipline of war and peace. The regimen of the "unorganized" industrial plant such as that of Ford is here prototypal of objectives seen as desirable by spokesmen who may have power to suggest or act in the larger sphere. The evolution of a ''harmony-of-all-interests'* propaganda in which the employer appears as benevolent pater familias: such was the blending which underlay the social legislation of Bismarck, the pro- grams of De Mun and Du Pin in the French Social Catholic move- ment, the Papal Encyclicals of Rerum Novarum in 1891 and Quad- ragesimo Anno in 1931, the "Clerical Fascism" of Dollfuss and Schuschnigg in Austria and of Franco in Spain, the NRA and some
38 Salvemini, Under the Axe of Fascism, Chapter VII. 89 See above, pp. 58-66.
? 3i8 POLITICAL POLICIES
of the American New Deal Legislation, the Japanese National Har-
monizing Movement, and, of course, the whole of "welfare capital-
ism. " The employer as "patron" or "trustee" becomes the beau ideal
of the business world. Correlatively the trustee concept still is ap-
plied in all other relationships of real or potential conflict between
organized business and the general public. The parallel to "indus-
trial relations" is "public relations," and this latter is growing by
every known criterion of relative importance in a sort of geometric
ratio to all other corporate publicity interests, both in the United
States and abroad. ^^ "Public relations" advances the concept of a nat-
ural "harmony" of interest between business and the public, business
and the consumer, business and social and economic progress. The
relationship is that of "trustee of the people's property and wel-
*i
fare. "
4. The"educationalemphasis"lookstwoways:towards"neutralizing"
the hostile amongst adults, while engraining "loyal" staff and espe- cially the younger generation "through the doctrine of the organiza- tion itself. " "Neutralization" involves recognition, wherever the Realpolitik of strategy may determine, of trade unions and simi- lar organizations; emphasis upon "cooperation" by promotion of labor-employer community activities; regional decentralization of plants; legal restraints upon the "abuse" of labor power; use of police power, strike breakers, espionage at need; the mobilization of the middle and professional classes into patriotic and other feder- ations; *2 attacks on opposition leadership under the guise of attack- ing "racketeering"; encouragement of fear of "aliens," "fifth-col- umnists," and other menaces which encourage in turn emphasis upon group loyalties, patriotic sentiments; especial types of interest programs and propaganda for women, children, and the aged, etc. Conversely, education of the young calls for control over apprentice- ship training; purge of school textbooks; vocational emphasis with belief in an eventual occupational stratification in which there is a one-to-one correspondence between economic station and presump- tive I. Q. ; *^ evolution of a system of rewards and punishments which
40 For example, the NAM public-relations program was first granted a small sum of money in 1934. By 1937 public-relations expenditures were larger than those for all purposes combined before 1934--a sum which was estimated, at commercial rates, to equal in that year around $36,000,000 for the whole United States. Since that year these expenditures have been probably doubled.
41 See Batchelor, Profitable Public Relations. Bureaucracy and Trusteeship. The Nazi motto, Gemeinnutz geht vor Eigennutz, carries the precise equivalent for Ger- man businessmen for the dictum, "A widespread, favorable attitude of mind is a first essential to effective trusteeship in big business. People must expect and assume that managers will look out for interests other than their own. Managers in turn will then attempt to live up to expectations. " TNEC Monograph No. ii, p. 130.
42 See pp. 287-90. 43 See pp. 280-86.
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319
turn on the axis of loyalty to the concern; the substitution of non- commercial for commercial incentives; of group and "social" for individual and personal incentives.
The key to control is political: executive authority and policy-form- ing power are concentrated in the same cooptatively renewed ranks, and these recognize that the key to power is twofold; (1) consolida- tion of all the "ins" in a solid, interest-conscious bloc; (2) a popular following, the key to which is alliance with any faction, movement, or party which has or may acquire popular following without dis- turbing the general social structure of command and subordination. This means compromise with the nouveau puissant as they are co- opted into the movement on all matters relating to "the take"--an old practice in relationships between political rings and powerful vested interests all over the world, but now generalized to entire national economics, and rationalized with an eye to sterilization of "take" knowledge and demand for participation below the upper ranks. And for these lower reaches, the evolving programs of the or- ganized business world look to well-ordered, and especially trained and loyal cadres of hierarchically controlled employees over whom as "leaders" they have complete charge--as Gignoux of the Con- federation Generale du Patronat Fran^ais expressed the matter "not only of men but of souls. "
The new power complexes are inherently expansive: two things are united in this reaching for political power. One is the tendency of all democratically irresponsible f>ower aggregations to expand with- out limit. And the other is the fact that the "life styles" of the units which form the cells of the new power pyramids have each and all been dominated by a tendency to expand without limit--a fact with which all great business leaders have been thoroughly familiar and which has been traced at great length by Sombart and others. Given control or power decisively to influence the national state, imperial expansion is inevitable. The more or less rational combination of fully articulated systems of protection and privilege combined with imperial expansion, on the one hand, and the integrative pressures of a rationally articulated industrial technology, on the other, lead logically to the concept of the next largest politically omnicompetent and coherently organized imperial area, "great-space economics"
(Grossraumwirtschaften). ^*
44 All through the Godesberg and Munich discussions the Federation of British Industries was carrying on negotiations with the Reichsgruppe Industrie. "On March 16, the day after the fall of Prague, the Dusseldorf discussions culminated in the signature in London of an agreement between agents of the Federation of British Industries and the Reichsgruppe Industrie to 'replace destructive competition by constructive cooperation. ' It contemplated the creation of a series of Anglo-German cartels. " Frederick L. Schuman, Night Over Europe, p. 107. Similar conversations
? 320 POLITICAL POLICIES
"The soul of Amenhotep is higher than Orion, and it is united with the underworld"--so runs a melancholy passage from the ancient Egyptian "Book of the Dead. " The roots of power of the several Spitzenverbdnde are intertwined in the sanctions of evolv- ing imperial class status, but monopoly-oriented business which attempts to evade effective democratic restraints can dominate government only through control over the thinking processes of the mass of the people who dwell at the base of the social pyramid. "Dangerous thoughts," as the Japanese are so acutely aware, breed democratic heresies. Antidemocratic "totalitarianism" can triumph only through ultimate consolidation of its "authoritarianism" by the seizure of political controls. Every single step in the path which leads in our times to use of the expedients which spell ultimate
resort to the coup d'etat are now sufficiently well known to be recognizable at a glance. And nothing fundamental in history, pro- gram, structure of organization, or social outlook divides clearly the policies of the Spitzenverbdnde within the "totalitarian" coun- tries from those of the liberal-capitalist states. Within Germany, Italy, Japan, and France these bodies made the critical decisions without which the final destruction of democracy could not have taken place.
Is it possible that the lesson will be learned elsewhere before it is too late?
were carried on between Japanese interests and the Federation of British Industries through a good deal of the crisis period when the Japanese took over Manchukuo. Nothing is to be found in the literature of the National Association of Manufactur- ers to indicate disapproval of the structure of controls effected through the ma- chinery of German and Italian Spitzenverbdnde, though considerable sympathy is frequently expressed that these latter should be so closely controlled by the govern- ment--a sentiment, incidentally, which the leading figures on the inner business circles in the totalitarian countries rarely reciprocate. Yet the Germans thought of NRA in 1935 as the equivalent of what they had brought on themselves, and won- dered not a little that there should be so much complaint among American business- men against their own program of "self-government in business" (The Germans use the same term), which they themselves had clearly helped to shape and guide from its initial stages on--and which must, so these same persons argued, be surely seen
as the inevitable pattern of the future if business and the capitalistic system are to survive in America as elsewhere.
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Its Public Significance and Its Regulation. New York, 1932.
Bonn, M. J. Das Schicksal des deutschen Kapitalismus. 1931.
Bonnett, Clarence E. Employers' Associations in the United States. New
York, 1922.
Boyle, John, Jr. "Corporation Patent Holdings. " Journal of the Patent
Office Society, XIX (Sept. , 1937), No. 9.
Brady, Robert A. The Rationalization Movement in German Industry.
Berkeley, Calif. , 1933.
The Spirit and Structure of German Fascism. New York, 1937.
Brandeis, Louis D. The Curse of Bigness. New York, 1934.
Brandt, Karl. "Junkers to the Fore Again. " Foreign Affairs, XIV (Oct. ,
1935)' 120-34.
Bratter, Herbert M. "The Role of Subsidies in Japan's Economic De-
velopment. " Pacific Affairs, IV (May, 1931), 377-93.
Bruck, W. F. Social and Economic History of Germany from Wilhelm
II to Hitler, 1888-1938. Oxford and New York, 1938.
Buchez, Philip. Essai d'un traite complet de philosophie du point de
vue du catholicisme et du progres. Paris, 1838-40.
Burnham, James. The Managerial Revolution. New York, 1941. Burns, Arthur R. The Decline of Competition.
25 This was especially true of NRA, largely an adaptation of Mr. Hoover's Trade Practice conventions, in turn based directly on war control ideas.
? 310 POLITICAL POLICIES
THE "slant" of the HIERARCHICAL OR "scalar" PRINCIPLE
So far as structure and control factors are concerned, trade associ- ations and their Spitzenverhdnde tend to be modeled after the pat- tern of the typical large-scale corporation. The managerial hier- archy of command and subordination follows typically the "line" or "military" form of organization: any necessary breakdown in function and staff is so dovetailed into the "line" of authority as to take maximum advantage of expert counsel and whatever prin- ciples of decentralization of management may be appropriate in each separate case. Policy-making power lies typically in the direc- torial and managerial ranks, and is not subject to check from be- low. So far as concerns the lower reaches of the hierarchy of com- mand and the labor that performs the functions which management directs, the system is completely authoritarian (antidemocratic); all duties and responsibilities are fixed from above except when counter-organization of labor or other organized special interest groups may be able to force concessions via governmental or direct- action pressure.
More recently, as has been outlined in numerous places,^^ man- agement has succeeded in largely freeing itself from owner or investor control. Conversely, labor is increasingly able to make its voice heard and its power felt only so far as it operates under the protection of government. The trade union may be the power that forces the government to act, but without government intervention the trade union finds itself increasingly unable effectively to make its influences felt or even to recruit its members. A first condition to trade-union bargaining power is favorable law. That is to say, even in labor relations organized business finds itself facing the government.
Free in large part of direct investor control,^^ managements which for one reason or another are primarily interested in execu- tive and not in larger policy matters, may be able greatly to ration-
26 See the works of such authors as Berle, Means, Bonbright, Gordon, and others, referred to in Chapter VII.
27 Here again government takes the place of the disenfranchised. Something the equivalent of the Securities and Exchange Commission is now to be found in most capitalist countries.
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311
alize productive operations where formerly such changes were in- hibited by investor interest in higher returns. ^(R) But even where this proves both possible and, from the point of view of manage- ment, desirable, management now largely swings free from all direct controls other than those which may be imposed upon it by governmental authority; this fact will and apparently does mean that the executive and managerial end will be handled by paid functionaries, the better to allow the leading figures within these ranks to focus the massed power of their pendulous corporations upon larger issues of policy. Business leadership not only acquires political interests, but it turns to the political arena already backed by enormous, fully mobilized, and easily focused power. There are but few good modern parallels for this situation in the field of in-
ternal-pressure politics. For most apt comparison one must turn to the massed and personally manipulable powers of ancient and tribal armies of legionaries and retainers, or to the medieval bar- onry of the crusading knights.
So far as this picture holds, the appropriate medium for express- ing, and the machinery for canalizing and focusing, the social and political power of management is the trade association and its Spitzenverbdnde. To the extent that paid functionaries in the hier- archy of management are enabled to handle matters on an authori- tative but expert or "civil service" basis (because they have been recruited from an especially trained and ideologically precondi-
tioned corps), to that extent will policy matters be the more com- pletely funneled through supra-managerial apparatus organized for this specific purpose. Such rationalization, simplification, and centralization as may on occasion be attempted within these latter bodies become, thus, merely problems of efficient organization ^^ of largely, if not primarily, political bodies.
28 A number of railroad reorganizations (e. g. , the New York, New Haven and Hartford) have greatly improved operations, road, rolling stock, and service facili- ties which cannot possibly--except perhaps in the very long run--benefit stockhold- ers. For all practical purposes the roads are run expertly, the compromise now being not between owner-income interests and public service demands--the ICC keeping an ever watchful eye on affairs--but between career-management and public service, the ICC now regarding prospective changes with a friendlier attitude.
29 In many cases, perhaps making the rule and not the exceptions, career men run associations, and much association activity seems a by-product of expansion of point- less tasks and "services," bureaucratically overstaffed and incompetently run by
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But the question of how far and in what ways rational organiza- tion of the productive properties underlying management, or the manipulative machinery lying over these directorial levels, may be afiEected by the new functional segregation is somewhat beside the point at present. It is doubtful if the run of recent improvements below the upper layers is as great as one might be led to suspect at first. ^^ But the significant point is that trade associations and their Spitzenverbdnde are largely, if not in many cases exclusively, poli- tical-pressure bodies. This remains true even in those cases where trade associations act as coordinating bodies for cartels, or where they themselves have taken on cartel functions. The records are, of course, unsatisfactory, since here as elsewhere they leave next to no traces, such collusive practices as they may resort to proceeding by rules known from times immemorial within inner political party circles, and not by the etiquette of written statements and formal contracts. ^^ Secrecy, long the essence of national diplomacy, becomes entirely natural and normal, as the Spitzenverband be- comes a politically potent pressure group.
But the main concern of the supra-managerial business organiza- tions is not, strictly speaking, economic. Even where it is so, the issues at stake are increasingly burdened with social, philosophical, and political problems. That this is true can readily be substanti- ated by any reader who will take the trouble to leaf through a few thousand pages of trade-association literature, or who can find time to sit in on a few hundred of their congresses and conventions. What he will find is that the issues relate predominately, at some remove or other, to known, felt, or feared challenges by labor or
functionaries whose main efforts are devoted to proving to a gullible membership that the completely or primarily useless is of overwhelming importance.
80 See the records of plant reorganizations reproduced in the pages of the Bulletin of the International Management Institute (now defunct).
81 Thus, when the author of the TNEC Monograph No. i8. Trade Association Survey, dealing with trade associations in the United States, finds little ground for the belief that trade associations have "engaged in collusive restraints of trade," he cites as proof not evidence, but the lack of it! Which is only to say that he has con- fused not only the nature of trade-association activity, but also the nature of such collusion and of its characteristic proofs. The evidence of NRA might have disabused the author, who was familiar with its practices, of this naive interpretation. But if nothing else, he might have turned to a brief review of the last year's crop of anti- trust indictments for proof that the very reverse was true. Political machines rarely keep vouchers or reduce understandings to the written form, as Lincoln Steffens was not the first to discover, nor Clarence Darrow (cf. his review of NRA) the last.
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313
other groups--operating independently or through regular poli- tical channels--to the tenets underlying the capitalistic system as a whole.
As political-pressure bodies, the trade associations and their Spitzenverbdnde will be found responsible to their membership on the principle of representation, de jure or de facto according to property holdings and clique groupings. In practice, except per- haps for some of the associations representing smaller businesses,^^ clearly most of them are as closely controlled by a few of the busi- ness giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel. That is to say, where the structure of organization and methods of control recognized in constitution and by-laws do not permit--which typically they do--centralized, self-perpetuating control, the Realpolitik of power and clique effects a like result. This picture is so well accepted in association circles throughout the world and is so typical and general as to seem clearly beyond dispute in point of fact.
Both above and below the level of corporate managerial circles, the "scalar chain" or principle of graduated hierarchical controls obtains. Leadership, so far as the respective underlying hierarchy of command and subordination is concerned, is typically self- appointed, self-perpetuating, and autocratic. In the submanagerial zones, this leadership impinges on the nonproperty interests of labor and the general public. But in the supra-managerial zones it bears largely, and in some respects exclusively, on business interests in general. Authority in both ranges from the top down, and re- sponsibility from the bottom up. Below, authority coordinates the non- or but partially-property minded in an operative complex policy being predetermined and given. Above, authority coordi- nates big and little business in a policy complex forged as a by- product of the Realpolitik practiced by their own self-appointed general staffs. The same individuals, the same groups and cliques, the same interests dominate in each sphere; in each the principle of
82 Although the evidence seems to indicate dearly that many of the leading small businessmen's associations have been formed on the initiative of the large. This is the case with many of the British associations, and with the vast network of trade or "guild" associations which have sprung into existence in Japan over the past five years.
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organization, relating as it does to policy issues, is that of an inher- ently undemocratic, authoritarian hierarchy. And in neither is it the property interest of the bulk of the corporate property holders which dominates the stage. Yet the issues are increasingly of a "system-defending" or ideological character which reach to the "roots of domination" in a capitalistically organized world.
THE CONTENT OF THE NEW OUTLOOK
Contrary to certain implications of current usage, "totalitarian- ism," like "bureaucracy," is not necessarily undesirable if it is taken to mean a social-psychological outlook possessing at once a coherent unifying philosophy and a general program of action which comprehend the totality of organized social life. In this sense, even democracy, as a theoretically coherent web of postulates, free- doms, and qualified restraints, is "totalitarian. " But the question naturally arises as to what the aim and content of a general doc- trinal and programmatic position may be, when it appears that its formulators are responsible neither to the general public nor even to the property interests upon whose sanctions their authoritative powers rest. And how understand--how, indeed, even begin to formulate--a program when it seems impossible to define the in- terests to be promoted?
The difficulty, however, is more apparent than real. The leading managerial and directorial figures within the inner business sancta are real, not fictitious people, and they are drawn from, or have been absorbed into, the upper layers of wealth and income whose stakes it is their function to defend. ^^ Under current conditions, they are called upon to defend these general interests in an environ- ment wherein the issues are increasingly so drawn as to appear in some sense or other to jeopardize the whole system of evolving status and special-class privilege whose mobilized resources they have acquired "emergency powers" to command. And for the open- ing struggle they have largely fought themselves free of the pro- cedural and other forms of red tape imposed upon them by law under the general business rule of "live and let live"--in a vast
33 It is at this point that Burnham's Managerial Revolution flies off at a danger- ous tangent and leads him to an analysis as misleading as it is superficially plausible.
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POLITICAL POLICIES
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315
political environment hostile to undue centralization of naked economic power. It cannot be forgotten that the world of relatively small-scale middle-class business of the not distant past, out of whose rich gleanings the great monopoly-oriented economic em- pires of the present gathered their first strengths, feared arbitrary political authority above all else. In limiting the state to laissez faire, they were careful to see that its functions were so defined as to make the state the specialized guardian of its own duty not to interfere as the tool of any hostile interest.
The history of government regulation of business has been pri- marily the history of attempts of small business to employ govern- ment to defend their interests against the encroachments of busi- ness monopolies,^* and of the latter to wrest the initiative from the small. ^^ The business giants, operating to an increasing extent in these matters through trade associations and their Spitzenverhdnde, seem to have found an effective means for neutralizing this opposi- tion, and to be in a fair way to the achievement of a "unified" and "harmonious" outlook of the business world vis-a-vis labor and any other challenging interest.
Real conflicts of interests within the business world have not been eliminated by these means, but to some degree they have been coordinated. Such successes as the various Spitzenverhdnde seem to have achieved in their legislative and allied efforts in the several capitalistic countries seem to stem in large part from the fact that they have been able to act as though business were united in bringing their collective pressures to bear upon government. It holds as a corollary to this that the bitterest and most ruthless at- tacks will be made upon those businesses large or small which re- fuse to play the game according to the new rules. The more "self- government in business," the more quickly the "price cutter," the business "alien," or any other footloose tycoon will be brought to
3* The vast and overwhelming bulk of complaints against the exercise of monopoly controls coming into the United States Department of Justice's Anti-Trust Division come, as Mr. Arnold has frequently pointed out, from business circles. The pressure for enactment of state and federal antitrust controls, as--for that matter--the bulk of the business regulatory machinery, emanates from similar circles.
35 As, for example, in the bulk of the resale price maintenance laws, agricultural marketing-agreement enabling acts, etc. , now to be found on the statute books of most capitalistic countries.
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heel by any means at the disposal of the central direction. The more complete the authority and the more centralized the power to act, the more quickly and drastically such action will be taken. ^^
Thus, there slowly emerges an apparent single view, a seeming common cause, and appearance of a general business "harmony," the semblance of a certain common business social philosophy which takes on form and content step by step with the growth and expansion of the centralized influence of the great peak associa- tions. ^^ And in proportion as this seeming internal unification takes place in organized business, one finds slowly being evolved parallel ideas vis-^-vis all other interests which, however and by whichever route they may come in conflict with any given business or aspect of business control, have no alternative but to appear to challenge the business world as a whole. Given comprehensive organization --the common ideal of the trade association all over the world this posture of affairs appears inevitable in the very nature of the case. If conflicting interests, as, for example, in the case of labor, are organized on an equally comprehensive basis, the effect will be thrown in much sharper relief. And it is an effect that has gradually become universally evident throughout the capitalistic world of the last half century.
How do the trade, employer, and business Spitzenverbdnde then proceed to meet challenges which they are led to interpret as in con- flict with the tenets underlying the capitalistic world as such? By somewhat varying routes, organized business amongst the several capitalistic countries has arrived at pretty much a common set of solutions. For the sake of brevity, and because they recapitulate a part of what has been said above, these may be summarized as follows:
3<< Consequently, the ejection or strategic demotion from the central councils of a Hjalmar Schacht, a Herr Thyssen or a Robert Stewart, not to mention the Jews when the opportune moment comes, becomes thoroughly understandable and a matter of course. Whoever does not play according to the accepted rules will be thrown out, just as whoever is weak will be absorbed in the strategies that lead to business mergers, and their expulsion or absorption is proof not of the weakness" but of the strength of organized business.
37 Which does not mean, of course, that the old conflicts do not exist, but that in a certain sense they have been "domesticated. " It is noteworthy that in the United States the growth of centralized business organization has been paralleled by both increasing concern over the fate of small business, and by its increased mortality (see the Prologue of the TNEC reports). In both Germany and Italy, the plight of little business, long before the outbreak of war, was becoming steadily worse.
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317
Control over popular organizations: the company union is father to the idea of universal, comprehensive, all-inclusive business-controlled joint labor-employer membership federations, of which the German Labor Front and the Italian General Confederation of Labor ^^ are the highest development to date. Similar ideas have run through the literature of American, French, and British business. An attempt was made to set up such a body in the United States in 1912; the Federation of British Industries was originally intended to include both labor and employers. The programs of De Mun, Harmel, and the French Social Catholic movement evolved similar ideas before the turn of the twentieth century ^^; the new French industrial re- organization plans follow similar lines. The ideas and patterns of the company union are applied wherever any other form of popular organization--of farmers, consumers, little businessmen, profession- als, women--has struck root. The idea is everywhere and in all coun- tries the same: mass organization centered around the ideologies of the upper business and social hierarchies and controlled by the self- appointed and self-perpetuating "natural" leaders from those ranks. The militarization of employer-employee relations: by a reassertion of authority in the hands of the employer similar to that which ob- tains in the army. This can be read from all complaints in the litera- ture of the Spitzenverbdnde and their subsidiary bodies when faced with effective labor protest, as in the events centered around the Bri- tish General Strike in 1926, the movements of the French Popular Front centered in the Matignon Agreement of June, 1936, the rise of the CIO in the United States and complaints demanding modifica- tion of the National Labor Relations Board, and in the successes of German, Italian, and Japanese employers, scored on the initiation of Fascist-type systems. A corollary is the militarization of legislative (substitution of the "edict" for statute law) and judicial (through the procedures of martial law) powers, with the consequent disappear- ance of the line between civil and military, the discipline of war and peace. The regimen of the "unorganized" industrial plant such as that of Ford is here prototypal of objectives seen as desirable by spokesmen who may have power to suggest or act in the larger sphere. The evolution of a ''harmony-of-all-interests'* propaganda in which the employer appears as benevolent pater familias: such was the blending which underlay the social legislation of Bismarck, the pro- grams of De Mun and Du Pin in the French Social Catholic move- ment, the Papal Encyclicals of Rerum Novarum in 1891 and Quad- ragesimo Anno in 1931, the "Clerical Fascism" of Dollfuss and Schuschnigg in Austria and of Franco in Spain, the NRA and some
38 Salvemini, Under the Axe of Fascism, Chapter VII. 89 See above, pp. 58-66.
? 3i8 POLITICAL POLICIES
of the American New Deal Legislation, the Japanese National Har-
monizing Movement, and, of course, the whole of "welfare capital-
ism. " The employer as "patron" or "trustee" becomes the beau ideal
of the business world. Correlatively the trustee concept still is ap-
plied in all other relationships of real or potential conflict between
organized business and the general public. The parallel to "indus-
trial relations" is "public relations," and this latter is growing by
every known criterion of relative importance in a sort of geometric
ratio to all other corporate publicity interests, both in the United
States and abroad. ^^ "Public relations" advances the concept of a nat-
ural "harmony" of interest between business and the public, business
and the consumer, business and social and economic progress. The
relationship is that of "trustee of the people's property and wel-
*i
fare. "
4. The"educationalemphasis"lookstwoways:towards"neutralizing"
the hostile amongst adults, while engraining "loyal" staff and espe- cially the younger generation "through the doctrine of the organiza- tion itself. " "Neutralization" involves recognition, wherever the Realpolitik of strategy may determine, of trade unions and simi- lar organizations; emphasis upon "cooperation" by promotion of labor-employer community activities; regional decentralization of plants; legal restraints upon the "abuse" of labor power; use of police power, strike breakers, espionage at need; the mobilization of the middle and professional classes into patriotic and other feder- ations; *2 attacks on opposition leadership under the guise of attack- ing "racketeering"; encouragement of fear of "aliens," "fifth-col- umnists," and other menaces which encourage in turn emphasis upon group loyalties, patriotic sentiments; especial types of interest programs and propaganda for women, children, and the aged, etc. Conversely, education of the young calls for control over apprentice- ship training; purge of school textbooks; vocational emphasis with belief in an eventual occupational stratification in which there is a one-to-one correspondence between economic station and presump- tive I. Q. ; *^ evolution of a system of rewards and punishments which
40 For example, the NAM public-relations program was first granted a small sum of money in 1934. By 1937 public-relations expenditures were larger than those for all purposes combined before 1934--a sum which was estimated, at commercial rates, to equal in that year around $36,000,000 for the whole United States. Since that year these expenditures have been probably doubled.
41 See Batchelor, Profitable Public Relations. Bureaucracy and Trusteeship. The Nazi motto, Gemeinnutz geht vor Eigennutz, carries the precise equivalent for Ger- man businessmen for the dictum, "A widespread, favorable attitude of mind is a first essential to effective trusteeship in big business. People must expect and assume that managers will look out for interests other than their own. Managers in turn will then attempt to live up to expectations. " TNEC Monograph No. ii, p. 130.
42 See pp. 287-90. 43 See pp. 280-86.
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319
turn on the axis of loyalty to the concern; the substitution of non- commercial for commercial incentives; of group and "social" for individual and personal incentives.
The key to control is political: executive authority and policy-form- ing power are concentrated in the same cooptatively renewed ranks, and these recognize that the key to power is twofold; (1) consolida- tion of all the "ins" in a solid, interest-conscious bloc; (2) a popular following, the key to which is alliance with any faction, movement, or party which has or may acquire popular following without dis- turbing the general social structure of command and subordination. This means compromise with the nouveau puissant as they are co- opted into the movement on all matters relating to "the take"--an old practice in relationships between political rings and powerful vested interests all over the world, but now generalized to entire national economics, and rationalized with an eye to sterilization of "take" knowledge and demand for participation below the upper ranks. And for these lower reaches, the evolving programs of the or- ganized business world look to well-ordered, and especially trained and loyal cadres of hierarchically controlled employees over whom as "leaders" they have complete charge--as Gignoux of the Con- federation Generale du Patronat Fran^ais expressed the matter "not only of men but of souls. "
The new power complexes are inherently expansive: two things are united in this reaching for political power. One is the tendency of all democratically irresponsible f>ower aggregations to expand with- out limit. And the other is the fact that the "life styles" of the units which form the cells of the new power pyramids have each and all been dominated by a tendency to expand without limit--a fact with which all great business leaders have been thoroughly familiar and which has been traced at great length by Sombart and others. Given control or power decisively to influence the national state, imperial expansion is inevitable. The more or less rational combination of fully articulated systems of protection and privilege combined with imperial expansion, on the one hand, and the integrative pressures of a rationally articulated industrial technology, on the other, lead logically to the concept of the next largest politically omnicompetent and coherently organized imperial area, "great-space economics"
(Grossraumwirtschaften). ^*
44 All through the Godesberg and Munich discussions the Federation of British Industries was carrying on negotiations with the Reichsgruppe Industrie. "On March 16, the day after the fall of Prague, the Dusseldorf discussions culminated in the signature in London of an agreement between agents of the Federation of British Industries and the Reichsgruppe Industrie to 'replace destructive competition by constructive cooperation. ' It contemplated the creation of a series of Anglo-German cartels. " Frederick L. Schuman, Night Over Europe, p. 107. Similar conversations
? 320 POLITICAL POLICIES
"The soul of Amenhotep is higher than Orion, and it is united with the underworld"--so runs a melancholy passage from the ancient Egyptian "Book of the Dead. " The roots of power of the several Spitzenverbdnde are intertwined in the sanctions of evolv- ing imperial class status, but monopoly-oriented business which attempts to evade effective democratic restraints can dominate government only through control over the thinking processes of the mass of the people who dwell at the base of the social pyramid. "Dangerous thoughts," as the Japanese are so acutely aware, breed democratic heresies. Antidemocratic "totalitarianism" can triumph only through ultimate consolidation of its "authoritarianism" by the seizure of political controls. Every single step in the path which leads in our times to use of the expedients which spell ultimate
resort to the coup d'etat are now sufficiently well known to be recognizable at a glance. And nothing fundamental in history, pro- gram, structure of organization, or social outlook divides clearly the policies of the Spitzenverbdnde within the "totalitarian" coun- tries from those of the liberal-capitalist states. Within Germany, Italy, Japan, and France these bodies made the critical decisions without which the final destruction of democracy could not have taken place.
Is it possible that the lesson will be learned elsewhere before it is too late?
were carried on between Japanese interests and the Federation of British Industries through a good deal of the crisis period when the Japanese took over Manchukuo. Nothing is to be found in the literature of the National Association of Manufactur- ers to indicate disapproval of the structure of controls effected through the ma- chinery of German and Italian Spitzenverbdnde, though considerable sympathy is frequently expressed that these latter should be so closely controlled by the govern- ment--a sentiment, incidentally, which the leading figures on the inner business circles in the totalitarian countries rarely reciprocate. Yet the Germans thought of NRA in 1935 as the equivalent of what they had brought on themselves, and won- dered not a little that there should be so much complaint among American business- men against their own program of "self-government in business" (The Germans use the same term), which they themselves had clearly helped to shape and guide from its initial stages on--and which must, so these same persons argued, be surely seen
as the inevitable pattern of the future if business and the capitalistic system are to survive in America as elsewhere.
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BIBLIOGRAPHY
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