No More Learning

25 No. 34, Control of Unfair Competitive Practices through Trade Practice Con- ference Procedure of the Federal Trade Commission, a rather bad whitewash of the FTC; No. 35, Large Scale Organization in the Food Industries; No. 39, Cofitrol of the Petroleum Industry by Major Oil Companies (section on the American Petroleum Company); and No. 43, The Motion Picture Industry--A Pattern of Control (section on the Motion Picture Producers and Distributors of America).
26 See almost any of the several dozen indictments of the Anti-Trust Division is- sued from the beginning of 1939, particularly those relating to the food, construc- tion, metals, and machinery industries and to patent pooling. See also numerous speeches of Assistant Attorney General Thurman W. Arnold, and his Bottlenecks of Business (New York, 1940).
27 No. 26, Economic Power and Political Pressures.
28 They were most highly developed in Germany, but were still largely in germinal form. In manufacturing, centralized peak associations were found in England, the United States, Switzerland and a number of other smaller manufacturing countries. None of any importance were to be found in France, Italy, and Japan.
? EFFORTS TO ORGANIZE BUSINESS
one country to the next, the rise of peak associations has been gen- erally paced by the movement of the business giants to the centers of the spreading webs of control. In Germany, and to a lesser extent in England, the two tendencies went pretty much hand in hand. The same was true also of Japan, though here both tendencies ap- peared very late. In the United States the latter was not clearly evidenced until the advent of NRA. But by the late thirties, the industrial and financial giants had practically without exception moved into the citadels of peak-association power all over the world.
These two tendencies take on an added significance when they are paired with two other well-known developments within the business world of the corporate giants. One is the fact that through a multitude of familiar devices (interlocking directorates, patent- pooling and other cartel-like agreements, holding companies, inter- corporate ownership of securities) ^^ the ties that bind the giants to- gether have long been growing so close, so mutually reinforcing that within, and to a certain extent amongst, the several capitalistic countries they have come as a whole to take on the characteristics of unified, more or less compact, and internally homogeneous groups. ^^ And the other is the fact that, within the several corporate segments of this almost consanguineous community of interests, de facto control has gradually been narrowed down until it is now typically held by very small, almost entirely self-perpetuating and largely non-owner directorial and managerial cliques. ^^
29 See TNEC Monograph No. 9, Taxation of Corporate Enterprise, Chapters III and IV.
30 Of particular interest in this connection, aside from those cited in footnote 31, below, is a series of studies published at intervals by Die Wirtschaftkurve (a monthly publication of the Frankfurter Zeitung) after the stabilization (1924) of national and international intercorporate affiliations of various British, French, American, Ger- man, Belgian, and other combines. See the "Electronics Chart of the Sound Picture Industry of the World," reproduced by H. A. Toulmin in Trade Agreements and the Anti-Trust Laws (Cincinnati, 1937); Robert Liefmann, Beteiligunge und Finanzie- rungs Gesellschaften (Jena, 1921); and the TNEC Monograph No. 36, Reports of the Federal Trade Commission on the Natural Gas, Gas Pipe, Agricultural Imple- ment, Machinery, and Motor Vehicle Industries.
siAdolph A. Berle, Jr. , and Gardiner C. Means, The Modern Corporation and Private Property (New York, 1933); National Resources Committee, The Structure of American Economy; Robert A. Gordon, "Ownership by Management and Control Groups in the Large Corporation," Quarterly Journal of Economics, May, 1938; TNEC Monograph No. 11, Bureaucracy and Trusteeship in Large Corporations, Part I.
13
? EFFORTS TO ORGANIZE BUSINESS
Any reader who will stop for a moment and attempt to think through the implications of these several developments when re- lated to each other in such a fashion will see at once that trade asso- ciations suddenly take on a new and almost spectacular significance. So considered in this new light they become at once power entities which may in some cases have the indefiniteness of a Herrenklub/^ and in others the potency of states within states--particularly when viewed as monopoly-minded forces, with a political turn of interest, thus strategically grouped together into centralized nationwide peak associations. But either case shows that everywhere and in every land, business has been "going political" as rapidly as it masses power.
The careful and systematic studies required as a basis for search- ing through the full historical and practical implications of this new massing of organized economic power have nowhere been made. Numerous individuals, including President Roosevelt ^^ and some of his leading subordinates,^* have shown some real appreciation of
32 A club--^similar in social cross-section in some respects to the famous New York Union League Club--of Junker potentates, landlords, industrialists, and military figures who met at fairly regular intervals in a down-town Berlin hotel throughout the post-war interval, and who were largely responsible, via the ministrations of von Papen, Hugenberg and others, for the original compromises and subsidies which led directly to the Nazi assumption of power.
33 "Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people. . . . The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism--ownership of a government by an individual, by a group, or by any other controlling private power. " Message from The President of the United States, Transmitting Recom- mendations Relative to the Strengthening and Enforcement of Anti-Trust Laws, Senate Document 173, 75th Congress, 3d Session.
J.
14
34 "Lest the people learn the lesson of history the dark powers of concentrated wealth choose in each new struggle a new name for themselves, avoiding the old names that carry the historic smell of tyranny. Tyrant, Satrap, Pharaoh, Caesar, Em- peror, Czar, and Kaiser have left their sulphurous trail across the pages of history. Today in Europe they have new names. In America we call the lesser rulers Business Leaders and Corporation Lawyers, the great ones are simply kings--oil kings, match kings, soap kings--hundreds of them. The great Overlord who will draw them all together into a perfect plutocratic dictatorship has not yet appeared. But there are portents in the heavens which betoken his opportunity. " Willis
Ballinger, Di- rector of Studies and Economic Advisor to the Federal Trade Commission, at the opening of hearings before the Temporary National Economic Committee. Again, "The best way to bring home the final results of these pressures is by the concrete example of Germany. Germany, of course, has developed within fifteen years from an industrial autocracy into a dictatorship. Most people are under the impression that the power of Hider was the result of his demagogic blandishments and appeals to the mob. This incorrect diagnosis has been responsible for most of the bad guesses
? EFFORTS TO ORGANIZE BUSINESS 15
the range of issues involved and the size of the stakes in play. But for the most part discussion has run in terms of vague defense or innuendo on the one hand, or a mere superficial glossing over on the other. ^^
The following survey cannot possibly hope to span the gap--it is a far greater void than any one student can hope to bridge--but it may possibly point the way to some more fruitful research to follow.
THE METHOD OF APPROACH
The selections made for the following chapters have been guided by two main considerations. First, and at the risk of sacrificing at a good many points desirable accumulative detail, the plan has been to obtain as wide a cross-section of variations on the major pattern as possible.
England, great industrial pioneer, contrasts with Japan, a late arrival amongst the major capitalistic powers. England as center of the vast British Empire contrasts with the minuscular empire of Mussolini's Italy. Some of the great capitalistic powers never really threw off feudal and autocratic carry-overs from their respective pasts; others, such as the United States, have little memory of these institutions at all. Laissez-faire doctrines and the ideals of free com- petition long dominated both political and economic thinking in England, France, and the United States, but never made much headway in Germany or Japan.
A second consideration was the selection of the field of manu- facturing. The reasons for this choice were several: manufacturing is itself the very heart and soul of the industrial system; singly it is
about German economy since Hitler came into power. Actually Hitler holds his power through the final and inevitable development of the uncontrolled tendency to combine in restraint of trade" Thurman Arnold, address before the Denver Bar Association, May 15, 1939 (mimeographed release, Dept. of Justice), italics mine. Or, again, "Germany presents the logical end of the process of cartelization. From 1923 to 1935 cartelization grew in Germany until finally that nation was so organized that everyone had to belong either to a squad, a regiment or a brigade in order to sur- vive. The names given to these squads, regiments or brigades were cartels, trade associations, unions, and trusts. Such a distribution system could not adjust its prices. It needed a general with quasi-military authority who could order the work- ers to work and the mills to produce. Hitler named himself that general. Had it not been Hitler it would have been someone else. " Arnold, in an address before the American Bar Association, July 10, 1939.
35 As in TNEC Monographs No. 7, Measurement of the Social Performance of Business and No. 11, Bureaucracy and Trusteeship in Large Corporations.
? i6 EFFORTS TO ORGANIZE BUSINESS
the major force making for change in the structure of economic re- lationships; the conflicts of interests are more clearly visualized and more readily focused in this field; the "peak associations" among manufacturers typically came first, or coming later, quickly as- sumed a position of commanding leadership; ^(R) the literature, though largely fugitive, is nevertheless more plentiful than for com- parable organizations in other fields of business activity. In general it may be said that whichever way the manufacturing peak associa- tion goes, so will go not only the trade association and cartel net- work of each country as a whole but also all of their various inter- locking peak associations.
In each case the plan has been, after first briefly following through the historical development of the peak association, to sketch in broad outlines the peculiarities of national institutions, social backgrounds, and political characteristics which conditioned, at each significant step, the functions, membership coverage, struc- ture, and policies of the association. In all cases, particular atten- tion has been paid to relationships with labor and the government. In order to bring certain comparisons and contrasts even more sharply to mind it was decided to separate the countries which have gone over formally to the totalitarian bloc from those which are still moving within the orbit of the liberal-capitalistic system. It is particularly important to note, in this connection, that the so- called principle of "self-government in business"--and some varia- tion on the expression is employed in all countries which have de- veloped peak associations, the better to coordinate networks of business organization--is not abandoned with the transition from a "liberal" to a "totalitarian" basis. In both systems it is now quite generally accepted as unavoidable that large and increasing meas- ures of governmental regulation must be extended over the eco- nomic system as a whole. But what appears in the first as a defensive measure to slow the process down, appears in the second as a tech-
36 Others in the United States are: retailing. The American Retail Federation; bank- ing, American Bankers Association; railroads, American Railway Association; power, Edison Electrical Institute. None of these compares even remotely in importance with the National Association of Manufacturers, and most of them are affiliated directly or indirectly with that organization. The only rival body is the Chamber of Com- merce of the United States, which the NAM helped to found, and whose functions are in turn largely those determined by its manufacturing members--typically be- longing also to the NAM. This picture is duplicated in most countries in the world.
? EFFORTS TO ORGANIZE BUSINESS 17
nique of formal decentralization of administration, coupled with what may be a more or less flexible method of delegating authority from on top.
How authority is so centralized and delegated in the two cases depends greatly upon the nature of the policies guiding the inner groups which are vested with power to formulate policy. The better to bring out these points and to underline what seem on present evidence the long-run implications of policies now guiding deci- sions, the bulk of the discussion of policy has been siphoned away from each of the more descriptive historical sketches in Parts I and II, and is brought together in the three concluding chapters, deal- ing respectively with economic, social, and political issues. Every effort has been made in these chapters to condense the discussion to the utmost in the hope that the more provocative and far- reaching issues will thereby stand more clearly outlined, and that, so standing in view, they may stimulate discussion and criticism from every possible angle.
? Part I
THE EVOLUTION OF MANUFACTUR- ING PEAK ASSOCIATIONS IN THE TOTALITARIAN BLOC
? Chapter I
THE NEW ORDER FOR GERMAN INDUSTRY
THE BATTLES of Poland, France, the Balkans, and Russia have been object lessons in the techniques of "lightning war. " Com- plete mechanization on the one hand and full coordination of air, land, and naval forces on the other have proven an irresistible com- bination against allied military strategists whose tactics have been still largely grounded in the obsolete methods of "fixed position" combat. But equally irresistible in a closely related field has been another Nazi innovation--that of the fullest possible coordination of propaganda, diplomacy, and economic power. To date, this lat- ter coordination has developed a striking power equal in paralyz- ing effect to that of the military forces; its actual conquests have reaped material gains for the Third Reich which extend far beyond anything the latter has had to offer, even in the major theater of
war.
The separate elements in both cases are in no important sense of
the term new. What is new is the fact that each element has been rationally exploited to the fullest possible extent, and at the same time all elements have been combined into a program which has been not only centrally directed but also dominated by a limited series of internally coherent objectives. While synchronization amongst the military branches is grounded in the works of Scharn- horst, von Moltke, von Schlieffen, von Hoffman and their compa- triots, the new synthesis is more boldly conceived, action is de- ployed on a far greater scale, and the services are coordinated on an infinitely more meticulous and finely detailed basis. Similarly, synchronization of the nonmilitary machinery traces back to such as von Treitschke, Bismarck, the elder Krupp, Stinnes, von Moellen-
? GERMAN INDUSTRY
dorf and Walther Rathenau. But, in order to be properly under- stood, the new synthesis must be compared simultaneously with the spiritual imperialism of the Catholic Church, the political imperial- ism of the Roman Empire, the psychoanalytic imperialism sug- gested by Le Bon, and the economic imperialism of the greatest of all British empire builders, Cecil Rhodes.
In a sense, the objectives of the Nazi program for a "new order in Europe" are self-evident. Clearly military and nonmilitary pro- grams are now but different facets of a dynamically expansionist imperial state which has effected a third line of coordination, that of domestic and foreign policy. And so, as a program for imperial coordination of European (and possibly both African and other) peoples on a continental basis, it represents a logical unfolding from earlier Germanic models for fusing the Germanics into a compact and militarily omnicompetent state. The Hohenstaufens, Frederick the Great, Friedrich List, Bismarck, the late Kaiser would all have understood the driving forces that lie behind the Hitlerian juggernaut.
Whether world domination be the eventual aim or not, there can now be no question that the Nazi conquerors are thinking of at least something like a modern European equivalent of the old Roman Empire. In this picture, a nucleus of compact, more or less "racially" and culturally homogeneous peoples stand at the center of an imperial system which is surrounded on every side by subject nations which, powerless to resist, may yet be simultaneously "en- slaved" and allowed some degree of "provincial" self-government.
On the outer fringes of these provincial areas, the expanding lines of conquest--always seeking but never finding "natural frontiers" --soon force division of the world into great competing, hostile, and continent-wide imperial systems. Within each such major sys- tem every effort will be made, step by step with the advance of con- quest, to weave the whole ever more closely together by construc- tion of the most modern transportation, communications, power, industrial, trade, and military networks. And the pattern of control fitted over "great-space economy" will necessarily be that of a mili-
tarized hierarchy of imperial command and subordination.
If so much may be predicted from analysis of past trends and present developments, what then becomes of the capitalistic sys-
22
? GERMAN INDUSTRY
tern? Will it disappear? Is it even now on its way out? Or is the transmutation of form and content one which is also in line with past developments in the structure, organization, functioning, and larger objectives of monopoly-oriented German business enter- prise?
GENESIS OF GERMAN IMPERIAL CAPITALISM
Taproots for all the immensely elaborated organizational net- works that characterize twentieth century Germany are found in Bismarck's imperial system. Under his capable hands, industrial capitalism underwent a sort of forced-draft growth within the con- fines of a modernized cameralism, in its turn greatly modified in many respects by important feudal carry-overs. The whole of the elaborate and amazingly efficient bureaucracy, inherited directly from the days of Frederick the Great and the systems of Kam- mern, was placed at the disposal of plans which visualized a swift catching-up and rapid overreaching of the industrial rivals of Im- perial Germany. To this end the recalcitrant landed aristocracy were bribed, beaten into line, or deliberately fused with favored industrial, shipping, and commercial circles, with the inevitable result that the stigmata of special privilege were transferred whole- sale to the new fields of upper class interest. And, on the other ex- treme the radicalized proletariat were numbed into submission by a combination of social security concessions--Bismarck's adaptation of Realpolitik to the "social question" which succeeded in robbing Lassalle of all independent initiative--and superpatriotic roman- ticism which appeared to gear labor's fortunes inescapably to those of the expanding state apparatus. ^
1 Within the Social Democratic theory, there existed a not unimportant social imperialist trend which was definitely anti-English; it was based on the belief that imperialist expansion would benefit the German worker and would act as a grave- digger of capitalism. This trend is represented by Lensch, Schippel, Cunow, and Parvus, and later by August Winnig. A fuller discussion of this matter is contained in Franz Neumann's Behemoth (194? ), pp. 210-15 (to this excellent study the pres- ent author owes much). Again it is interesting to note that much of Bismarck's social legislation was taken over in large part from the programs of the Social Catho- lics led by Baron von Ketteler--his bitterest opponents in his ill-fated Kulturkampf (the Nazis have succeeded here where Bismarck failed). This program led ultimately to the great papal encyclical on "The Condition of Labor" (Rerum Novarum) (1891) and indirectly to Quadragesimo Anno (1931). The Rerum Novarum launched a movement which contributed greatly to the success of Italian Fascism (see pp. 62-66, below), while the Quadragesimo Anno provided the direct inspiration for the cor-
2$
? 24
GERMAN INDUSTRY
Coming onto the industrial stage comparatively late,^ under such auspices, and with England as the principal rival,^ there was little tendency to comply with the tenets of competition or laissez faire. Some speculation on, followed by half-hearted experimenta- tion with, the advantages of the Manchestrian system had, of course, taken place. For a short period of time during the sixties and the seventies ideas imported from England seemed to be gaining ground. But this Blutezeit of laissez faire was brought to a close with the famous Bismarck tariff of 1879. Germany thus returned to more familiar ways. These ways--from the romanticism of an Adam Mueller and the rationalized protectionism of a Friedrich List--her theoreticians had assured Germany were fitting and proper in the face of economic conditions and in the perspectives of future need. *
All the important institutional seeds ^ of contemporary Ger-
porate state of the ill-starred Schuschnigg. A circular of the Federation of Austrian Industries (undated, but apparently of 1934) traces the new "vocational reorganiza- tion" to the "Constitution of May 1, 1934," which was based on Qiiadragesimo Anno and which "starts out with the inviolate right of private property, and then con- fronts individuality of property with the socialistic conception, that is, individual property in relationship to the welfare of the whole. "
2 Thorstein Veblen, in his Imperial Germany and the Industrial Revolution (New York, 1915), has attempted to show how great an advantage this late arrival was for the unrestricted taking over and full expansion of the techniques of mass production. See, in particular, pp. 174-210.
3 How very seriously this rivalry was taken by the British has been shown by
S. Hoffman, in his penetrating study. Great Britain and the German Trade Rivalry, iSy^-i^i^ (Philadelphia, 1933). The major themes of modern German im- perialism are the hatred of England and anti-Marxism. This dual hatred forged the various groups of the ruling cliques together for imperialist expansion. See Neu- mann, op. cit. , pp. 193-210.
4 Political parties and trade unions in the direct Marxian tradition were in the main satisfied to let combination take its course. They were convinced that the ulti- mates in such centralized control were the prelude to the socialist state of the future. Such was the idea underlying the Socialization Law of March 23, 1919, in which the Social Democratic government actually undertook to help along the process of capi- talist consolidation. See, in particular, Elisabeth Schalldach, Rationalisierungsmass- nahmen der Nachinflationszeit im Urteil der deutschen freien Gewerkschaften (Jena, 1930) and Fritz Tarnow, Warum arm sein? (Berlin, 1929).
5 (a) Autarkie: employing rationalized techniques in manipulation of protective tariff schedules, special shipping subsidies and expert bounties; promoting the idea of self-sufficiency in foodstuffs and industrial raw materials--"Buy German. " (b) The concept of Grossraumwirtschaft, coupled to Lebensraum, or that of a balanced im- perial system having complementary and adequate raw materials, industrial and finan- cial resources, population homogeneity in proper relation to "inferior" and "colonial" subject populations, and cultural unity. Neumann, op. cit. , pp. 171-83, has an ex- tended discussion of Lebensraum. (c) A social system of graded hierarchy and worth.
Ross
J.
? GERMAN INDUSTRY 25
many were sown in this final rejection of Manchester. And, amongst these, an almost completely free field was opened to every con- ceivable type of monopoly, quasi-monopoly, or monopoly- oriented device which did not clearly militate against the felt needs of the state. No important bars were placed against combinations in general or in any field. Not until 1923, with the passage of the famous law against "the abuse of economic power," ^ was any legis- lation placed on the statute books which could effectively check the more obvious abuses of collusive action on the part of the cartels. In the main, the state laid a premium on fusion, organiza- tion, compacts, agreements, communities of interest. If at any point the state stepped into the picture, it was primarily to protect one collusively organized section of the business world against the over- whelming power of another collusively organized section, or to act as an ally, a promoter, a guardian, or a partner of some particular type of central economic control apparatus. The result has been a proliferation of organizational activity without parallel in modern
times. A few data will illustrate the point and show how far con- centration of control had gone by the time the Nazis took over.
COMBINATIONS AND MONOPOLY GROUPINGS. ^
Coal
(a) Ten companies produced 68. 98 percent of total output and em-
ployed 67. 88 percent of all labor.
led by the cultural elite (Treitzchke, Nietszche, Houston Stewart Chamberlain) which is the predecessor to the idea of the Stdndestaat (see R. W. Darre, leader of the National Food Estate (Reichsndhrstand), Neuadel axis Blut und Boden (Munich, 1939) or Andreas Pfenning, "Das Eliten-Problem in seiner Bedeutung fiir den Kul- turbereich der Wirtschaft," Zeitschrift fiir die gesamte Staatswissenschaft (1939), Vol. 99, Part IV. (d) An internal "harmony" of all interests and classes, in which the concessions of Bismarck to the trade unions are as father to the conceptions which underlie the Nazi Labor Front, (e) An exclusion of influences, secular or ecclesiastical, which detract from such internal unity, in which Bismarck's Kulturkampf serves as prototype for persecutions of "alien" Jewish and Catholic influences, (f) The com- plementary external face to internal unity and harmony is "totalitarianism" in war and peace.
6 See the summary of the jurist, Rudolf Callman, Das deutsche Kartellrecht (Ber-
lin, 1934).
7 All data, unless otherside indicated, are given as of the last more or less "pros-
perous" year, 1929. Even such data serve only as indication of a general movement which it is next to impossible to summarize in simplified terms. As Levy has well said, "The industrial organisation represented by cartels and trusts can hardly be elucidated by statistics. " Hermann Levy, Industrial Germany, a Study of Its Monop- oly Organisations and Their Control by the State (Cambridge, England, 1935), p. 15.
?
26 GERMAN INDUSTRY
Three companies produced 37. 93 percent of total output, and
employed 37. 22 percent of all labor.
(b) Under law the coal industry was divided into ten producing dis-
tricts, each of which was governed by a special coal syndicate, and made subordinate to a national coal association and the federal coal council. ^
Steel and Iron
(a) Three concerns produced 68. 8 percent of all pig iron; one con-
cern produced 50 percent.
Four concerns produced 68. 3 percent of all crude steel; one con- cern produced 43 percent. ^
(b) One concern, the United Steel Works, held the following cartel quotas: pig iron, 38. 445; crude steel, 38. 298; "A"-Products, 40. 023; bar iron, 30. 724; band iron, inland and foreign, 38. 955; thick sheet, 39. 742; rolled wire, 29. 161; wire, 22. 224; pip^* 50-613.
Electro-technical (manufacture of electrical machinery and goods) 1. 9 percent of all firms employed 66. 1 percent of all persons. Two firms, AEG and Siemens-Halske-Siemens-Schuckert, completely
dominated both "heavy" and "light" current fields. Electric power
"Two-thirds of the current production and delivery of all Ger- man public electrical enterprises (concerns producing power for sale to third parties) are concentrated in the hands of seven con- cerns. " Two companies delivered over 40 percent of the total power consumed in 1929-30. 1?
Chemicals
One company, the vast I. G. Farbenindustrie A. G. , owned 35 per-
cent of all invested capital and employed over one-third of all employees. il
8 The second largest of these three companies was owned by the Prussian state. It produced 8. 15 percent of the total output, employed 6. 72 percent of the labor, and owned 17. 21 percent of the known coal reserves. The "forced cartels" or coal syndicates included three governing the lignite industry. Later a Gaskokssyndikat was organized and attached thereto. Under the law, private industry, modified only by the interest of the Prussian fiskus as owner and mine operator, regulated itself with a semblance of quasi-legal authority to enforce its decisions--the Social Demo- cratic version of what came subsequently to be known as the principle of "self- management" (Selbstverwaltung) in business.
9 This one concern, the Vereinigte Stahlwerke, was likewise a heavy producer of machinery, the largest producer of coal, the largest participant in Ruhrgas (largest long-distance gas supply system in Germany) and an extensive producer of power, chemicals, fertilizer, etc.
10 These two largest concerns were known as "mixed enterprises," being owned jointly by private interests, the Reich, various states, and local city and communal groups. Both of them, in turn, were tied in with coal, lignite, gas producing, and other groups.
11 These percentages greatly underestimate the relative importance of the I. G. at that time. Including partially or completely owned and controlled subsidiaries, its
GERMAN INDUSTRY
Potash
A closed syndicate ("forced cartel") governed the entire industry, as in coal. Four of the leading 9 concerns were organized in the Kalibleck, controlling about 77 percent of the industry's quotas. ^^
Shipping
Two companies, the Hamburg-Amerika and the North German
Lloyd, almost completely dominated all overseas shipping. ^^
Industrial cartels. --According to estimates made by different experts, there were four cartels in Germany in 1865. Thereafter occurred the following spectacular growth in numbers: 1875, 8;
1887, 70; i8go, 117; 1900, 300; 1911, 600; 1922, 1,000; 1925, 1,500; " 1930, 2,100. ^^ Data collected by the Cartel Bureau. of the National Federation of German Industry for the year 1926 listed 1,543 cartels to w^hich its various subsidiary special trade and in-
dustry groups belonged. They were distributed as follows: ^^
Milling
Iron making
Smelting and semi-manufac-
tures
Machine industry
Iron, steam boiler, and ap
15 optics 73 Metalware
Wood 17 Leather
147 Stone and earth Building industry
r
56
78
44 46 30 36 10 20 91 36
107 201
paratus
Railway car construction . . . 1
Motor vehicles and wheels . . Iron and steel ware
Electric manufacturers, fine
mechanical equipment and
48 Ceramics
Glass industries
8 Chemical industries 234 Oil and fats
Paper Textiles
relative size was pretty close to twice that of the figures given. It has since grown relative much more important in the whole structure of the Nazi economic system.
12 The balance was similarly organized. Control was so complete that prices, pro- duction, plant capacity, markets, conditions and terms of delivery, patents, etc. , could be and at times actually were controlled lock, stock, and barrel.
13 Before the Nazis came into power these two were fused in a community of interest which had become for all practical purposes as rigid as formal amalgamation. To the above figures might be added data on banking (where control was centralized in the four "D" banks), forwarding (particularly in Berlin and Hamburg), depart- ment and retail store trade (Karstadt's, Leonard Tietz, Wertheim), etc.
14 An official government estimate for 1925 placed the figure at 2,500, but it ap- pears to have included many nonindustrial cartels and similar organizations. See Wagenfiihr, Kartelle, p. xiii.
15 Idem. The estimate excludes "cartels and cartel-similar organizations in agri- culture, banking, exchanges, transportation, insurance and the free professions. "
16 Ibid. , p. xiv.
.
? 27
? 28 GERMAN INDUSTRY
Clothing
Brewing, malting, and mill-
71 Food and luxuries Shipping and forwarding .
.
49 4 1543
97 Total Sugar and foodstuffs 24
ing
According to an estimate of the German Business Cycle Institute all raw and semimanufactured goods produced within Germany and about half of all finished industrial goods were in 1938 bound by mo- nopoly or by cartel agreements. See Neumann, op. cit. , p. 291.
Trade associations, federations, and business coordinating groups. ^''--So numerous and so varied in details of organization and functions are the pre-Nazi trade and industrial associations that statistical summary is next to impossible. Some idea of the level of development may be had by reference to the membership rolls of the Central Committee of German Employers' Associa- tions. This body was made up of industrial, trade, and financial associations, organized on a national, regional, and local basis. Counting all these together, there were 2,272 associations within
14 central business associations,^^ in turn divided into 8 groups. ^^ Even this listing is incomplete, and the web of business organiza- tion not included under the Central Committee seems at some points to have been very extensive. -^
In any of these fields or in respect to any of this organiza- tional machinery it is equally impossible to summarize neatly (1) the limits of power within, amongst or between monopoly or semi-monopoly groupings, (2) the degree to which the various
17 It will help to clarify the following discussion if certain distinctions are kept in mind: (1) cartels, syndicates, and the like are organizations for the control of pro- duction and commodity markets; (2) employers' associations are organizations for control of the labor market; and (3) central federations of trade associations are politi- cal pressure groups (Standesverbdnde) or organizations for the control of public opin- ion and the government. A scheme of the various types of business organization in the Weimar Republic is found in Neumann, op. cit. , pp. 238, 239.
18 Respectively, the National Committee of German Agriculture, National Federa- tion of German Industry, Federation of German Employers' Associations, National Association of German Handicrafts, National Association of German Transportation, Employers' Association for the German Newspaper Industry, Hansa League for Trade, Commerce and Industry, Central Federation of German Retail Trade, Na- tional Association of German Wholesale and Overseas Trade, League of Wholesale Employers Associations, National Association of Bank Managements, Central As- sociation of German Bank and Banking Trades, National Association of Private In- surance, Employers' Association of German Insurance Enterprises.
19 Respectively, Agriculture, Industry, Handicrafts, Transportation, Miscellaneous, Commerce, Banking, and Insurance.
20 For a list of associations not affiliated directly or indirectly with the Central Committee, see Wagenfiihr, op. cit. , p. 1, footnote 1.
.
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trades and employers' associations were able to centralize and to enforce policy decisions, (3) the areas in which a large meas- ure of "free competition" was still to be found, or (4) the exact nature of governmental control, regulation, or participation, federal, state, or local. One is safe in concluding only that in general the centralizing trends were uniform, unbroken, mutually reinforcing, and additive. Cumulatively they promoted monopoly powers, centralized policy determination, and necessitated an inter- lacing of governmental and business authorities until by the ad- vent of the Nazis little more than systematization and streamlining were required for inauguration of the much heralded "corporative economy. "
The most important, by all odds, of these German business- coordinating, political pressure groups was the National Fed- eration of German Industry (Reichsverband der deutschen In- dustrie--RDI), to which the present National Industry Group is the Nazified successor. The National Federation of German In- dustry was, in its turn, a postwar fusion of two predecessor organiza- tions, the Central Association of German Industrialists, founded in 1879,-^ and the Industrial Alliance, dating from 1895. The his- tory of its origin and growth, from more or less haphazard first be- ginnings of the present all-inclusive and highly streamlined, in- dustrial policy-control network, shows a logical unfolding of the possibilities inherent in a large-scale industrial capitalism, when morganatically wedded to a powerful centralized state which is dominated by consciously expansionist imperial ambitions. Im- portant as is the history of the evolution of the National Industry
Group in and of itself, its larger significance is found in the fact that its historical antecedents were dominated by forces typical and symptomatic of this fusion in the whole of German national life.
EVOLUTION OF THE NATIONAL FEDERATION OF GERMAN INDUSTRY
The history of the two predecessor organizations is marked by partial conflict, absorbing at times the bulk of associational energy,
21 Handworterbuch der Staatswissenschaft (Jena, 1928), 4th ed. VIII, p. 502. This date checks likewise with data given out by the Reichsverband der deutschen In- dustrie. Wagenfiihr, however, fails in his extraordinarily comprehensive compendium to mention this date at all; I have been unable to account for the discrepancy.
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and by occasional cooperation. Though representing divergent interests at many points, their respective histories brought them into increasingly closer contact with one another. Preliminary at- tempts at partial or complete fusion before the First World War made but little headway. ^- The exigencies of war economy brought them formally together for the first time (1914) in the War Com- mittee of German Industry. In 1918 this gave way to the German Industrial Council, which was in turn superseded by the National Federation of German Industry.
The Central Association of German Industrialists represented the first enduring coagulation of any large block of industrial in- terests in Germany. Excepting only the short-lived Central Fed- eration of German Industrialists (Zentralverband deutschen In- dustrieller), organized in 1856, there had been prior to 1879, no grouping which could be said to represent any considerable block of raw materials and manufacturing interests per se. The Handels- tag, or Convention of Commerce, founded in 1862 as a central co- ordinating institution for some 160 Chambers of Commerce in Germany, was not set up so as to serve the specialized needs of any broad line of business activity. This the Central Association at- tempted to do.
Its origin is commonly attributed to concern over the protective tariff. By and large the association seemed to be in favor of rela- tively moderate tariff schedules, but at the same time was definitely opposed to any outright surrender to the Franco-British free trade system. 2^ This position was strengthened during the decade of the seventies by virtue of changed international positions following the Franco-Prussian War,^* and by the altered domestic situation
22 One effort which led to the Interessengemeinschaft der zentralen Industriellen- verbande (Community of Interests of the Central Industrial Associations), 1906-8, seems to have enjoyed little popularity.
23 More or less formally inaugurated with the Anglo-French Treaty of Commerce in i860. The Germans followed with tariff-lowering "most favored nation" treaties negotiated with Italy in 1863, Switzerland in 1864, Norway, the Hanse Towns, Spain and the Netherlands in 1865, Austria in 1866, Portugal in 1867. Following the Austro- Prussian War in 1866, the terms of the tariff agreement between the two countries were extended to all other countries with whom special agreements had already been made. The Bismarck tariff represented a complete reversal of this trend.
24 The phenomenal recovery of French industry following the War of 1870 and the payments of reparations to the Germans was paralleled by a correspondingly sharp setback, assuming almost catastrophic proportions within the course of the next three years, in Germany.
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resulting from the great world-wide depression of 1873 and the subsequent beginning of a long period of decline in world price levels.
How import-^nt a role was played by the Central Association in the inauguration of the new protective policies ushered in by the Bismarck tariff of 1879 is a matter of dispute. But at any rate, the Association's principal interest seems at the very outset to have centered primarily in various forms of protective tariff legislation. From tariffs the outlook seems quickly to have expanded to include legislation touching upon a steadily widening range of economic problems.
These activities quickly brought the Central Association into conflict with other interests, especially the chemical industry. It was accused of promoting the welfare of the heavy--apparently quite largely raw materials--industrial field to the disadvantage of the finished goods field. Despite emphatic denials to the contrary, the Central Association was soon faced with organization of rival interests in the form of the Central Bureau for the Preparation of Trade Agreements (Zentralstelle fiir Vorbereitung von Handels- vertragen), established with headquarters in Berlin in 1879. This association seems to have met with but indifferent success, and thus to have been superseded entirely in 1895 by the much more com- prehensive and better organized Industrial Alliance (Bund der
Industriellen).
The purpose of the Industrial Alliance appears to have been
twofold. On the one hand it was to represent the interests of the finishing goods industries, which had been more or less neglected, if not openly opposed, by the Central Association. On the other hand, it was apparently hoped that cooperative relationships could readily be established between the two organizations on behalf of common industrial interests. ^^ Some at least expected either that the Alliance would absorb the Central Association or that the two would at some time in the future be fused into a single body.
Whatever the founders' expectations, the Industrial Alliance,
25 "The Bund was organized in 1895 as the result of a demand for an organization representing the interests of manufacturers of finished products, and also 'because it seemed desirable to find a liberal and general basis for the joint representation of commerce and industry as a counterpoise to the Agricultural Alliance. '" American Industries (Feb. 15, 1903), p- 3-
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thanks to comprehensive membership basis,^(R) low dues, and vigor- ous leadership, quickly became the leading industrial organization in Germany. Dedicated to "protection of the common interests of German industry as well as cooperation in all questions affecting it," the Alliance proceeded to the formation of legislative pressure blocs and the promotion of a comprehensive member service supplemented by a general public relations propaganda cam- paign.
Though friction with the Central Association of German In- dustrialists rendered fruitless many attempts to achieve a "united front," the exigencies of war ultimately compelled what the efforts of peacetimes could not achieve. As indicated above, the first real united industrial front came with the establishment of the govern- mentally regulated war Committee of German Industry. Further experience with the German Industrial Council paved the way for eventual union, achieved immediately following the revolu- tionary interlude," in the establishment of the National Federa- tion of German Industry (Reichsverband der deutschen Industrie --RDI).
The new organization swiftly grew to a position of commanding importance in the organizational fabric of German industry. The Federation brought together "445 national, 58 regional, and 70 local associations, 1,363 individual members, and 70 Chambers of Industry and Commerce. " ^^ Via such memberships, cartel affilia- tions increased from some 300 around 1922 to more than 1,500 during the middle twenties. As organized in 1931, members of the Federation were divided into 19 divisions, subdivided into 32 func- tional groups (Fachgruppen), in turn made up of 889 national, re- gional, and local trade associations and chambers of commerce and industry. -^
Spectacular as the growth indicated by such figures may appear, they fail to give any clear idea of how comprehensive and all in-
26 Membership was open to the following: manufacturing concerns in any field, independent engineers and chemists, industrial associations, leagues and federations. A special category of "extraordinary members" need only have German residence.
27 During the revolutionary interlude a preliminary form of what under the Nazis became the Labor Front was evolved; this was known as the "Works Committee of Industrial Employers and Employees of Germany. "
28 Wagenfiihr, op. cit. , p. 2.
29 Jahrbuch der Berufsverbande im deutchen Reiche, pp. 46-48.
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elusive this organizational meshwork had beeome by the early thir- ties. A couple of illustrations will suffice. Group 10 of the Federa- tion of German Industry is designated Machine Building. It included the following organizations: ^?
Federation of German Machine Building Associations , Federation of German Machine Tool Manufacturers
German Cutting and Stamping Machinery Association Federation of German Wood-Working Machine Manufacturers Association of Textiles Machine Makers
Federation of German Agricultural Machine Industries German Locomotive Alliance
Federation of German Steam-Driven Machine Producers Federation of Pump and Pump-Machinery Makers Special Federation of Gauge and Auxiliary Machinery Federation of Elevator Makers
Association of German Railway Car Builders Paper-Making Machinery Federation
Association of German Printing Machinery Producers Brewery Machinery Association
Federation of German Milling Machinery Makers
Association of Crusher and Dressing Mill Machinery Producers Association of German Armature Industries
Federation of German Appliance Making Industries
(76 Additional Associations)
Largest and most important of these is the Federation of German Machine Building Associations (Verein der deutschen Maschinen- bau Anstalten--VDMA). Not only is it the largest, but it is in turn a central association of the machine-building industry which in- cludes the bulk of all firms producing machinery in Germany as well as most of the other associations in the machine-producing field such as those listed above. Founded in 1892 with 29 concerns employing 13,000 workers, by 1930 it included some 1,424 firms, employing 359,000 workers. If one adds to those, members of some 81 affiliatedspecialtradeassociations,theVDMAinthatyearrepre- sented 2,150 firms employing 450,000 workers, or around 80 per- cent of all producers of machinery in Germany. ^^
The VDMA in turn divided its members into 13 "functional or trade groups" (Fachverbande), each made up of one or more "spe-
^olbid. , p. 47.
31 Exclusive of repair shops and firms having less than 25 workers. Wagenfiihr, op. cit. , p. 113. /
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34
cial" or trade associations. The central office of the VDMA served in three distinct capacities. As organizer, it set as its task (i) "pro- motion of the organic federation of German industry in special associations of individual trades and groups of trades"; (2) the performance of a wide range of service functions on behalf of membership, a service ranging from such things as the supply of routine information and the setting of uniform cost-accounting methods to promotion of cartels and the exercise of political pres- sures; ^^ and (3), the working out of special agreements and liaison activities with other similarly organized industries. ^^
The special or trade groups joined to the VDMA were organized along lines similar to the parent or central association. Through this machinery there was created a vast, inclusive, and tremen- dously efficient apparatus for centralizing information relating to every facet of technical, commercial, and political questions of every member directly or indirectly associated with the VDMA. In many respects members were free to accept or reject any portion of the services or the advice given on most points where interests were joined. But the history of the organization likewise shows that to an increasing extent agreements were leading to legally enforce- able compacts (cartel agreements and intercartel compacts such as the Avi-Abkommen) at the same time that the roots of the network
32 According to Wagenfiihr, op. cit. , p. 1 15, the work of the central office is divided as follows: I. Special problems of economic science, cartel problems, publications, editorship of the economic sections of the journal, Maschinenbau; II. Trade agree- ments, Tariff relations with foreign markets and competitive conditions abroad; III. German import tariffs; a) general questions and raw materials duties, b) duties on machinery; IV. Raw materials supply for the machine industry; V. Problems of transportation; VI. Taxes, special imposts, the Young Plan; VII. Banking and credit problems, conditions of payment, questions of the internal market; VIII. Legal ques-
tions, delivery terms, protection of legal rights; IX: a) Exhibitions and fairs (Gen- eral Machine and Appliance Making in Leipzig), advertising, b) information on sources of customer demand, VDMA address book; X. Technical-economic questions (inclusive of information on work materials, accident prevention, standards, pro- fessional training; XI.