It is interesting in this
connection
to note that the proposal of Mr.
Brady - Business as a System of Power
^* This defect has been remedied by the establishment of the National Industrial Council, organized and controlled by the NAM, and designed to include in its membership all associations, national and local, which represent all the industrial enterprises of America.
Originally known as the National Council for Industrial De- fense, the National Industrial Council was founded in 1907 "as a
29 This total did "not include 215,814 hand trades; 127,419 establishments with a product of less than $500; 138 governmental establishments and 383 educational, eleemosynary and penal institutions. " Twentieth Century Fund, Big Business, Its Growth and Its Place (New York, 1937), p. 34.
30 2,707 in 1903; 4,000 in 1916; 4,500 in 1919; 6,000 in 1924. The most recent figure is given as 7,500. NAM brochure, "Women, Partners with Industry in the Economic and Social Advancement of the Nation. "
^^ American Industries, May, 1915, p. 22.
32 Ibid. , Nov. , 1925, p. 5. 33 See pp. 201-2.
84 In a prepared statement before the LaFollette Committee, Mr. Walter B. Weisen-
burger of the NAM estimated that members of the NAM "employ between one-third and one-half of all workers in manufacturing industry. " LaFollette Committee Re- ports, Part 18, pp. 7850-51.
199
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joint legislative committee of the National Association of Manu- facturers and the Citizens' Industrial Association of America. " ^^ Its membership is made up exclusively of associations, and its functions are controlled by the NAM through the devices of com- mon officers, common headquarters, common research staff, and through a largely cooptative--in effect, largely self-elected and self-perpetuating--executive committee. By 1913 its membership included 253 national, state, and local organizations. By 1920, this number had grown to 300. Subsequently the Council has shown relatively slight increase in number of member associations, but the coverage of these associations has been enormously ex- panded. ^(R)
In fact, one of the purposes in establishing the NIC was to pre- vent undue multiplication, duplication, and overlapping of em- ployer organizations. An NAM brochure of 1928 makes this clear. "While functioning as a national body, the leaders of the associa- tion realized the value of work on a decentralized basis and in- augurated campaigns for the organization of state manufacturers' associations. Their efforts were rewarded by the formation and development of many such organizations, and to coordinate their efforts, thus eliminating unnecessary duplication of effort, the National Industrial Council was organized by the Association. " ^^ This is a consistent following out of the original intentions of its founders, as is shown by the speech of President Van Cleave one year after the founding of the new body:
I called a meeting of representatives of a number of various organiza- tions here at the Waldorf-Astoria, and after several meetings we finally succeeded in getting a simple working-plan. We realized the undesira- bility of multiplied associations, and we finally adopted the plan that, working under the auspices of the National Association of Manufac- turers, we would ask of these various organizations, both national and state, and of the local boards of trade and associations of business men to authorize this council movement, which we designated the National Council for Industrial Defense, to authorize us to represent them. The
35 Clarence E. Bonnett, Employers' Associations in the United States (New York,
1922), p. 374.
36 In the statement of Mr. Weisenburger quoted in footnote 34, it is estimated that
through the NIC the NAM "comes in contact with an additional 40,000 manufac- urers. "
87 NAM, "The Nation's Industry Synchronized," p. 14.
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National Association of Manufacturers becomes primarily, but not fully the financial representative. ^(R)
Its purpose was and is to focus all manufacturing power, local and national, on behalf of mutual interests in general, but par- ticularly with respect to legislation bearing upon the labor ques- tion. This is shown both by its declared objectives as stated in its constitution, and by general commentary in the trade press of the times. Among the stated objectives the following are particularly significant:
To establish and maintain a legislative reference bureau for the com- pilation, analysis and distribution of accurate and timely information respecting legislation affecting industrial relations.
To advise its members with respect to legislation proposed or enacted, affecting their business relations with the various departments of the national government and with state governments when deemed ad- visable.
To preserve and promote the principles of individual freedom for employers and employees in commerce and industry. To emphasize the essential worth of these, and to defend them against legislation calcu- lated to impair or destroy them or the legal remedies by which they are efficiently protected. To appeal to public and legislative opinion re- specting these matters through every medium through which it can be legitimately and effectively informed.
Vigorously to oppose class legislation in whatever form it proposes to make it lawful for one class of citizens to do that which remains un- lawful for any other class to do. To encourage legislation tending to better the relations between employer and employee. ^^
In 1933 the NAM and in 1936 the NIC underwent general re- organization for the purpose of further centralizing control and tightening up the organizational structure. The changes brought about in the NAM, which we will discuss shortly, fall primarily under centralization of control--although a by-product of efforts along this line was to increase materially the badly impaired mem- bership ranks. *? The NIC, however, underwent a general over- hauling, which transformed it from a loose federation of mis-
38 NAM, Proceedings (1908), p. 295.
39 Constitution, National Council for Industrial Defense.
40 Members and noncontributing members had fallen, in 1933, to 1,469. Increase
thereafter was as follows: 1934, 1,910; 1935, 2490; 1936, 2,905; 1937, 3,008. In 1938 membership approached 4,000.
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cellaneous trades organizations and employers associations into a compact and efficiently functioning affiliate of the NAM.
Prior to 1936, the NIC had been, in the words of William Frew Long, head of the Associated Industries of Cleveland, composed "almost entirely of State associations, and those of us in local asso- ciations rather resented that fact. " *^ Furthermore, there had been thrown together under the old arrangement miscellaneous associa- tions, large and small, special-purpose trade associations and gen- eral employer associations, without any clear grouping by inter- ests, powers, or functions. This the reorganization was designed to correct, by setting up three distinct types of members. The first is made up of state industrial associations, some 35 ^^ in number in 1 940, which represent central coordinating associations similar on a state-wide basis to the NAM on a nation-wide basis. The second comprises industrial-employment-relations organizations, mostly on a city-wide basis, but including most of the central employers' associations in the leading manufacturing centers of America. There were 107 of these in 1940. The third group includes (1940) 92 national manufacturing associations, constituting the dominant large associations in both heavy and light manufacturing fields. There are also 14 "miscellaneous" association members.
To state the matter somewhat differently, the NIC is now made up of three functionally different types of associations whose mem- bership is overlapping in part and whose interests are interlaced in an almost infinitely complex pattern. Most of the large manu- facturing companies of America belong to the NAM in their cor- porate capacities. Most of them, likewise, are organized in manu- facturing trade associations such as the Iron and Steel Institute, the Cotton Textile Institute, the National Electric Manufacturers As- sociation, and the rest. Again, most of these concerns are located in or near large cities, and are members of employers' associations, such as the Associated Industries of Cleveland and the Industrial Association of San Francisco, primarily concerned with formulat-
ing and carrying through a common policy on all phases of labor relations. Finally, most of these manufacturers are to be found in the principal manufacturing states, and are members of state manu-
al Cited in La Follette Committee Reports, Part 6, No. 6, p. 61.
*2 From data given in a letter from Noel Sargent, Secretary of the NAM, dated Feb. 8, 1940.
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facturers' associations interested in formulating common policies on a state-wide or regional basis. In part, consequently, individual membership is fourfold.
This holds almost exclusively, however, for members of the NAM, who, with very few exceptions, are members of the other three types of associations brought together in the NIC. But as one goes from the national manufacturing associations, to the more specifically employers' associations, and down to the state industrial associations, the coverage spreads, and the degree of duplica- tion of membership declines. Under one or another form of repre- sentation, it seems probable that the NIC includes in its member- ship close to 80 percent of all manufacturing activity in the United States. The other 20 percent, with rare exceptions, is made up of small-scale and relatively unimportant concerns.
Thus the reorganization of the NIC has at once simplified, streamlined, and extended the reach of the NAM down through the entirety of the American industrial system. To employ the nam's own term, the association has taken the step from the "na- tion's industry organized," to the "nation's industry synchronized. "
Paralleling in part this elaborate policy-formulating meshwork is the National Industrial Conference Board. Originally estab- lished in 1916, as a by-product of experience in war-controls and war-time habits of "business cooperation," it was designed to serve a two-fold function. On the one hand it was to supply relevant information to the NAM and other sponsoring and member asso- ciations; on the other it was to provide the factual background for a convincing propaganda that has been adjusted, as it has evolved over the years, to meet all levels of intelligence and knowledge, and to affect professor, housewife, and day laborer.
It was, consequently, advertised as an "impartial, fact-finding body," whose object it would be to investigate all aspects of in- dustrial life, and through its analyses and publications "promote good understanding and friendly relations between employees and employers for the benefit of both, and between those engaged in industry and the public, for the general good of the community. " This was to be done in "cooperation with individuals, institutions, associations, and agencies of the Government," to the end that, by making its findings generally available to legislatures, scholars,
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labor and the general public, it might "encourage and promote the sound development of American industry by all proper and legiti- mate means. " *^
The NICB was a "war baby," and it participated actively in the promotions of coordination of the war effort. On the practical side, it assisted in, and by spokesman of the NAM has been given credit for, the formation of the War Labor Board. ** On the ide- ological front it promoted "unit thinking. " As Mr. L. W. O'Leary, President of the National Metal Trades Association expressed it in
1920, "The National Industrial Conference Board is of . . . great
value in that it is bringing about uniformity of thought and action
among employers, woefully lacking in the past. We are thinking
*^
together. "
The Board's research facilities are elaborate, expensive, and im-
pressive. Occupying sumptuous quarters on lower Park Avenue, New York City, it is equipped with a large research staff, extensive library facilities, and a vast corps of domestic and foreign cor- respondents, who enable it to turn out research findings on a mass production basis. To give even an outline of its functions and product would require an extensive monograph. *^
Its activities fall under three mains heads. Discussion, Research and Publication, and Service. The first includes four different types of special committee meetings: Private Meetings of the Con- ference Board (monthly). Advisory Committee Meetings (peri- odic), meetings of a Conference Board of Statisticians in Industry (monthly), and of the Conference of Corporate Statisticians (monthly). *^ Research and Publication include Books and Special Reports (comprising seven subdivisions). Periodical Publications
(four subdivisions), and Confidential Memoranda (including key information sent on request to members, and also regular circulars). Service includes a Reference Library, Publicity, and Correspond- ence. Foreign correspondents, executive officials strategically lo- cated in the leading industrial centers of the world, keep the
*3 Bonnett, Employers' Associations, p. 478.
4* Ibid. , p. 490. 45 Ibid. , p. 483.
46 A good general outline of the Conference Board's work, functions, and organiza-
tion is given in its 23d Annual Report, revised to Jan. 1, 1940.
47 Additional conferences are held from time to time by business economists, per-
sonnel executives, and foreign trade executives.
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Board in close and intimate contact with developments abroad. There is practically nothing the Board does not examine--local, national, or international--of interest to the economic, political, social and cultural interests of manufacturers' and allied associa- tions. ^^
Having such an elaborate apparatus for soaking up, sifting, dis- seminating the raw materials for "thinking together" at their beck and call, the NAM and its numerous affiliates are "able to voice a united opinion on vital national questions," and to back up the nam's claim that it "is the only organization exclusively repre- senting the interests of American industry," ^(R) on all policies of mutual interest.
Consistent with the view that its central function is to coor- dinate the thought and action of all American industry, the NAM has promoted the extension of business organization, thus further expanding its own powers, and has at the same time discouraged any other type of organization that might split or divide those powers. A few examples will suffice to show the issues at stake.
It has actively promoted employers' associations (trade, regional, and local), which have become affiliated with it through the Na- tional Industrial Council, and it has also aided in the formation of many general- and special-purpose organizations. An example of the former activity is the participation in the organization of the U. S. Chamber of Commerce in 1912, which was established to promote all American business objectives similar to those cham- pioned by the NAM for industry. An example of the latter is found in the ill-fated Trades and Workers' Association, organized around
igio by a Mr. Joseph W. Bryce, expatriate union leader, as an early effort to establish a nation-wide federation of company unions similar in membership and structure to the Labor Front of con- temporary Germany. ^^ This is illuminating not only for the anal-
48 The "affiliated Organizations" include the Air Corps, the Military Intelligence Division, and the Ordnance Dept. of the U. S. Army, and the Bureau of Ordnance and the Intelligence Division of the U. S. Navy.
49 NAM, Exhibit 3793, LaFoUette Committee Reports, Part 17, pp. 7528-37.
50 ". . . both employers and employees could become members of the Association. " Branches were to be established in various cities, organized by "mixed" or "one trade" lines . . . such as carpenters' branch, a bricklayers' branch, etc. , for each lo- cality where there were NAM members. Employers were to lead and conduct all activities. Strikes, lockouts and boycotts were to be prohibited. This type of company-
? 2o6 THE AMERICAN WAY
ogies current times offer, but also because it anticipated issues which were subsequently to engage the NAM in a fundamental organizational problem.
It was not until after the World War that the NAM shifted its general position from violent opposition to unions as such to an attempt to control labor organization by the establishment of company-controlled unions. With the inauguration of the "Open- Shop" drive, according to plans and policy lines laid out by such organizations as the National Metal Trades Association, the Spe- cial Conference Committee,^^ Industrial Relations Councilors,^^ and others, members of the NAM had to face the question of set- ting up central associations especially to handle labor problems separate from other matters of common concern.
This issue came to a head in 1933 with the proposal of A. C. Rees, manager of the Associated Industries of Utah and chairman of the American Plan-Open Shop Conference, to establish a "Coun- cil of American Industry" which would parallel the NAM and the NIC in part, but would also "interest . . . large groups such as bankers. Mining Congress, utilities, railroads, telephone compa- nies,shippinginterests,oil,etc. , . . . "notpreviouslybroughtinto the NAM controlled network. ^^ Presented in this form, the issue took on a double meaning. In the first place, Rees was proposing a functional separation of employer-employee problems from the main concern of the NAM and its affiliate system. And, in the sec- ond place, this proposal was to unite all employers throughout the nation in all fields of business, whether industry, commerce, or finance.
William Frew Long, manager of the Associated Industries of
dominated labor union corresponds to the Social Catholic concept of "mixed syndi- cates" (Chapter II). The comparable idea of "parallel" or "collateral syndicates" has been advanced a number of times in the United States. One of the most recent of such proposals was to establish "A National Independent Labor Organization in the Steel Industry" in the late thirties, a plan backed by the NAM. See LaFollette Com- mittee Reports, Part 17, p. 7451.
51 A secret committee of ten large American corporations, organized in 1919 under the apparent leadership of the Standard Oil of New Jersey, for the purpose of evolv- ing a common labor-relations program for American industry.
52 An organization established by the Rockefeller interests to promote the "welfare capitalism" ideas expressed in various speeches of John D. Rockefeller, Jr. , following "Bloody Ludlow," and elaborated in his book. The Personal Relation in Industry (New York, 1923).
53 LaFollette Committee Reports, No. 6, Part 6, pp. 58-59.
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Cleveland, succeeded in defeating the Rees plan on the first ground, but was faced with a curious difficulty in the second. If the NAM and its affiliated bodies were to expand their membership to in- clude these additional business interests, how could it remain the exclusive representative of the manufacturing interests of Amer- ica, as had always been its claim? And if it did not so expand, how could it defend its position as spokesman for the "business point of y'igw as a whole," which it likewise claimed to be?
From the available literature we cannot infer precisely what stand the NAM will take on this issue; Long's reply argued, how- ever, that the various affiliates of the NIC were established for just such purpose as Rees had in mind, and that they were sufficiently inclusive of various types of business interests to really speak for "the community as a whole" on local affairs. In support of this contention, an inspection of the available records, reveals mem- bership and connections which include practically every local in- terest in the various affiliated employers' associations (organized on a city-wide basis), and in many of the state industrial associa- tions. It does not apply, of course, to the third group made up of national, manufacturing trade associations.
The controversy settled one issue: there was to be no splitting up of the organization of industrial employers into functional groups such as obtains, for example, in England. Whether or not the NAM will attempt to expand its functions so as to represent all employers on a national basis, as its functional NIC affiliates do on a local basis, remains to be seen. ^*
Before leaving this description of the expansion of the NAM network, two other items should be mentioned. First, that its local and regional affiliates attempt to organize and attach to themselves the whole of their separate territories, just as the NAM attempts to do on a national basis. The state associations are particularly ef- fective to this end, and in some areas they appear to have succeeded
54 There is some evidence of willingness of the NAM to take in banking, financial, shipping, advertising, and similar interests.
It is interesting in this connection to note that the proposal of Mr. Almon E. Roth, President of the San Francisco Employers' Council, for "one-big-Union-of-Eraployers" and "industry-wide collective bargain- ing," presented before the Industrial Relations Section of the Annual Meeting of the Chamber of Commerce of the United States, May i, 1940 (mimeographed) inevita- bly leads to the industry-wide compacts which require that organized labor speaks for all labor as in the famous French "Matignon Agreement" (see pp. 139-45).
? 2o8 THE AMERICAN WAY
in making their associational dragnet almost loo percent com- plete. *^^
And second, that the NAM has to date shown little disposition to surrender any of its power and influence to any superior body similarly designed to coordinate the activities of industry, trade, finance, and other fields, on behalf of business interests as a whole. At one time, apparently, it hoped for something of this nature from the organization of the Chamber of Commerce of the United States. Serious difficulties arose, attested by the withdrawal of the NAM from the Chamber in the early twenties. More recently, amicable relations have been established; but the Chamber is still far from serving the various associations of associations as a cen- tral, policy-coordinating body, in the manner of the NAM and the American Bankers' Association in their respective fields.
CENTRALIZING AND STRENGTHENING THE STRANDS OF CONTROL WITHIN THE NAM
In estimating the degree of centralized power within the NAM to manipulate business policies, and the extent to which such poli- cies may in effect be implemented, it is necessary to call to the mind of the reader certain familiar facts. These may be detailed seriatim:
1 . With minor exceptions the NAM and its affiliates through the NIC are made up of corporations. Correlative with expansion of the nam's influence throughout the manufacturing community has gone the cumulative transformation of business enterprise from a simple ownership to a corporate footing. Including all forms of American economic activity, business and nonbusiness alike, it has been estimated that the corporate share in 1929 was approxi- mately 57 percent. ^^ It is doubtless higher today. The very fact that change has been made from the simple individual business enter- prise or partnership to the corporation represents in itself cen- tralization of policy-determining power within the ranks of owner- ship. All property rights represented by bonds " and nonvoting
65 See La Follette Committee Reports, Parts 20 and 21, for discussion of the or- ganization of the Associated Industries of Cleveland.
56 Twentieth Century Fund, Big Business, p. 16.
57 1 am ignoring the accounting distinction in this connection which excludes bonds from equity holdings. Suffice it to say that these constitute accumulated capital funds which are employed under this peculiar legal and accounting form, but are no less property, despite such identification.
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shares are ipso facto separated from any voice in management and the determination of policy.
2. Within voting-share ranks, power to participate in the deter- mination of policies is probably narrowed by as much again through the various devices analyzed in such studies as that of Berle and Means. ^^ The "property atom" is further split through blocked voting interests, through devices like the holding company, and through the special influence of various interests operating through interlocking directorates, special trust funds, and financial circles. The result is to divide corporate property holders, so that progres- sively fewer of them participate in the formation of policies, and to concentrate in extremely small inside groups the policy-forming control. ^^ The rest of the stockholders possessing voting rights fall into the same class as the nonvoting shareholders and bondholders, and go to make up a large and rapidly growing "rentier" (R)? class. The larger the corporation, typically, the more significant this shift.
3. The swift growth in the relative importance of the corporate form and in the further "splitting of the property atom" is paral- leled historically by continued extension of the combination move- ment noted at the beginning of this chapter. With the close of the World War, combination began on a new and higher scale than ever before. "During the ten years, 1919-1928, there were 1,268 combinations in manufacturing and mining," involving "the union of 4,135 separate concerns and the disappearance of 5,991"; and so on throughout practically every field of business enterprise. Dur- ing the same period, 3,744 public-utility companies disappeared through consolidations. *^ Chain stores, chain-department and mail- order systems, chain and branch banking, and similar types of enterprises expanded with unprecedented speed.
58 The Modern Corporation.
59 For some rather spectacular examples of the power of small inside groups simi- lar to those outlined by Berle and Means, in the hitherto quite unexplored field of life insurance, see the report of the TNEC Investigation of Concentration of Eco- nomic Power, Part 4, "Life Insurance. "
60 The term originated with the French government bond called the rente. The rentier class, made up of several million small bondholders who live largely by clip- ping coupons, and who, as bondholders, possess absolutely no rights over the source of their income, constitute a model which the holder of the American private cor- porate security is rapidly approaching. See p. 228.
61 Twentieth Century Fund, Big Business, p. 32.
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The results of this rather spectacular concentration of corporate
holdings have been pretty well publicized. Speaking before the
Temporary National Economic Committee, a representative of
Dun and Bradstreet cited a few of the better-known examples.
From various governmental sources he found that the output of
automobiles was dominated to the extent of 86 percent by three
companies; 47 percent of the beef products business by two com-
panies; 20 percent of the bread and other bakery produced by
three companies; 90 percent of the can output by three companies;
40 percent of cement by five; 80 percent of the cigarettes by three;
78 percent of the copper by four; 95 percent of the plate glass by
two; 64 percent of the iron ore by four; 60. 5 percent of the steel by
three; and so on. ^^ yj^^ National Resources Committee found that,
using three criteria of size, the hundred largest companies under
each respective heading "employed 20. 7 per cent of all the man-
power engaged in manufacturing, contributed 24. 7 per cent of all
the value added in manufacturing activity" and "accounted for
32. 4 per cent of the value of products reported by all manufactur-
(R)^
ing plants. "
4. The real significance of such concentration is found less in
the exercise of direct monopolistic powers ^* than in the position of leadership of these giant concerns in their respective fields. This leadership is applied in two principal ways. First, by such devices as "price leadership," "sharing the market," "price stabilization," "non-price competition," and the like; (R)^ these devices the smaller concerns are unable to oppose successfully, and must either "fol- low the leader" or face a variety of pressures which experience demonstrates they cannot possibly hope, in the normal course of affairs, to survive.
The second class of devices are those subsumed under the actions of the leading trade associations. As pointed out above, the effect of
62 TNEC Hearings, Investigation of Concentration of Economic Power, Testimony of Willard Thorp, Part I, p. 137.
63 National Resources Committee, The Structure of the American Economy, Part I (June, 1939), "Basic Characteristics," p. 102.
64 "Monopolies in the crude sense of single sellers of products for which there are no nearby substitutes are extremely rare. " A. R. Burns, The Decline of Competi- tion (New York, 1936).
65 For an elaborate, careful, and meticulously detailed discussion of these policies a reading of Burns, op. cit. , is indispensable.
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NRA was to transform a large number of the leading trade associa- tions into "cartels," possessing either de facto or de jure^^ powers along one or more lines similar to those of their European national and international prototypes. Many of the trade associations have advanced so far along this line as to approach in function the higher states of combined action which lead to the syndicates ^^ and com- munities of interest. ^^ Such leadership, possessing in many cases some degree of coercive power to compel conformity to policies laid down, is found more frequently in manufacturing fields than elsewhere. Hence the peculiar significance in this respect of the NAM, designed to serve as a policy coordinator for all industrial operations in America.
5. The leading concerns in the principal trade associations ap- pear simultaneously in the testimony of Thorp before the TNEC, in the investigations of Berle and Means and the National Re- sources Committee, and on the membership rolls of the NAM. Within the NAM this same small coterie of giant concerns are able to dominate, fairly completely, policies which affect to some ex- tent all fields and functions of American industry. In evidence of this fact, the La Follette Committee findings disclosed that while the NAM claimed approximately 4,000 corporate members for the year 1938, all of its directorships together, for the period 1933-
1937 inclusive, represented only 127 individuals from 89 firms. Adding to these figures some 118 additional concerns that con- tributed $2,000 or more in at least one of the five years, we obtain some 207 companies which "comprise approximately 5 per cent of the total estimated membership" and "whose contributions total $572,711 or 48. 9 per cent of the total. It would . . . appear . . . from this analysis," said Mr. Robert Wohlforth, testifying before the Committee, "that about 207 companies, or approximately five
66 De jure powers exist through the efforts of the lobby which succeeds in placing onto the statute books--federal, state, or local--laws under which recalcitrants may readily be forced into line. An example is the Robinson-Patman Act. The same holds true for most of the other federal and state "fair-trade practices" legislation.
67 "Syndicates" are central selling agencies for cartels. Close American equivalent is the now widespread practice of central allocation of all sales through manipulation of bidding schedules.
68 "Communities of interest" involve working arrangements so close as to consti- tute monopoly action. In Europe this is commonly regarded as an equivalent, and an immediate predecessor, to complete monopoly through formal combination.
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per cent of the National Association of Manufacturers, are in a posi- tion to formulate the policies of the association. " (R)(R)
6. This small minority represents very largely giant concerns, as can be seen from a perusal of the lists of the boards of directors for different years, of the affiliations of the leading committee members, and of financial contributions. ^^ Even within this small minority the machinery of organization provides for a still higher degree of centralized power. All policies are determined by the Board of Directors, elected by member bodies, but only after can- didates are sifted through a nominating committee, which is, in turn, appointed by the president and approved of by the existing Board of Directors. Of the 66 members of the Board of Directors, nine are direct presidential appointees. The direction of the NAM is in the hands, consequently, of a group who are able to act in effect as a cooptative body, to perpetuate their influence indefinitely with the passage of time, and so to compel consistency of policy with a view to long-run interests.
7. The NAM in turn dominates the National Industrial Coun- cil. It is enabled cumulatively to strengthen its power to influence NIC membership, because of three cardinal facts. First, the asso- ciations belonging to the NIC are typically organized along lines similar to those outlined for the NAM. As indicated above, such organizations (a) permit a high degree of centralization in organiza- tional control, (b) allow such centralized control to perpetuate it- self cooptatively over time, and (c) provide a milieu in which the large concerns readily and typically rise to positions of command- ing importance. Second, the leading firms in the associations af- filiated with the NAM via the NIC are, with rare exceptions, mem- bers of the corporative "elite" who belong to the NAM. Thus
6>>LaFollette Committee Reports, Part 17, pp. 7385-87. Also Exhibit 3799, p. 7540. "Among the corporations that have retained directorships for 5 years are the Ameri- can Rolling Mill Co. , of Middletown, Ohio; the General Mills, Inc. , of Minneapolis, Minn. ; the International Business Machines Co. , of New York; the Lambert Pharma- cal Co. , of St. Louis, Mo. ; The Standard Oil Co. , of Ohio; and the Eastman Kodak Co. , of Rochester, New York. " Among those which have had the same directors for four and three years continuously are to be found additional large-scale corporations.
70 Among these for the five-year period are E. I. Dupont de Nemours and Co. , |i16,800; Standard Oil, $76,800; General Motors, $65,295; National Steel Corp. , $42,050; Westinghouse Electric, $39,927. 50; United States Steel, $37,500; Monsanto Chemical Co. , of St. Louis, $36,775. Other contributors were the American Cyanamid Co. , Chrysler Co. , American Smelting and Refining, General Foods, Heinz, Pittsburgh Plate Glass.
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instrumentation of NAM policies is facilitated through the central controls of the several associations indirectly subsidiary to it. And third, the NIC itself functions through an hierarchical series of policy controls which lead from the bottom to the top, through what are known as "pyramided conferences": Local and trade con- ferences lead to state and regional conferences and to industry conferences, and from thence on through to the national confer- ences held in conjunction with the officialdom of the NAM. These ''pyramided conferences" do not constitute an expression of demo- cratic sentiment within the business community; on the contrary, inspection of available records show that they provide means for (a) gaining information concerning movements, sentiments, and interests in the industrial world in order the better to (b) manipu- late the "climate of opinion" and instrument policies emanating from on top.
8. By avoiding dual-functional organization throughout the complex machinery of the NAM and its affiliates, policies have been more highly centralized than they would otherwise have been. The group that directs business and political policies for the in- dustrialists of America also manages social and labor problems.
9. The importance of these two points is heavily underlined when it is recalled that the history of the NAM has shown that, except for certain short intervals, its overshadowing interest has been in labor relations. A common interest in opposing organized labor has served to hold the membership together, to dominate the motives in organizing and perfecting the machinery of the NIC, and to provide a never-failing bond of opposition to liberal-social legislation of the New Deal variety.
It appears to be likewise true that the position taken by the NAM and its affiliates on labor matters has been formulated by an ex- tremely small number of "inside firms" amongst the "insiders" who appear increasingly to dominate its policies. The Special Con- ference Committee, mentioned above, was organized in 1919 by ten giant concerns; ^^ it has held monthly meetings since that
71 The original corporations "cooperating" in this endeavor are Bethlehem Steel Co. , E. I. DuPont de Nemours and Co. , General Electric Co. , General Motors Corp. , Goodyear Tire and Rubber, International Harvester Co. , Irving Trust Co. , Standard Oil Co. (of New Jersey), United States Rubber Co. , Westinghouse Mfg. Co. Subse- quently two other concerns, the American Telephone and Telegraph Co. (1925) and
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time ^^ for the purpose of formulating common labor-relations pro- grams for all American industry, and has led in systematizing the promotion of policies consistently pursued by the NAM since its formation.
Not only are most of the member corporations of the Special Conference Committee at once members of the inner controlling group of the NAM and the leaders among American industrial giants in their respective fields,/^^ but also they represent a secret coalition in direct furtherance of the specific forms of company union fathered by the Colorado Fuel and Iron Company. Since its inception, the Committee has met at the offices of the Standard Oil of New Jersey, central unit of the gigantic Rockefeller oil, mining, banking, real-estate empire. "Two members of the staff of Industrial Relations Counselors, Inc. , a firm which specializes in advising corporations on problems of industrial relations, have served individually as members of the committee. " ^* From its
the United States Steel Corp. (1934) were added. LaFollette Committee Reports, Part 45, p. 16783.
72 Monthly meetings of personnel executives; semiannual meetings of corporate executives.
73 The Irving Trust Co. alone is not a member of the NAM. "The Committee con- sidered the desirability of enlarging its membership through the inclusion of repre- sentatives from corporations in additional industries. However, investigation led to the decision that this would be inadvisable because other corporations which were outstanding leaders in their respective industries in the same degree as the sponsors of the Special Conference Committee could not be found. Omitting the Irving Trust Co. , in 1937 the corporations represented on the Special Conference Committee em- ployed more than 1,300,000 persons and paid total wages and salaries of more than $2,400,000,000. At the end of 1937 these 11 corporations claimed total assets in excess of $13,500,000,000. The American Telephone and Telegraph Co, has almost a com- plete national coverage in the public utility field which it serves. The United States Steel Corp. and the Bethlehem Steel Co. rank first and second, respectively, in the steel industry--with Bethlehem, through its subsidiaries, also ranking first in ship- building. E. I. DiiPont de Nemours and Co. is easily first in chemicals, and the General Motors Corporation maintains an approximately, similar position in the motor car industry. The Goodyear Tire and Rubber Co. and the United States Rubber Co. rank first and second, respectively, in their industry. The International
Harvester Co. is the outstanding manufacturer of farm equipment. The Standard Oil Co, of New Jersey is not only the largest of the Standard Companies; it is also regarded as the largest oil company in the world. The General Electric Co. is the largest producer of electrical equipment, while the Westinghouse Electric and Manufacturing Co. is next in rank . . . the United States Steel . . . through its subsidiaries is the largest producer of coal in the country and also largest producers of iron ore in the United States. " La Follette Committee Reports, Part 45, pp.
Originally known as the National Council for Industrial De- fense, the National Industrial Council was founded in 1907 "as a
29 This total did "not include 215,814 hand trades; 127,419 establishments with a product of less than $500; 138 governmental establishments and 383 educational, eleemosynary and penal institutions. " Twentieth Century Fund, Big Business, Its Growth and Its Place (New York, 1937), p. 34.
30 2,707 in 1903; 4,000 in 1916; 4,500 in 1919; 6,000 in 1924. The most recent figure is given as 7,500. NAM brochure, "Women, Partners with Industry in the Economic and Social Advancement of the Nation. "
^^ American Industries, May, 1915, p. 22.
32 Ibid. , Nov. , 1925, p. 5. 33 See pp. 201-2.
84 In a prepared statement before the LaFollette Committee, Mr. Walter B. Weisen-
burger of the NAM estimated that members of the NAM "employ between one-third and one-half of all workers in manufacturing industry. " LaFollette Committee Re- ports, Part 18, pp. 7850-51.
199
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joint legislative committee of the National Association of Manu- facturers and the Citizens' Industrial Association of America. " ^^ Its membership is made up exclusively of associations, and its functions are controlled by the NAM through the devices of com- mon officers, common headquarters, common research staff, and through a largely cooptative--in effect, largely self-elected and self-perpetuating--executive committee. By 1913 its membership included 253 national, state, and local organizations. By 1920, this number had grown to 300. Subsequently the Council has shown relatively slight increase in number of member associations, but the coverage of these associations has been enormously ex- panded. ^(R)
In fact, one of the purposes in establishing the NIC was to pre- vent undue multiplication, duplication, and overlapping of em- ployer organizations. An NAM brochure of 1928 makes this clear. "While functioning as a national body, the leaders of the associa- tion realized the value of work on a decentralized basis and in- augurated campaigns for the organization of state manufacturers' associations. Their efforts were rewarded by the formation and development of many such organizations, and to coordinate their efforts, thus eliminating unnecessary duplication of effort, the National Industrial Council was organized by the Association. " ^^ This is a consistent following out of the original intentions of its founders, as is shown by the speech of President Van Cleave one year after the founding of the new body:
I called a meeting of representatives of a number of various organiza- tions here at the Waldorf-Astoria, and after several meetings we finally succeeded in getting a simple working-plan. We realized the undesira- bility of multiplied associations, and we finally adopted the plan that, working under the auspices of the National Association of Manufac- turers, we would ask of these various organizations, both national and state, and of the local boards of trade and associations of business men to authorize this council movement, which we designated the National Council for Industrial Defense, to authorize us to represent them. The
35 Clarence E. Bonnett, Employers' Associations in the United States (New York,
1922), p. 374.
36 In the statement of Mr. Weisenburger quoted in footnote 34, it is estimated that
through the NIC the NAM "comes in contact with an additional 40,000 manufac- urers. "
87 NAM, "The Nation's Industry Synchronized," p. 14.
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National Association of Manufacturers becomes primarily, but not fully the financial representative. ^(R)
Its purpose was and is to focus all manufacturing power, local and national, on behalf of mutual interests in general, but par- ticularly with respect to legislation bearing upon the labor ques- tion. This is shown both by its declared objectives as stated in its constitution, and by general commentary in the trade press of the times. Among the stated objectives the following are particularly significant:
To establish and maintain a legislative reference bureau for the com- pilation, analysis and distribution of accurate and timely information respecting legislation affecting industrial relations.
To advise its members with respect to legislation proposed or enacted, affecting their business relations with the various departments of the national government and with state governments when deemed ad- visable.
To preserve and promote the principles of individual freedom for employers and employees in commerce and industry. To emphasize the essential worth of these, and to defend them against legislation calcu- lated to impair or destroy them or the legal remedies by which they are efficiently protected. To appeal to public and legislative opinion re- specting these matters through every medium through which it can be legitimately and effectively informed.
Vigorously to oppose class legislation in whatever form it proposes to make it lawful for one class of citizens to do that which remains un- lawful for any other class to do. To encourage legislation tending to better the relations between employer and employee. ^^
In 1933 the NAM and in 1936 the NIC underwent general re- organization for the purpose of further centralizing control and tightening up the organizational structure. The changes brought about in the NAM, which we will discuss shortly, fall primarily under centralization of control--although a by-product of efforts along this line was to increase materially the badly impaired mem- bership ranks. *? The NIC, however, underwent a general over- hauling, which transformed it from a loose federation of mis-
38 NAM, Proceedings (1908), p. 295.
39 Constitution, National Council for Industrial Defense.
40 Members and noncontributing members had fallen, in 1933, to 1,469. Increase
thereafter was as follows: 1934, 1,910; 1935, 2490; 1936, 2,905; 1937, 3,008. In 1938 membership approached 4,000.
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cellaneous trades organizations and employers associations into a compact and efficiently functioning affiliate of the NAM.
Prior to 1936, the NIC had been, in the words of William Frew Long, head of the Associated Industries of Cleveland, composed "almost entirely of State associations, and those of us in local asso- ciations rather resented that fact. " *^ Furthermore, there had been thrown together under the old arrangement miscellaneous associa- tions, large and small, special-purpose trade associations and gen- eral employer associations, without any clear grouping by inter- ests, powers, or functions. This the reorganization was designed to correct, by setting up three distinct types of members. The first is made up of state industrial associations, some 35 ^^ in number in 1 940, which represent central coordinating associations similar on a state-wide basis to the NAM on a nation-wide basis. The second comprises industrial-employment-relations organizations, mostly on a city-wide basis, but including most of the central employers' associations in the leading manufacturing centers of America. There were 107 of these in 1940. The third group includes (1940) 92 national manufacturing associations, constituting the dominant large associations in both heavy and light manufacturing fields. There are also 14 "miscellaneous" association members.
To state the matter somewhat differently, the NIC is now made up of three functionally different types of associations whose mem- bership is overlapping in part and whose interests are interlaced in an almost infinitely complex pattern. Most of the large manu- facturing companies of America belong to the NAM in their cor- porate capacities. Most of them, likewise, are organized in manu- facturing trade associations such as the Iron and Steel Institute, the Cotton Textile Institute, the National Electric Manufacturers As- sociation, and the rest. Again, most of these concerns are located in or near large cities, and are members of employers' associations, such as the Associated Industries of Cleveland and the Industrial Association of San Francisco, primarily concerned with formulat-
ing and carrying through a common policy on all phases of labor relations. Finally, most of these manufacturers are to be found in the principal manufacturing states, and are members of state manu-
al Cited in La Follette Committee Reports, Part 6, No. 6, p. 61.
*2 From data given in a letter from Noel Sargent, Secretary of the NAM, dated Feb. 8, 1940.
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facturers' associations interested in formulating common policies on a state-wide or regional basis. In part, consequently, individual membership is fourfold.
This holds almost exclusively, however, for members of the NAM, who, with very few exceptions, are members of the other three types of associations brought together in the NIC. But as one goes from the national manufacturing associations, to the more specifically employers' associations, and down to the state industrial associations, the coverage spreads, and the degree of duplica- tion of membership declines. Under one or another form of repre- sentation, it seems probable that the NIC includes in its member- ship close to 80 percent of all manufacturing activity in the United States. The other 20 percent, with rare exceptions, is made up of small-scale and relatively unimportant concerns.
Thus the reorganization of the NIC has at once simplified, streamlined, and extended the reach of the NAM down through the entirety of the American industrial system. To employ the nam's own term, the association has taken the step from the "na- tion's industry organized," to the "nation's industry synchronized. "
Paralleling in part this elaborate policy-formulating meshwork is the National Industrial Conference Board. Originally estab- lished in 1916, as a by-product of experience in war-controls and war-time habits of "business cooperation," it was designed to serve a two-fold function. On the one hand it was to supply relevant information to the NAM and other sponsoring and member asso- ciations; on the other it was to provide the factual background for a convincing propaganda that has been adjusted, as it has evolved over the years, to meet all levels of intelligence and knowledge, and to affect professor, housewife, and day laborer.
It was, consequently, advertised as an "impartial, fact-finding body," whose object it would be to investigate all aspects of in- dustrial life, and through its analyses and publications "promote good understanding and friendly relations between employees and employers for the benefit of both, and between those engaged in industry and the public, for the general good of the community. " This was to be done in "cooperation with individuals, institutions, associations, and agencies of the Government," to the end that, by making its findings generally available to legislatures, scholars,
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labor and the general public, it might "encourage and promote the sound development of American industry by all proper and legiti- mate means. " *^
The NICB was a "war baby," and it participated actively in the promotions of coordination of the war effort. On the practical side, it assisted in, and by spokesman of the NAM has been given credit for, the formation of the War Labor Board. ** On the ide- ological front it promoted "unit thinking. " As Mr. L. W. O'Leary, President of the National Metal Trades Association expressed it in
1920, "The National Industrial Conference Board is of . . . great
value in that it is bringing about uniformity of thought and action
among employers, woefully lacking in the past. We are thinking
*^
together. "
The Board's research facilities are elaborate, expensive, and im-
pressive. Occupying sumptuous quarters on lower Park Avenue, New York City, it is equipped with a large research staff, extensive library facilities, and a vast corps of domestic and foreign cor- respondents, who enable it to turn out research findings on a mass production basis. To give even an outline of its functions and product would require an extensive monograph. *^
Its activities fall under three mains heads. Discussion, Research and Publication, and Service. The first includes four different types of special committee meetings: Private Meetings of the Con- ference Board (monthly). Advisory Committee Meetings (peri- odic), meetings of a Conference Board of Statisticians in Industry (monthly), and of the Conference of Corporate Statisticians (monthly). *^ Research and Publication include Books and Special Reports (comprising seven subdivisions). Periodical Publications
(four subdivisions), and Confidential Memoranda (including key information sent on request to members, and also regular circulars). Service includes a Reference Library, Publicity, and Correspond- ence. Foreign correspondents, executive officials strategically lo- cated in the leading industrial centers of the world, keep the
*3 Bonnett, Employers' Associations, p. 478.
4* Ibid. , p. 490. 45 Ibid. , p. 483.
46 A good general outline of the Conference Board's work, functions, and organiza-
tion is given in its 23d Annual Report, revised to Jan. 1, 1940.
47 Additional conferences are held from time to time by business economists, per-
sonnel executives, and foreign trade executives.
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Board in close and intimate contact with developments abroad. There is practically nothing the Board does not examine--local, national, or international--of interest to the economic, political, social and cultural interests of manufacturers' and allied associa- tions. ^^
Having such an elaborate apparatus for soaking up, sifting, dis- seminating the raw materials for "thinking together" at their beck and call, the NAM and its numerous affiliates are "able to voice a united opinion on vital national questions," and to back up the nam's claim that it "is the only organization exclusively repre- senting the interests of American industry," ^(R) on all policies of mutual interest.
Consistent with the view that its central function is to coor- dinate the thought and action of all American industry, the NAM has promoted the extension of business organization, thus further expanding its own powers, and has at the same time discouraged any other type of organization that might split or divide those powers. A few examples will suffice to show the issues at stake.
It has actively promoted employers' associations (trade, regional, and local), which have become affiliated with it through the Na- tional Industrial Council, and it has also aided in the formation of many general- and special-purpose organizations. An example of the former activity is the participation in the organization of the U. S. Chamber of Commerce in 1912, which was established to promote all American business objectives similar to those cham- pioned by the NAM for industry. An example of the latter is found in the ill-fated Trades and Workers' Association, organized around
igio by a Mr. Joseph W. Bryce, expatriate union leader, as an early effort to establish a nation-wide federation of company unions similar in membership and structure to the Labor Front of con- temporary Germany. ^^ This is illuminating not only for the anal-
48 The "affiliated Organizations" include the Air Corps, the Military Intelligence Division, and the Ordnance Dept. of the U. S. Army, and the Bureau of Ordnance and the Intelligence Division of the U. S. Navy.
49 NAM, Exhibit 3793, LaFoUette Committee Reports, Part 17, pp. 7528-37.
50 ". . . both employers and employees could become members of the Association. " Branches were to be established in various cities, organized by "mixed" or "one trade" lines . . . such as carpenters' branch, a bricklayers' branch, etc. , for each lo- cality where there were NAM members. Employers were to lead and conduct all activities. Strikes, lockouts and boycotts were to be prohibited. This type of company-
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ogies current times offer, but also because it anticipated issues which were subsequently to engage the NAM in a fundamental organizational problem.
It was not until after the World War that the NAM shifted its general position from violent opposition to unions as such to an attempt to control labor organization by the establishment of company-controlled unions. With the inauguration of the "Open- Shop" drive, according to plans and policy lines laid out by such organizations as the National Metal Trades Association, the Spe- cial Conference Committee,^^ Industrial Relations Councilors,^^ and others, members of the NAM had to face the question of set- ting up central associations especially to handle labor problems separate from other matters of common concern.
This issue came to a head in 1933 with the proposal of A. C. Rees, manager of the Associated Industries of Utah and chairman of the American Plan-Open Shop Conference, to establish a "Coun- cil of American Industry" which would parallel the NAM and the NIC in part, but would also "interest . . . large groups such as bankers. Mining Congress, utilities, railroads, telephone compa- nies,shippinginterests,oil,etc. , . . . "notpreviouslybroughtinto the NAM controlled network. ^^ Presented in this form, the issue took on a double meaning. In the first place, Rees was proposing a functional separation of employer-employee problems from the main concern of the NAM and its affiliate system. And, in the sec- ond place, this proposal was to unite all employers throughout the nation in all fields of business, whether industry, commerce, or finance.
William Frew Long, manager of the Associated Industries of
dominated labor union corresponds to the Social Catholic concept of "mixed syndi- cates" (Chapter II). The comparable idea of "parallel" or "collateral syndicates" has been advanced a number of times in the United States. One of the most recent of such proposals was to establish "A National Independent Labor Organization in the Steel Industry" in the late thirties, a plan backed by the NAM. See LaFollette Com- mittee Reports, Part 17, p. 7451.
51 A secret committee of ten large American corporations, organized in 1919 under the apparent leadership of the Standard Oil of New Jersey, for the purpose of evolv- ing a common labor-relations program for American industry.
52 An organization established by the Rockefeller interests to promote the "welfare capitalism" ideas expressed in various speeches of John D. Rockefeller, Jr. , following "Bloody Ludlow," and elaborated in his book. The Personal Relation in Industry (New York, 1923).
53 LaFollette Committee Reports, No. 6, Part 6, pp. 58-59.
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Cleveland, succeeded in defeating the Rees plan on the first ground, but was faced with a curious difficulty in the second. If the NAM and its affiliated bodies were to expand their membership to in- clude these additional business interests, how could it remain the exclusive representative of the manufacturing interests of Amer- ica, as had always been its claim? And if it did not so expand, how could it defend its position as spokesman for the "business point of y'igw as a whole," which it likewise claimed to be?
From the available literature we cannot infer precisely what stand the NAM will take on this issue; Long's reply argued, how- ever, that the various affiliates of the NIC were established for just such purpose as Rees had in mind, and that they were sufficiently inclusive of various types of business interests to really speak for "the community as a whole" on local affairs. In support of this contention, an inspection of the available records, reveals mem- bership and connections which include practically every local in- terest in the various affiliated employers' associations (organized on a city-wide basis), and in many of the state industrial associa- tions. It does not apply, of course, to the third group made up of national, manufacturing trade associations.
The controversy settled one issue: there was to be no splitting up of the organization of industrial employers into functional groups such as obtains, for example, in England. Whether or not the NAM will attempt to expand its functions so as to represent all employers on a national basis, as its functional NIC affiliates do on a local basis, remains to be seen. ^*
Before leaving this description of the expansion of the NAM network, two other items should be mentioned. First, that its local and regional affiliates attempt to organize and attach to themselves the whole of their separate territories, just as the NAM attempts to do on a national basis. The state associations are particularly ef- fective to this end, and in some areas they appear to have succeeded
54 There is some evidence of willingness of the NAM to take in banking, financial, shipping, advertising, and similar interests.
It is interesting in this connection to note that the proposal of Mr. Almon E. Roth, President of the San Francisco Employers' Council, for "one-big-Union-of-Eraployers" and "industry-wide collective bargain- ing," presented before the Industrial Relations Section of the Annual Meeting of the Chamber of Commerce of the United States, May i, 1940 (mimeographed) inevita- bly leads to the industry-wide compacts which require that organized labor speaks for all labor as in the famous French "Matignon Agreement" (see pp. 139-45).
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in making their associational dragnet almost loo percent com- plete. *^^
And second, that the NAM has to date shown little disposition to surrender any of its power and influence to any superior body similarly designed to coordinate the activities of industry, trade, finance, and other fields, on behalf of business interests as a whole. At one time, apparently, it hoped for something of this nature from the organization of the Chamber of Commerce of the United States. Serious difficulties arose, attested by the withdrawal of the NAM from the Chamber in the early twenties. More recently, amicable relations have been established; but the Chamber is still far from serving the various associations of associations as a cen- tral, policy-coordinating body, in the manner of the NAM and the American Bankers' Association in their respective fields.
CENTRALIZING AND STRENGTHENING THE STRANDS OF CONTROL WITHIN THE NAM
In estimating the degree of centralized power within the NAM to manipulate business policies, and the extent to which such poli- cies may in effect be implemented, it is necessary to call to the mind of the reader certain familiar facts. These may be detailed seriatim:
1 . With minor exceptions the NAM and its affiliates through the NIC are made up of corporations. Correlative with expansion of the nam's influence throughout the manufacturing community has gone the cumulative transformation of business enterprise from a simple ownership to a corporate footing. Including all forms of American economic activity, business and nonbusiness alike, it has been estimated that the corporate share in 1929 was approxi- mately 57 percent. ^^ It is doubtless higher today. The very fact that change has been made from the simple individual business enter- prise or partnership to the corporation represents in itself cen- tralization of policy-determining power within the ranks of owner- ship. All property rights represented by bonds " and nonvoting
65 See La Follette Committee Reports, Parts 20 and 21, for discussion of the or- ganization of the Associated Industries of Cleveland.
56 Twentieth Century Fund, Big Business, p. 16.
57 1 am ignoring the accounting distinction in this connection which excludes bonds from equity holdings. Suffice it to say that these constitute accumulated capital funds which are employed under this peculiar legal and accounting form, but are no less property, despite such identification.
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shares are ipso facto separated from any voice in management and the determination of policy.
2. Within voting-share ranks, power to participate in the deter- mination of policies is probably narrowed by as much again through the various devices analyzed in such studies as that of Berle and Means. ^^ The "property atom" is further split through blocked voting interests, through devices like the holding company, and through the special influence of various interests operating through interlocking directorates, special trust funds, and financial circles. The result is to divide corporate property holders, so that progres- sively fewer of them participate in the formation of policies, and to concentrate in extremely small inside groups the policy-forming control. ^^ The rest of the stockholders possessing voting rights fall into the same class as the nonvoting shareholders and bondholders, and go to make up a large and rapidly growing "rentier" (R)? class. The larger the corporation, typically, the more significant this shift.
3. The swift growth in the relative importance of the corporate form and in the further "splitting of the property atom" is paral- leled historically by continued extension of the combination move- ment noted at the beginning of this chapter. With the close of the World War, combination began on a new and higher scale than ever before. "During the ten years, 1919-1928, there were 1,268 combinations in manufacturing and mining," involving "the union of 4,135 separate concerns and the disappearance of 5,991"; and so on throughout practically every field of business enterprise. Dur- ing the same period, 3,744 public-utility companies disappeared through consolidations. *^ Chain stores, chain-department and mail- order systems, chain and branch banking, and similar types of enterprises expanded with unprecedented speed.
58 The Modern Corporation.
59 For some rather spectacular examples of the power of small inside groups simi- lar to those outlined by Berle and Means, in the hitherto quite unexplored field of life insurance, see the report of the TNEC Investigation of Concentration of Eco- nomic Power, Part 4, "Life Insurance. "
60 The term originated with the French government bond called the rente. The rentier class, made up of several million small bondholders who live largely by clip- ping coupons, and who, as bondholders, possess absolutely no rights over the source of their income, constitute a model which the holder of the American private cor- porate security is rapidly approaching. See p. 228.
61 Twentieth Century Fund, Big Business, p. 32.
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The results of this rather spectacular concentration of corporate
holdings have been pretty well publicized. Speaking before the
Temporary National Economic Committee, a representative of
Dun and Bradstreet cited a few of the better-known examples.
From various governmental sources he found that the output of
automobiles was dominated to the extent of 86 percent by three
companies; 47 percent of the beef products business by two com-
panies; 20 percent of the bread and other bakery produced by
three companies; 90 percent of the can output by three companies;
40 percent of cement by five; 80 percent of the cigarettes by three;
78 percent of the copper by four; 95 percent of the plate glass by
two; 64 percent of the iron ore by four; 60. 5 percent of the steel by
three; and so on. ^^ yj^^ National Resources Committee found that,
using three criteria of size, the hundred largest companies under
each respective heading "employed 20. 7 per cent of all the man-
power engaged in manufacturing, contributed 24. 7 per cent of all
the value added in manufacturing activity" and "accounted for
32. 4 per cent of the value of products reported by all manufactur-
(R)^
ing plants. "
4. The real significance of such concentration is found less in
the exercise of direct monopolistic powers ^* than in the position of leadership of these giant concerns in their respective fields. This leadership is applied in two principal ways. First, by such devices as "price leadership," "sharing the market," "price stabilization," "non-price competition," and the like; (R)^ these devices the smaller concerns are unable to oppose successfully, and must either "fol- low the leader" or face a variety of pressures which experience demonstrates they cannot possibly hope, in the normal course of affairs, to survive.
The second class of devices are those subsumed under the actions of the leading trade associations. As pointed out above, the effect of
62 TNEC Hearings, Investigation of Concentration of Economic Power, Testimony of Willard Thorp, Part I, p. 137.
63 National Resources Committee, The Structure of the American Economy, Part I (June, 1939), "Basic Characteristics," p. 102.
64 "Monopolies in the crude sense of single sellers of products for which there are no nearby substitutes are extremely rare. " A. R. Burns, The Decline of Competi- tion (New York, 1936).
65 For an elaborate, careful, and meticulously detailed discussion of these policies a reading of Burns, op. cit. , is indispensable.
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NRA was to transform a large number of the leading trade associa- tions into "cartels," possessing either de facto or de jure^^ powers along one or more lines similar to those of their European national and international prototypes. Many of the trade associations have advanced so far along this line as to approach in function the higher states of combined action which lead to the syndicates ^^ and com- munities of interest. ^^ Such leadership, possessing in many cases some degree of coercive power to compel conformity to policies laid down, is found more frequently in manufacturing fields than elsewhere. Hence the peculiar significance in this respect of the NAM, designed to serve as a policy coordinator for all industrial operations in America.
5. The leading concerns in the principal trade associations ap- pear simultaneously in the testimony of Thorp before the TNEC, in the investigations of Berle and Means and the National Re- sources Committee, and on the membership rolls of the NAM. Within the NAM this same small coterie of giant concerns are able to dominate, fairly completely, policies which affect to some ex- tent all fields and functions of American industry. In evidence of this fact, the La Follette Committee findings disclosed that while the NAM claimed approximately 4,000 corporate members for the year 1938, all of its directorships together, for the period 1933-
1937 inclusive, represented only 127 individuals from 89 firms. Adding to these figures some 118 additional concerns that con- tributed $2,000 or more in at least one of the five years, we obtain some 207 companies which "comprise approximately 5 per cent of the total estimated membership" and "whose contributions total $572,711 or 48. 9 per cent of the total. It would . . . appear . . . from this analysis," said Mr. Robert Wohlforth, testifying before the Committee, "that about 207 companies, or approximately five
66 De jure powers exist through the efforts of the lobby which succeeds in placing onto the statute books--federal, state, or local--laws under which recalcitrants may readily be forced into line. An example is the Robinson-Patman Act. The same holds true for most of the other federal and state "fair-trade practices" legislation.
67 "Syndicates" are central selling agencies for cartels. Close American equivalent is the now widespread practice of central allocation of all sales through manipulation of bidding schedules.
68 "Communities of interest" involve working arrangements so close as to consti- tute monopoly action. In Europe this is commonly regarded as an equivalent, and an immediate predecessor, to complete monopoly through formal combination.
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per cent of the National Association of Manufacturers, are in a posi- tion to formulate the policies of the association. " (R)(R)
6. This small minority represents very largely giant concerns, as can be seen from a perusal of the lists of the boards of directors for different years, of the affiliations of the leading committee members, and of financial contributions. ^^ Even within this small minority the machinery of organization provides for a still higher degree of centralized power. All policies are determined by the Board of Directors, elected by member bodies, but only after can- didates are sifted through a nominating committee, which is, in turn, appointed by the president and approved of by the existing Board of Directors. Of the 66 members of the Board of Directors, nine are direct presidential appointees. The direction of the NAM is in the hands, consequently, of a group who are able to act in effect as a cooptative body, to perpetuate their influence indefinitely with the passage of time, and so to compel consistency of policy with a view to long-run interests.
7. The NAM in turn dominates the National Industrial Coun- cil. It is enabled cumulatively to strengthen its power to influence NIC membership, because of three cardinal facts. First, the asso- ciations belonging to the NIC are typically organized along lines similar to those outlined for the NAM. As indicated above, such organizations (a) permit a high degree of centralization in organiza- tional control, (b) allow such centralized control to perpetuate it- self cooptatively over time, and (c) provide a milieu in which the large concerns readily and typically rise to positions of command- ing importance. Second, the leading firms in the associations af- filiated with the NAM via the NIC are, with rare exceptions, mem- bers of the corporative "elite" who belong to the NAM. Thus
6>>LaFollette Committee Reports, Part 17, pp. 7385-87. Also Exhibit 3799, p. 7540. "Among the corporations that have retained directorships for 5 years are the Ameri- can Rolling Mill Co. , of Middletown, Ohio; the General Mills, Inc. , of Minneapolis, Minn. ; the International Business Machines Co. , of New York; the Lambert Pharma- cal Co. , of St. Louis, Mo. ; The Standard Oil Co. , of Ohio; and the Eastman Kodak Co. , of Rochester, New York. " Among those which have had the same directors for four and three years continuously are to be found additional large-scale corporations.
70 Among these for the five-year period are E. I. Dupont de Nemours and Co. , |i16,800; Standard Oil, $76,800; General Motors, $65,295; National Steel Corp. , $42,050; Westinghouse Electric, $39,927. 50; United States Steel, $37,500; Monsanto Chemical Co. , of St. Louis, $36,775. Other contributors were the American Cyanamid Co. , Chrysler Co. , American Smelting and Refining, General Foods, Heinz, Pittsburgh Plate Glass.
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instrumentation of NAM policies is facilitated through the central controls of the several associations indirectly subsidiary to it. And third, the NIC itself functions through an hierarchical series of policy controls which lead from the bottom to the top, through what are known as "pyramided conferences": Local and trade con- ferences lead to state and regional conferences and to industry conferences, and from thence on through to the national confer- ences held in conjunction with the officialdom of the NAM. These ''pyramided conferences" do not constitute an expression of demo- cratic sentiment within the business community; on the contrary, inspection of available records show that they provide means for (a) gaining information concerning movements, sentiments, and interests in the industrial world in order the better to (b) manipu- late the "climate of opinion" and instrument policies emanating from on top.
8. By avoiding dual-functional organization throughout the complex machinery of the NAM and its affiliates, policies have been more highly centralized than they would otherwise have been. The group that directs business and political policies for the in- dustrialists of America also manages social and labor problems.
9. The importance of these two points is heavily underlined when it is recalled that the history of the NAM has shown that, except for certain short intervals, its overshadowing interest has been in labor relations. A common interest in opposing organized labor has served to hold the membership together, to dominate the motives in organizing and perfecting the machinery of the NIC, and to provide a never-failing bond of opposition to liberal-social legislation of the New Deal variety.
It appears to be likewise true that the position taken by the NAM and its affiliates on labor matters has been formulated by an ex- tremely small number of "inside firms" amongst the "insiders" who appear increasingly to dominate its policies. The Special Con- ference Committee, mentioned above, was organized in 1919 by ten giant concerns; ^^ it has held monthly meetings since that
71 The original corporations "cooperating" in this endeavor are Bethlehem Steel Co. , E. I. DuPont de Nemours and Co. , General Electric Co. , General Motors Corp. , Goodyear Tire and Rubber, International Harvester Co. , Irving Trust Co. , Standard Oil Co. (of New Jersey), United States Rubber Co. , Westinghouse Mfg. Co. Subse- quently two other concerns, the American Telephone and Telegraph Co. (1925) and
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time ^^ for the purpose of formulating common labor-relations pro- grams for all American industry, and has led in systematizing the promotion of policies consistently pursued by the NAM since its formation.
Not only are most of the member corporations of the Special Conference Committee at once members of the inner controlling group of the NAM and the leaders among American industrial giants in their respective fields,/^^ but also they represent a secret coalition in direct furtherance of the specific forms of company union fathered by the Colorado Fuel and Iron Company. Since its inception, the Committee has met at the offices of the Standard Oil of New Jersey, central unit of the gigantic Rockefeller oil, mining, banking, real-estate empire. "Two members of the staff of Industrial Relations Counselors, Inc. , a firm which specializes in advising corporations on problems of industrial relations, have served individually as members of the committee. " ^* From its
the United States Steel Corp. (1934) were added. LaFollette Committee Reports, Part 45, p. 16783.
72 Monthly meetings of personnel executives; semiannual meetings of corporate executives.
73 The Irving Trust Co. alone is not a member of the NAM. "The Committee con- sidered the desirability of enlarging its membership through the inclusion of repre- sentatives from corporations in additional industries. However, investigation led to the decision that this would be inadvisable because other corporations which were outstanding leaders in their respective industries in the same degree as the sponsors of the Special Conference Committee could not be found. Omitting the Irving Trust Co. , in 1937 the corporations represented on the Special Conference Committee em- ployed more than 1,300,000 persons and paid total wages and salaries of more than $2,400,000,000. At the end of 1937 these 11 corporations claimed total assets in excess of $13,500,000,000. The American Telephone and Telegraph Co, has almost a com- plete national coverage in the public utility field which it serves. The United States Steel Corp. and the Bethlehem Steel Co. rank first and second, respectively, in the steel industry--with Bethlehem, through its subsidiaries, also ranking first in ship- building. E. I. DiiPont de Nemours and Co. is easily first in chemicals, and the General Motors Corporation maintains an approximately, similar position in the motor car industry. The Goodyear Tire and Rubber Co. and the United States Rubber Co. rank first and second, respectively, in their industry. The International
Harvester Co. is the outstanding manufacturer of farm equipment. The Standard Oil Co, of New Jersey is not only the largest of the Standard Companies; it is also regarded as the largest oil company in the world. The General Electric Co. is the largest producer of electrical equipment, while the Westinghouse Electric and Manufacturing Co. is next in rank . . . the United States Steel . . . through its subsidiaries is the largest producer of coal in the country and also largest producers of iron ore in the United States. " La Follette Committee Reports, Part 45, pp.
