, the acquisition of control over additional enterprises by the corporations which they control, such
acquisitions
being financed mainly out of undistributed profits.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
But the Hartfords and Rosenwalds should be considered.
The Houghtons, incidentally, were missed by the TNEC dragnet.
Fortune mentioned only two Pews, but the TNEC study showed them to be a numerous clan: J. Howard Pew, Marv Ethel Pew, J. N. Pew, Jr. , Mabel Pew Myrin, Walter C. Pew, Albert H. Pew, Mrs. Mary C. Pew, Arthur E. Pew, Jr. , John G. Pew, Helen T. Pew, Alberta C. Pew and others. The Pews collectively--individually and through estates and trust funds--owned 70. 6 per cent of Sun Oil Company common stock as of February 15, 1938. 56
Assuming that this same percentage of ownership was maintained, they would be collectively worth $708,458,121 at closing prices for Sun Oil in 1964.
But the Pews since TNEC days have also set up foundations. As of March 2, 1965, the Pew Memorial Trust (through The Glenmede Trust Company) owned 21. 7 per cent of Sun Oil stock and held as fiduciary for other Pew trusts and estates 20. 9 per cent. 57 The Foundation Directory, 1964, states the 1960 assets of the Memorial Trust alone, leaving out its fiduciary holdings, at $135,309,481.
Before we pass to lesser but interesting wealth-holders (the extremely wealthy as distinguished from the super-wealthy), we may scan those we have examined in this chapter for common characteristics apart from their holdings of wealth.
Characteristics of the Super-Wealthy
All were born American citizens; their families have been in the United States for generations. All are inheritors in greater or less degree and, except for the Du Ponts who sprang from a revolutionary savant, all are far better educated than their family founders. Such being the case, they have a broader awareness of the world and its vagaries. None of these groups has its younger members placed in less than the third generation of wealth; the Du Ponts stand at least seven generations in the stream of gold. Such being the case they all together contradict the American folk-belief that a family passes from shirtsleeves to shirtsleeves in three generations. None of these gilt- edged people, obviously, are having any of that.
Offhand it would be said that they are all white, Anglo-Saxon Protestants; but such a statement would be somewhat misleading. The Du Ponts are of French Huguenot origin, and there is a Jewish crossing (Belin) in one of their lines of descent. Nor can it be said categorically that they are all Protestants. For Henry Ford II became a convert to Catholicism on the occasion of his first marriage and, through the foundation, funnels large sums to Catholic schools and colleges. As a consequence of his divorce and remarriage outside the Church, he is now automatically excommunicated but remains a Catholic. His children are Catholic.
Despite the fuss made by outsiders about being white, Anglo-Saxon and Protestant (or Catholic-Jewish) it is doubtful that any of these people attach much importance to the point. Most of them, from all indications, are pretty worldly wise and wear their ethincity and religiosity debonairly. Money, they know, is what counts in the established scheme.
Sinews of Republicanism
A far more significant common characteristic of all these super-wealthy families is that they have long been the main supporters nationally of the Republican Party, the party of plutocratic oligarchy. They have been its big sinews. Except for some minor Democratic deviants among the Du Ponts (and the Du Ponts can show many kinds of deviants from the basic family pattern) all leading members are Republican and their forebears were Republican.
With the exception of the Fords each has at various times played strong forward roles in the Republican party--the Rockefellers particularly under the McKinley
Administration; the Mellons under the Harding-Coolidge-Hoover Administrations; the Du Ponts with the Liberty League in fighting a strong rearguard action during the 1930's against the resurgent Democratic Party; and the Pews ever since in being the wealthiest supporters (among many) of unreconstructed right-wing Republicanism down to the present. If not kings themselves, they are king-makers.
The RockefelIers have in recent years come again to play a forward role through the person of Nelson A. Rockefeller. Thrice elected governor of New York, until his divorce and remarriage to a divorced woman he was considered a chief Republican presidential prospect. Every professional politician in the country agrees that if the personable and outgoing Nelson had pressed for the Republican presidential nomination in 1960 he would have obtained it and beaten John F. Kennedy. While his divorce might not under other circumstances have kept him from the presidency its inflation to a major issue by ultra-rightist Republicans tended to have that effect in the 1960's.
But the Rockefellers still play a very strong role in Republican politics and Winthrop has become the Republican governor of Arkansas. Ultra-rightist Republicans, however, give them credit for too much by blaming them chiefly for the electoral disaster that overtook their implausible darling, Barry Goldwater, in 1964.
As important wheels in the political process these families have always had quick and direct access to the White House, no matter what the party of the president. Not only in times of war (when gossamer party lines tend to blur) but in times of peace, representatives of these families have always been able to obtain an audience even with a Democratic president, and sometimes have been summoned for counsel, comfort and advice by dazed Republican presidents. But the name of Rockefeller was once under such a public cloud that on a visit to the White House the younger Rockefeller was spirited in by a back entrance to talk to President William Howard Taft. 58
Yet these and other magnates of extreme wealth have been far from Strangers to the Democratic Party. Both the political parties have been supported--the Republican mainly by weightily propertied elements. The parties are opposite sides of the same coin. Instead of saying that the United States has a two-party system, it would be more nearly correct to say it has a dual-party system.
After the Civil War, with the plantation owners self-destroyed, the Democratic Party always attracted large propertied elements whenever it made strong bids to win national elections. The Cleveland Administrations were as close to Wall Street, manned by Wall Streeters, as any Republican Administration. William Jennings Bryan, although anathema to the Wall Street Establishment, was supported by western mining interests, for whom "free silver" was so much extra gravy. The Wilson Administration was as completely under the thumb of Wall Street as the subsequent Harding, Coolidge and Hoover Administrations. 59 John W. Davis, the Democratic candidate for president in 1924 was a Wall Street corporation lawyer.
In 1928 Al Smith had his chief backing, financial and emotional, from fellow-Catholic John J. Raskob, prime minister of the Du Ponts. If Smith had won he would have been far less a Catholic than a Du Pont president, although the religious question was what was pushed to the fore by a politically obtuse electorate. Hoover, the Republican, was a J. P. Morgan puppet; Smith, his democratic opponent, was in the pocket of the Du Ponts, for whom J. P. Morgan and Company was the banker. By 1936 Smith was a roaring Liberty Leaguer. The victory of either man put J. P. Morgan and the Du Pouts into the presidential driver's seat. W. Averell Harriman was one of the leading wealthy Republicans who crossed the line to the Democrats in 1928 and has been a Democrat, and a high government official, in all subsequent Democratic Administrations.
Under Franklin Delano Roosevelt, owing chiefly to troubled circumstances, for the first time it appeared that some of the magnates might be unwelcome at the White House. The wealthiest, especially the Du Ponts, opposed him bitterly, which meant that he was opposed by the banks and heavy industry. Those numerous wealthy persons who became staunch Rooseveltians were mainly of the second or third tier of wealth and nearly all in merchandising and light industry, immediately dependent upon the stagnating mass-consumption market. They were down-the-line New Dealers but not, as misconceived Republican propaganda had it, Socialists, Populists or even Welfare- Staters.
But owing to the disastrous Republican-fostered and Wall Street nurtured economic depression, which interrupted seventy-two years of unbroken rule by the magnates through either Republican or Democratic puppets, the Democratic Party became the inheritor of vast social problems informally created largely by Republican neglect. The big special problems in the United States always develop through neglect, in part because so many active and intelligent elements are permanently siphoned off into the chicaneries of the money-making process. If profitability cannot be shown for an activity, such as raising the cultural level and tending to the lame, the halt, the blind and the stricken, such activity is left to quixotic and somewhat suspect elements--quixotic at least by prevailing standards.
Not that the Democratic Party moved very far to the Left in coping with domestic disaster, as hostile propaganda has it; for the magnates had ready to their call almost the entire southern congressional delegation, which had been their ready tool ever since Reconstruction days in a deal that left the Negroes to the mercies of their former masters in return for giving southern Support to the Republican magnates in Congress. The southern wing of the Democratic Party, rooted in grass-roots ineptitude, was as much a political tool of big wealth as was the Republican Party.
Under the impact of the depression the Democratic Party became the national spokesman for the suddenly risen industrial city with all its problems. its mass base was urban. The mass base of the Republican Party had always been in the small towns and rural areas, close to the fly-blown cracker barrel, although its telltale inaction in the 1920's lost it the overexploited western farmers. But behind these disparate mass bases-- city dwellers for the Democrats and country dwellers for the Republicans, with southern Democrat politicos spiritually in harmony with the Republicans, and western Republicans veering into the Democratic fold--there was at all times, in both parties, big wealth pulling the strings and arranging the scenes in its own succulent interests, a grotesque spectacle.
It simply so happened that the biggest wealth, shaped by policies since the Civil War, was Republican, and included the Rockefellers, Du Ponts, Mellons and Fords. The Democrats had with them, however, plenty of heavy money, committed to different handling of the domestic mess created by the Republicans.
Although Roosevelt and his New Deal became the hated devil of big wealth, which brought 85 per cent of the newspapers to bear against him through its control of corporate advertising, with the advent of war and the adoption of a bipartisan foreign policy it was Roosevelt who made the first overtures toward bringing the less fanatical Republicans into the government. He brought into his Cabinet, for example, Colonel Frank Knox, Republican vice presidential candidate of 1940; Henry L. Stimson, Hoover's secretary of state; E. R. Stettinius, Jr. , of J. P. Morgan and Company; and James V. Forrestal of the investment banking house of Dillon Read and Company. He gave Nelson A. Rockefeller his first leg up in political office by making him Coordinator of Latin-American Affairs. With these and similar appointments Roosevelt
made his third administration seem a Bar Harbor, Newport and Park Avenue affair. As FDR himself said, "the New Deal is out the window. "
After two Republican Administrations from 1952 to 1960, gained by using a clearly apolitical war hero as a stalking horse, the country again went Democratic under John F. Kennedy, himself a wealthy heir although basically a political man from a political family. Kennedy, even with no war providing an excuse for a coalition, awarded his chief Cabinet posts to Republicans from the camp of big wealth. Douglas Dillon, Republican and very wealthy heir of the founder of Dillon Read and Company, Forrestal's old firm, was made Secretary of the Treasury. Robert S. McNamara, Republican president of the Ford Motor Company, was made Secretary of Defense. McGeorge Bundy, Republican, was made liaison man to the CIA. Dean Rusk, a Democrat, but president of the Rockefeller Foundation from 1952 to 1960, was made Secretary of State.
The basic government posts, in other words, went to men deep in the camp of big wealth. But those posts that required dealings with the hoi polloi in social contexts went to party men versed in the rhetoric of inspirational ambiguity.
Dillon resigned under Johnson and was replaced by Henry H. Fowler, a career Democrat; but most of the rest of the Kennedy team continued, with the distant goal a mirage: the Great Society. The laudable stated ends of this Great Society are the end of want and of inequalities of opportunity.
As Princeton University political sociologist Richard F. Hamilton remarks,
In an affluent society, a liberal, welfare-oriented party can go a long way toward satisfying the wishes of its followers. Rather than preside over a drawn-out struggle between the people and the interests, as if it were an either/or game, the new style is to give both what they want and pay for it out of the returns from a stable and rapidly growing economy. In essence this is the Galbraithian solution--not to struggle over the "take" but to increase its size. Thus, the typical new figure on the political scene is the liberal demagogue--one who can cater to the masses because he is willing to pay them off and can do so without depriving the interests of what they want. He can be for civil rights, for improved housing, for urban renewal, for a poverty program, and at the same time can vote against a reduction of the depletion allowance. The Great Society synthesis overcomes that age-old problem of liberal politics: how to reward the clientele. Before affluence, the result was a long, hard and usually indecisive fight with the interests or it was capitulation. The new liberal, however, does not have to fight or switch. 60
The attraction of the Great Society for the wealthy, however, is the new opportunities it creates for making money on huge government contracts. In the area of defense there is a huge tax-supported military establishment making constant highly profitable demands--up to 40 and 50 per cent profit--on industry for complex new weapons. In urban renewal there is the vast profitable enterprise, replete with windfalls, of rehabilitating the commercial heart of the big cities. In slum clearance and school buildings there are vast slushy construction projects of low quality in the offing. And in the antipoverty program itself there is vast roadbuilding, as in Appalachia (which needs few roads), as well as opportunities for the local political machines.
As Dr. Hamilton remarks, "Large numbers of entrepreneurial types have recently discovered that 'there's money in poverty. '"
We have, then, as he notes, now developed "liberals of convenience" as contrasted with "liberals of conviction," and staunch Republicanism is no longer to be taken for
granted among the big wealthy, whatever their past history. For big wealth cannot afford to back political losers.
Everything about the Great Society as blueprinted spells lucrative contracts for someone. Hence the party of the Great Society now has special attractions for the wealthy that the Republican Party, fallen into the hands of dervishes of the cracker barrel, no longer has. The defections of the professional elite and leading mass media from the Republican cause in 1964, when a "true" Republican ran, clearly show the way the wind is blowing.
In point of fact, the Johnsonian Democratic Party is the new political rallying ground of big wealth, which is forced by circumstance suddenly to see some validity in the Democratic approach ("Me-Tooism"). The social programs of marginal rehabilitation and repair will go forward, but at a snug profit, provided the military can spare the money. And big wealth will continue to get its depletion allowances, tax cuts and big deduction writeoffs.
Lest we be carried away by the prospect of an early marriage of old-line Republicans with the Democratic Party we are reminded of difficulties by no less a personage than David Rockefeller, president of the mammoth Chase National Bank (1964 assets: $13 billion). Explaining in a television interview that he had "great admiration for the president [Johnson]," Mr. Rockefeller said he was nevertheless "disturbed by the Government's move in the aluminum price increase" that was rescinded after the government moved to sell stockpiled aluminum. In words that his grandfather would have unhesitatingly endorsed, the Chase bank chief said "the aluminum industry was the best judge of whether prices should go up" and added that he was "in disagreement with the attitude of Government that prices should be controlled. "
The problem of inflation should be dealt with through "natural economic forces within the capitalist system," the Times said he observed, without specifying just what these natural forces were and to what extent they included greed, which is certainly a sturdy, old reliable natural force. An assumption in his position, as in that of the early classical economists, is that if something is natural it is acceptable, which tenet would make tuberculosis or cancer acceptable. A further assumption was that if someone intervenes in any process, as in regulating industry or practicing surgery, there is something "unnatural" and to be condemned about it. Actually, whatever any human being does-- spit on the sidewalk, paint monstrosities on the walls, set fire to buildings, fornicate with lower animals, or regulate the actions of other people--is entirely natural. For if it weren't natural they couldn't do it. Mr. Rockefeller, like many others, reserves natural as a description of that of which he approves.
Said the Times report: "Mr. Rockefeller said the manner in which President Johnson handled the aluminum increase, even though he remained largely behind the scenes, was not appreciated by business [read. persons of wealth] anymore than President Kennedy's halting of a proposed steel increase. " 61
But the reason Democratic presidents must be sympathetic toward the big wealthy at all times, short of allowing them to upset the new synthesis, is simple: All these people, even if Republican, carry great weight in American affairs because of their intimate hereditary involvement through professional subordinates in complex enterprises penetrating into every comer of society. They may no longer be self-made they may have been sired by trust, testament or codicil out of holding company, foundation and monopoly-but they are independent power wielders. They aren't average citizens. And this is a political fact, not likely to be overlooked by any serious politician.
Any criticism of Presidents Kennedy and Johnson for the nature of their top appointments should face up to this question: Where should they look for Cabinet officers? Kennedy and Johnson looked for them where Eisenhower looked for them, and where Roosevelt looked: in the large financial and industrial organizations. These organizations belong to the wealthy. They are part of their plantation, which in its broadest sweep is the market place itself.
Experts of greater if not complete independence of judgment are to be had, to be sure, from the leading universities, and Franklin D. Roosevelt and John F. Kennedy both drew heavily upon them for certain tasks. But scholars have neither the habit of command nor is their authority apt to be recognized by men practiced in the arts of expedient manipulation--Plato's men of the appetites. Any president has to look to the big enterprises, selecting competent men who are least compromised by egocentric self- service.
To be sure, it is not the quintet of Du Ponts, Rockefellers, Mellons, Fords and Pews that alone has supported the Republican Party in its struggles to protect and nourish big wealth and is now playing around the edges at least of the Democratic Party. They have had many collaborators among groups of lesser wealth, most of them strong Republicans in the past as now, even though some of them seem inclined to take fright as latter-day woozy fanatics come to the fore in the Republican Party.
When, as and if they become Democratic the Democratic Party will have to become more tractable along the lines David Rockefeller suggests; it will have to become more Republican. This not too difficult process may take place gradually and stealthily. But the power of money is such that it can easily come about.
Five
THE INHERITORS: II
Approximately 200,000 households of the upper layer of American wealthholding assets of $500,000 or more own 22 per cent of the private wealth of the country and 32 per cent of the investment assets, while another 500,000 households (worth $200- $500,000) own another 13 per cent of wealth and 22 per cent of investment assets--54 per cent in all of investment assets for 700,000 households out of 57. 9 million households. Add another 700,000 households--those worth from $100,000 to $200,000--and one has accounted for 43 per cent of all private wealth and 65 per cent of all investment assets. * (*Board of Governors of the Federal Reserve System, Survey of Financial Characteristics of Consumers, Washington, D. C. , August, 1966; pp. 151,136. )
It is these huge percentages of ownership that give these relatively small groups their enormous leverage in the American political economy and justify our referring to the ownership as "leverage wealth. "
It should, therefore, be evident that the super-wealthy and big-wealthy are settled within a somewhat larger contingent of contemporaries who differ financially only in that their holdings are less extensive in the pyramidal hierarchy of property. Relating to this property there is an all-pervading cult, forming a large part of what some refer to as
the American ideology. The part of this ideology that relates to property is, basically, Standard Doctrine, heavily sugar-coated.
For preliminary guidelines to the big holdings, we can do no better than to turn to the compendious TNEC report, based as it was on official questionnaires filled out by the companies. 1 The data in them are as "hard" as government surveillance can make them.
Summarizing this valuable governmental study in a report to, Senator Joseph C. O'Mahoney, chairman of the TNEC, Sumner T. Pike, chairman of the Securities and Exchange Commission, under date of September 24, 1940, wrote:
Thirteen family groups-including these three (Du Ponts, Mellons and Rockefellers)-- with holdings worth $2,700,000,000, own over 8 per cent of the stock of the 200 [largest nonfinancial] corporations.
Only one-half of the large shareholdings of individuals in the 200 corporations are in the direct form of outright ownership, the other half being represented by trust funds, estates, and family holding companies. The study clearly shows the importance of these instrumentalities for perpetuating the unit of control over a block of stock held by an individual or the members of a family.
Each large interest group has shown a strong tendency to keep its holdings concentrated in the enterprise in which the family fortune originated. . . The branching out of the Mellon family into a dominating position in half a dozen important corporations in as many industries is rather unusual and not duplicated among the other interest groups controlling any of the 200 corporations. Many large family interest groups, however, have greatly expanded their industrial sphere of influence by indirect means, viz.
, the acquisition of control over additional enterprises by the corporations which they control, such acquisitions being financed mainly out of undistributed profits.
In the case of about 40 percent of these 200 largest corporations, one family, or a small number of families, exercise either absolute control, by virtue of ownership of a majority of voting securities, or working control through ownership of a substantial minority of the voting stock. About 60 of the corporations, or an additional 30 per cent, are controlled by one or more other corporations. Thus, a small group of dominant security holders is not in evidence in only 30 percent of the 200 large corporations. [Emphasis added. ]
[Note: Although the TNEC confined itself to nonfinancial corporations, approximately the same pattern of ownership is shown by informal inquiry into purely financial enterprises such as banks and insurance companies. The same people own these that own the industrial corporations: Rockefeller, Du Pont, Ford, Mellon and others. ]
The financial stake of officers and directors in their own corporations is relatively small. [Note: This is because they, like workers lower down, are merely employees, subject to dismissal. The largest holdings of officers, said the report, are in the hands of those who represent dominant or controlling family groups. ]
The 20 largest shareholdings in each of the 200 corporations account, on the average, for nearly one-third of the total value of all outstanding stock. In the average corporation the majority of the voting power is concentrated in the hands of not much over 1 percent of the stockholders. [Emphasis added. ]
As the study showed, the value of the twenty largest record holdings in 208 common stock issues as a percentage of total value was:
Per Cent
Manufacturing companies 26. 7
Railroads 24. 9
Electric, gas and water utilities 45. 3
Others 17. 3
The relatively small percentage in the fourth category is accounted for by the fact that it included AT&T with its widely dispersed comparatively small shareholders.
But for the twenty largest stockholders to own such large percentages, on the average, of the leading companies testifies to the extremes of concentrated ownership in the American economy.
Most of the millions of individual stockholdings in the hands of a variety of run-of- the-mill people made up only 6 per cent of the ownership and voting power. The general anonymous stockholders, although up to twenty million by count in 1965, all together own very little and have as much to say as the Russians have over their rulers in the Kremlin.
"The great bulk of the 8 to 9 million domestic stockholders own only small amounts of stock and the dividends they receive represent but a minor proportion of their total income. About half of all stock-holders have an annual dividend income of less than $100 and holdings worth less than $2,000. The group which depends economically to a large extent on the dividends from corporate stocks or the market value of these stocks is very small and probably numbers not much more than 500,000 people.
"The ownership of the stock of all American corporations is highly concentrated. For example, 10,000 persons (0. 008 percent of the population) own one-fourth, and 75,000 persons (0. 06 percent of the population) own fully one-half, of all corporate stock held by individuals in this country. " 2
Foreign investors, it was pointed out, own more than 6 per cent of the common and nearly 4 per cent of the preferred stock of these companies, and "Foreign ownership exceeds 10 per cent of total stock outstanding in about one-tenth of the 200 corporations. " [Note: These foreign holdings are held by comparable individual large European interests. ]
These patterns persist down to the present, as shown conclusively by the Lampman, University of Michigan, Federal Reserve and many other studies, and also in what I shall refer to as The Dartmouth Study: Corporate Concentration and Public Policy, by Professors Martin L. Lindahl and William A. Carter of Dartmouth College.
Noting that the patterns persist does not mean that the position of the owners has remained stationary. Although the percentage of ownership in the economy may conceivably be no greater than the concentration of control, owing to the steadily increasing concentration of assets, it is unquestionably greater now than it ever was before. The only dropouts from the upper strata of ownership have been produced by the ending of a family line. None of the big fortunes pinpointed in the TNEC study has gone bankrupt. Under the impetus of economic and technical change, of course, some of the minor big fortunes have lost ground relative to the leaders; but as other elements have thrust their way forward, the essentials of the panorama have scarcely changed.
While it might be of some interest to pinpoint changes for the better or the worse within some fortunes, it is not within the scope of this exposition to make such an attractive digression. We may, therefore, be spared the details of who is worth $100 million more or less. The Ford Motor Company is reported to have taken a $250 million loss on its unsuccessful Edsel model, but the Ford family remains in the leading quartet of wealth. These big fortunes can afford to take big losses, and they do have their ups and downs. What they lose one day in one place they make up another day in another place. What permits them to do this is: heavy reserves, affording maneuverability.
The TNEC study broke itself down into types of control, either by family or corporation, as follows:
a. By majority ownership b. By predominant majority c. By substantial minority d. By small minority
But in most cases control of one corporation by another saw the controlling corporation itself under single or multiple-family control.
The Thirteen Largest TNEC Family Interest Groups
As measured by market or calculated value at the end of 1937, the thirteen wealthiest family interest groups, led by the Du Ponts, Mellons, Rockefellers and Fords, also included the following: 3
Family
McCormick (Chicago)
Hartford (New York)
Harkness (New York)
Duke (North Carolina)
Pew (Philadelphia)
Pitcairn (Pittsburgh)
Clark
Reynolds (North Carolina)
Kress (New York)
Main Corporations
International Harvester
Great Atlantic & Pacific Tea
Standard Oil (New Jersey)
Standard Oil (Indiana)
Standard Oil of California and
Socony Vacuum Oil
Duke Power, Aluminum Co. of America
Liggett and Myers Tobacco
Sun Oil
Pittsburgh Plate Glass
Singer (sewing machines)
R. J. Reynolds Tobacco
S. H. Kress (variety stores)
To be sure, as the study warned, "Many members of these groups undoubtedly had stock investments in one or more of the 200 corporations which did not appear among the 20 largest record shareholdings. . . . Many also had investments in other corporations, particularly in large financial corporations which are not covered by the study, and investments in other forms such as corporate bonds, tax-exempt securities, real estate, and bank deposits. It is quite possible that for some groups these outside investments had a larger aggregate value than their identified holdings in the 200 largest corporations. " 4
A point never made by the TNEC study is that this same pattern of concentrated ownership and control extends below the 200 largest companies to the 500 largest, the 1,000 largest, the 10,000 largest, etc. What is remarkable about the TNEC showing is not that there were shown ownership and control by such tiny groups but that there were such concentrated ownership and control over such mammoth corporate entities, which standard propaganda insists are widely owned by the rank-and-file citizenry as stockholders. As enterprises get smaller and smaller there is even less public participation in their ownership than in the biggest companies until one soon runs into the 100 per cent family-owned or individually owned closed corporation. It is no exaggeration to say that all money-making enterprises of whatever size, including the widely owned AT&T, are owned by a very small class of proprietors, Whatever property is scattered among nearly 90 per cent of the populace is mostly nonrevenue- producing: much-used cars, TV and radio sets, furniture-in brief, chattels.
The Standard Oil branch of the Harkness family, now with few surviving members and its once vast funds largely distributed, mainly to leading educational institutions, was found to be among the twenty largest stockholders in no fewer than 24 of the 200
largest companies, apparently a record. 5 While this particular ownership is no longer concentrated, the fact that it recently existed shows what is possible within the system.
Single
Family
1. Dorrance
2. Duke
3. Ford
4. Hartford
5. James
6. Kress
7. Mellon
8. Mellon
9. Mellon
10. Pew
Multiple
Family
1. Anderson-Clayton
Main
Corporation
Campbell Soup
Duke Power
Ford Motor
Great Atlantic & Pacific 100
Western Pacific RR 61. 18
S. H. Kress 79
Gulf Oil 69. 5
Koppers 52
Pittsburgh Coal 50. 9
Sun Oil 69
Anderson, Clayton 94-plus
(Houston)
Family Control by Majority Ownership 6
2. Clarke-Bourne-Singer Singer 50-plus
3. Pbillips-Olmsted- Long Island Lighting 47-plus
Childs
4. Bell-Darby-Cooper American Cyanamid
Biddle-Duke etal.
88. 77
A peculiarity about this last holding was that while most of the Class A voting stock
was owned by eight senior officers-almost 29 per cent by W. B. Bell, president-most of
the equity was represented by the Class B nonvoting stock. The twenty-two leading
stockholders, with three tied for twentieth place, held 88. 77 per cent of the voting stock. 7
The holdings of the Hartford family in the Great Atlantic & Pacific Tea Company, which does more than 6 per cent of all retail grocery business in the United States, are not precisely ascertainable now on the basis of the TNEC report. The Hartfords owned at least 61 per cent of the old preferred stock, exchanged for three shares of common in the recapitalization of 1958, and all of the voting common, exchanged for one share of new common. In the old arrangement there were 935,812 shares of nonvoting common, also exchanged share-for-share for new common, but because the TNEC did not inquire into the Hartford ownership, if any, of this stock, its possible present ownership position (assuming no sales or purchases) cannot be completely deduced.
But, assuming the Hartfords owned none of the nonvoting stock and retained all their other stock in the exchange, they would now own very close to 70 per cent control of the company. At the end of 1964 all its outstanding common had a market value of $936,850,025, leaving the Hartford share at about $650 million. At the end of 1959, 33. 98 of this outstanding stock was held by the John A. Hartford Foundation. I conclude, then, that the Hartford family through nominees still retains majority controlling ownership of this huge company by a wide margin.
Predominant Minority Control 8
A predominant minority was defined in the TNEC study as consisting of the ownership of 30 to 50 per cent of the stock. 9
Single Family Corporation Percentage of
(approximate number of Ownership
income recipients)
Percentage of
Ownership
100 82 100
1. Du Pont
(about 250)
2. Mellon
(about 10)
Mellon
3. Cudahy
(about 32)
4. Deere (4)
5. Pitcairn
(4 or more)
6. Straus
(14)
7. Kresge (6)
Multiple Family 15
1. Field-Simpson-Shedd
E. 1. du Pont de Nemours
(controlling General
Motors by 23 per cent. )
Aluminum Co. of
America
Pittsburgh (Consoli-
dation) Coal
Cudahy
Deere
Pittsburgh Plate Glass
R. H. Macy
S. S. Kresge
Marshall Field
44
34. 4 50. 9 48. 71 10 34. 12 11 35. 34 12 38. 67 13 44. 24 14
2. Rosenstiel-Jacobi-Wiehe- Schenley Distillers
Schwarzhaupt-Gergross
3. Weyerhaeuser-Clapp-Bell- Weyerhaeuser
McKnight
The largest number of family interest groups was found to use the device of control by means of a substantial minority ownership of stock, which permits controlling positions to be taken in some cases in a wide spectrum of big companies. These were as follows:
Control by Substantial Minority 16
Single Family
1. E. I. du Pont de Nemours &
Co. (family controlled)
2. Crane
3. Colgate
4. Firestone
5. Gimbel
6. McCormick
7. Hanna
8. Palmer
9. Rockefeller
10. Levis
11. Mellon
12. Rosenwald
13. Avery
14. Du Pont
15. Williams
Multiple Family
Corporation
General Motors
Crane
Colgate-Palmolive-Peet
Firestone Tire & Rubber
Gimbel Brothers
International Harvester
National Steel
New Jersey Zinc
Ohio Oil (now
Marathon Oil)
Socony Vacuum Oil Co.
(now Socony Mobil Oil)
Standard Oil of Calif.
Standard Oil (Indiana)
Standard Oil (New Jersey) case
Owens-Illinois
Pullman
Sears, Roebuck
U. S. Gypsum
U. S. Rubber
North American Co. (since
dissolved into constituent
public utility operating
companies)
10
to
30
per cent
in
each
1. Walters-Jenkins-Newcomer
2. Stone-Webster
3. Davies-Woodward-Igleheart
4. Block-Ryerson-Jones
5. Rand-Watkins-Johnson-
Peters
6. Widener-Elkins-Dula-
Ryan
7. Hillman-Shouvlin-Chalfant
S. Miller-Volkman-Schilling
9. James-Dodge-Hanna
10. Procter-Gamble-
Cunningham
11. Lynch-Merrill
12. Kirby-Woolworth-
Donahue-McCann
13. Hochschild-Loeb-
Sussman
Hochschild-Loeb-
Sussman
Small Minority Control 17 Family
1. Moore
2. Zellerbach
3. Crawford
4. Moore
5. Cornish
6. Du Pont-Phillips
7. Swift
S. Warner
Atlantic Coast Line RR
Engineers Public Service Co.
(since dissolved into constituent
operating units)
General Foods
Inland Steel
International Shoe
Liggett & Myers Tobacco
National Supply (oil
well supplies)
Pacific Lighting
Phelps Dodge
(copper)
10
to
30
per cent
in
each case
Procter and Gamble
(soap)
Safeway Stores (groceries)
F. W. Woolworth
Climax Molybdenum
American Metal
Corporation
American Can
Crown Zellerbach
Lone Star Gas
National Biscuit
National Lead
Phillips Petroleum
Swift
Warner Bros. Pictures
We have named fifty-seven single families and combined, cooperating multiple- family groups that exercise control of the largest corporations by majority, predominant minority, substantial minority and small minority ownership. There were thirty-seven single-family-control entities, although some of these, such as the Mellons, Du Ponts and Rockefellers, each controlled several big companies. There were sixty-four single families in the multiple-family groups named, although in some cases the names are not given in this text. Perhaps as many as 400 families composed the various multiple- control groups in the 200 largest corporations.
Some of these companies, as noted, have changed their modus operandi, notably the public utility companies. Some have changed their names, like the Ohio Oil Company. Others have gone out of existence by the merger route. It is neither necessary nor expedient to trace here each company through various subsequent permutations and combinations, for equities are what concern us.
Have the percentage positions of these families remained the same in all these companies? Probably not. In some cases they have undoubtedly increased their holdings, in others they are known to have decreased. Some may even have closed out their holdings. But, as pointed out earlier, if anyone has sold out in one place he has reinvested elsewhere, and possibly to better advantage. He is, therefore, still rich.
Less
than
10
per cent
Knowing the value of the property from the inside, all these groups know when the stock is overpriced and when to sell. As the income-tax returns since the war show, the higher income groups have been steadily taking capital gains, which are taxed at a maximum of 25 per cent, a bargain in relation to the upper income taxes. Wealthy holders usually show a strong tendency to sell some holdings in rising markets and to buy again in declines, thus increasing their percentile position (Standard Doctrine). So their percentages of ownership change from time to time. Sales would not necessarily show on the books of a company. For a man can always sell the stock short.
With the exception only of two as far as I have been able to ascertain, all these families are still extant and still highly solvent. The exceptions are the Harknesses and Arthur Curtiss James (1867-1941), who died leaving no heirs. James left his money to a foundation with the fairly unusual stipulation that the principal was to be distributed in twenty-five years, which was done.
Fortune mentioned only two Pews, but the TNEC study showed them to be a numerous clan: J. Howard Pew, Marv Ethel Pew, J. N. Pew, Jr. , Mabel Pew Myrin, Walter C. Pew, Albert H. Pew, Mrs. Mary C. Pew, Arthur E. Pew, Jr. , John G. Pew, Helen T. Pew, Alberta C. Pew and others. The Pews collectively--individually and through estates and trust funds--owned 70. 6 per cent of Sun Oil Company common stock as of February 15, 1938. 56
Assuming that this same percentage of ownership was maintained, they would be collectively worth $708,458,121 at closing prices for Sun Oil in 1964.
But the Pews since TNEC days have also set up foundations. As of March 2, 1965, the Pew Memorial Trust (through The Glenmede Trust Company) owned 21. 7 per cent of Sun Oil stock and held as fiduciary for other Pew trusts and estates 20. 9 per cent. 57 The Foundation Directory, 1964, states the 1960 assets of the Memorial Trust alone, leaving out its fiduciary holdings, at $135,309,481.
Before we pass to lesser but interesting wealth-holders (the extremely wealthy as distinguished from the super-wealthy), we may scan those we have examined in this chapter for common characteristics apart from their holdings of wealth.
Characteristics of the Super-Wealthy
All were born American citizens; their families have been in the United States for generations. All are inheritors in greater or less degree and, except for the Du Ponts who sprang from a revolutionary savant, all are far better educated than their family founders. Such being the case, they have a broader awareness of the world and its vagaries. None of these groups has its younger members placed in less than the third generation of wealth; the Du Ponts stand at least seven generations in the stream of gold. Such being the case they all together contradict the American folk-belief that a family passes from shirtsleeves to shirtsleeves in three generations. None of these gilt- edged people, obviously, are having any of that.
Offhand it would be said that they are all white, Anglo-Saxon Protestants; but such a statement would be somewhat misleading. The Du Ponts are of French Huguenot origin, and there is a Jewish crossing (Belin) in one of their lines of descent. Nor can it be said categorically that they are all Protestants. For Henry Ford II became a convert to Catholicism on the occasion of his first marriage and, through the foundation, funnels large sums to Catholic schools and colleges. As a consequence of his divorce and remarriage outside the Church, he is now automatically excommunicated but remains a Catholic. His children are Catholic.
Despite the fuss made by outsiders about being white, Anglo-Saxon and Protestant (or Catholic-Jewish) it is doubtful that any of these people attach much importance to the point. Most of them, from all indications, are pretty worldly wise and wear their ethincity and religiosity debonairly. Money, they know, is what counts in the established scheme.
Sinews of Republicanism
A far more significant common characteristic of all these super-wealthy families is that they have long been the main supporters nationally of the Republican Party, the party of plutocratic oligarchy. They have been its big sinews. Except for some minor Democratic deviants among the Du Ponts (and the Du Ponts can show many kinds of deviants from the basic family pattern) all leading members are Republican and their forebears were Republican.
With the exception of the Fords each has at various times played strong forward roles in the Republican party--the Rockefellers particularly under the McKinley
Administration; the Mellons under the Harding-Coolidge-Hoover Administrations; the Du Ponts with the Liberty League in fighting a strong rearguard action during the 1930's against the resurgent Democratic Party; and the Pews ever since in being the wealthiest supporters (among many) of unreconstructed right-wing Republicanism down to the present. If not kings themselves, they are king-makers.
The RockefelIers have in recent years come again to play a forward role through the person of Nelson A. Rockefeller. Thrice elected governor of New York, until his divorce and remarriage to a divorced woman he was considered a chief Republican presidential prospect. Every professional politician in the country agrees that if the personable and outgoing Nelson had pressed for the Republican presidential nomination in 1960 he would have obtained it and beaten John F. Kennedy. While his divorce might not under other circumstances have kept him from the presidency its inflation to a major issue by ultra-rightist Republicans tended to have that effect in the 1960's.
But the Rockefellers still play a very strong role in Republican politics and Winthrop has become the Republican governor of Arkansas. Ultra-rightist Republicans, however, give them credit for too much by blaming them chiefly for the electoral disaster that overtook their implausible darling, Barry Goldwater, in 1964.
As important wheels in the political process these families have always had quick and direct access to the White House, no matter what the party of the president. Not only in times of war (when gossamer party lines tend to blur) but in times of peace, representatives of these families have always been able to obtain an audience even with a Democratic president, and sometimes have been summoned for counsel, comfort and advice by dazed Republican presidents. But the name of Rockefeller was once under such a public cloud that on a visit to the White House the younger Rockefeller was spirited in by a back entrance to talk to President William Howard Taft. 58
Yet these and other magnates of extreme wealth have been far from Strangers to the Democratic Party. Both the political parties have been supported--the Republican mainly by weightily propertied elements. The parties are opposite sides of the same coin. Instead of saying that the United States has a two-party system, it would be more nearly correct to say it has a dual-party system.
After the Civil War, with the plantation owners self-destroyed, the Democratic Party always attracted large propertied elements whenever it made strong bids to win national elections. The Cleveland Administrations were as close to Wall Street, manned by Wall Streeters, as any Republican Administration. William Jennings Bryan, although anathema to the Wall Street Establishment, was supported by western mining interests, for whom "free silver" was so much extra gravy. The Wilson Administration was as completely under the thumb of Wall Street as the subsequent Harding, Coolidge and Hoover Administrations. 59 John W. Davis, the Democratic candidate for president in 1924 was a Wall Street corporation lawyer.
In 1928 Al Smith had his chief backing, financial and emotional, from fellow-Catholic John J. Raskob, prime minister of the Du Ponts. If Smith had won he would have been far less a Catholic than a Du Pont president, although the religious question was what was pushed to the fore by a politically obtuse electorate. Hoover, the Republican, was a J. P. Morgan puppet; Smith, his democratic opponent, was in the pocket of the Du Ponts, for whom J. P. Morgan and Company was the banker. By 1936 Smith was a roaring Liberty Leaguer. The victory of either man put J. P. Morgan and the Du Pouts into the presidential driver's seat. W. Averell Harriman was one of the leading wealthy Republicans who crossed the line to the Democrats in 1928 and has been a Democrat, and a high government official, in all subsequent Democratic Administrations.
Under Franklin Delano Roosevelt, owing chiefly to troubled circumstances, for the first time it appeared that some of the magnates might be unwelcome at the White House. The wealthiest, especially the Du Ponts, opposed him bitterly, which meant that he was opposed by the banks and heavy industry. Those numerous wealthy persons who became staunch Rooseveltians were mainly of the second or third tier of wealth and nearly all in merchandising and light industry, immediately dependent upon the stagnating mass-consumption market. They were down-the-line New Dealers but not, as misconceived Republican propaganda had it, Socialists, Populists or even Welfare- Staters.
But owing to the disastrous Republican-fostered and Wall Street nurtured economic depression, which interrupted seventy-two years of unbroken rule by the magnates through either Republican or Democratic puppets, the Democratic Party became the inheritor of vast social problems informally created largely by Republican neglect. The big special problems in the United States always develop through neglect, in part because so many active and intelligent elements are permanently siphoned off into the chicaneries of the money-making process. If profitability cannot be shown for an activity, such as raising the cultural level and tending to the lame, the halt, the blind and the stricken, such activity is left to quixotic and somewhat suspect elements--quixotic at least by prevailing standards.
Not that the Democratic Party moved very far to the Left in coping with domestic disaster, as hostile propaganda has it; for the magnates had ready to their call almost the entire southern congressional delegation, which had been their ready tool ever since Reconstruction days in a deal that left the Negroes to the mercies of their former masters in return for giving southern Support to the Republican magnates in Congress. The southern wing of the Democratic Party, rooted in grass-roots ineptitude, was as much a political tool of big wealth as was the Republican Party.
Under the impact of the depression the Democratic Party became the national spokesman for the suddenly risen industrial city with all its problems. its mass base was urban. The mass base of the Republican Party had always been in the small towns and rural areas, close to the fly-blown cracker barrel, although its telltale inaction in the 1920's lost it the overexploited western farmers. But behind these disparate mass bases-- city dwellers for the Democrats and country dwellers for the Republicans, with southern Democrat politicos spiritually in harmony with the Republicans, and western Republicans veering into the Democratic fold--there was at all times, in both parties, big wealth pulling the strings and arranging the scenes in its own succulent interests, a grotesque spectacle.
It simply so happened that the biggest wealth, shaped by policies since the Civil War, was Republican, and included the Rockefellers, Du Ponts, Mellons and Fords. The Democrats had with them, however, plenty of heavy money, committed to different handling of the domestic mess created by the Republicans.
Although Roosevelt and his New Deal became the hated devil of big wealth, which brought 85 per cent of the newspapers to bear against him through its control of corporate advertising, with the advent of war and the adoption of a bipartisan foreign policy it was Roosevelt who made the first overtures toward bringing the less fanatical Republicans into the government. He brought into his Cabinet, for example, Colonel Frank Knox, Republican vice presidential candidate of 1940; Henry L. Stimson, Hoover's secretary of state; E. R. Stettinius, Jr. , of J. P. Morgan and Company; and James V. Forrestal of the investment banking house of Dillon Read and Company. He gave Nelson A. Rockefeller his first leg up in political office by making him Coordinator of Latin-American Affairs. With these and similar appointments Roosevelt
made his third administration seem a Bar Harbor, Newport and Park Avenue affair. As FDR himself said, "the New Deal is out the window. "
After two Republican Administrations from 1952 to 1960, gained by using a clearly apolitical war hero as a stalking horse, the country again went Democratic under John F. Kennedy, himself a wealthy heir although basically a political man from a political family. Kennedy, even with no war providing an excuse for a coalition, awarded his chief Cabinet posts to Republicans from the camp of big wealth. Douglas Dillon, Republican and very wealthy heir of the founder of Dillon Read and Company, Forrestal's old firm, was made Secretary of the Treasury. Robert S. McNamara, Republican president of the Ford Motor Company, was made Secretary of Defense. McGeorge Bundy, Republican, was made liaison man to the CIA. Dean Rusk, a Democrat, but president of the Rockefeller Foundation from 1952 to 1960, was made Secretary of State.
The basic government posts, in other words, went to men deep in the camp of big wealth. But those posts that required dealings with the hoi polloi in social contexts went to party men versed in the rhetoric of inspirational ambiguity.
Dillon resigned under Johnson and was replaced by Henry H. Fowler, a career Democrat; but most of the rest of the Kennedy team continued, with the distant goal a mirage: the Great Society. The laudable stated ends of this Great Society are the end of want and of inequalities of opportunity.
As Princeton University political sociologist Richard F. Hamilton remarks,
In an affluent society, a liberal, welfare-oriented party can go a long way toward satisfying the wishes of its followers. Rather than preside over a drawn-out struggle between the people and the interests, as if it were an either/or game, the new style is to give both what they want and pay for it out of the returns from a stable and rapidly growing economy. In essence this is the Galbraithian solution--not to struggle over the "take" but to increase its size. Thus, the typical new figure on the political scene is the liberal demagogue--one who can cater to the masses because he is willing to pay them off and can do so without depriving the interests of what they want. He can be for civil rights, for improved housing, for urban renewal, for a poverty program, and at the same time can vote against a reduction of the depletion allowance. The Great Society synthesis overcomes that age-old problem of liberal politics: how to reward the clientele. Before affluence, the result was a long, hard and usually indecisive fight with the interests or it was capitulation. The new liberal, however, does not have to fight or switch. 60
The attraction of the Great Society for the wealthy, however, is the new opportunities it creates for making money on huge government contracts. In the area of defense there is a huge tax-supported military establishment making constant highly profitable demands--up to 40 and 50 per cent profit--on industry for complex new weapons. In urban renewal there is the vast profitable enterprise, replete with windfalls, of rehabilitating the commercial heart of the big cities. In slum clearance and school buildings there are vast slushy construction projects of low quality in the offing. And in the antipoverty program itself there is vast roadbuilding, as in Appalachia (which needs few roads), as well as opportunities for the local political machines.
As Dr. Hamilton remarks, "Large numbers of entrepreneurial types have recently discovered that 'there's money in poverty. '"
We have, then, as he notes, now developed "liberals of convenience" as contrasted with "liberals of conviction," and staunch Republicanism is no longer to be taken for
granted among the big wealthy, whatever their past history. For big wealth cannot afford to back political losers.
Everything about the Great Society as blueprinted spells lucrative contracts for someone. Hence the party of the Great Society now has special attractions for the wealthy that the Republican Party, fallen into the hands of dervishes of the cracker barrel, no longer has. The defections of the professional elite and leading mass media from the Republican cause in 1964, when a "true" Republican ran, clearly show the way the wind is blowing.
In point of fact, the Johnsonian Democratic Party is the new political rallying ground of big wealth, which is forced by circumstance suddenly to see some validity in the Democratic approach ("Me-Tooism"). The social programs of marginal rehabilitation and repair will go forward, but at a snug profit, provided the military can spare the money. And big wealth will continue to get its depletion allowances, tax cuts and big deduction writeoffs.
Lest we be carried away by the prospect of an early marriage of old-line Republicans with the Democratic Party we are reminded of difficulties by no less a personage than David Rockefeller, president of the mammoth Chase National Bank (1964 assets: $13 billion). Explaining in a television interview that he had "great admiration for the president [Johnson]," Mr. Rockefeller said he was nevertheless "disturbed by the Government's move in the aluminum price increase" that was rescinded after the government moved to sell stockpiled aluminum. In words that his grandfather would have unhesitatingly endorsed, the Chase bank chief said "the aluminum industry was the best judge of whether prices should go up" and added that he was "in disagreement with the attitude of Government that prices should be controlled. "
The problem of inflation should be dealt with through "natural economic forces within the capitalist system," the Times said he observed, without specifying just what these natural forces were and to what extent they included greed, which is certainly a sturdy, old reliable natural force. An assumption in his position, as in that of the early classical economists, is that if something is natural it is acceptable, which tenet would make tuberculosis or cancer acceptable. A further assumption was that if someone intervenes in any process, as in regulating industry or practicing surgery, there is something "unnatural" and to be condemned about it. Actually, whatever any human being does-- spit on the sidewalk, paint monstrosities on the walls, set fire to buildings, fornicate with lower animals, or regulate the actions of other people--is entirely natural. For if it weren't natural they couldn't do it. Mr. Rockefeller, like many others, reserves natural as a description of that of which he approves.
Said the Times report: "Mr. Rockefeller said the manner in which President Johnson handled the aluminum increase, even though he remained largely behind the scenes, was not appreciated by business [read. persons of wealth] anymore than President Kennedy's halting of a proposed steel increase. " 61
But the reason Democratic presidents must be sympathetic toward the big wealthy at all times, short of allowing them to upset the new synthesis, is simple: All these people, even if Republican, carry great weight in American affairs because of their intimate hereditary involvement through professional subordinates in complex enterprises penetrating into every comer of society. They may no longer be self-made they may have been sired by trust, testament or codicil out of holding company, foundation and monopoly-but they are independent power wielders. They aren't average citizens. And this is a political fact, not likely to be overlooked by any serious politician.
Any criticism of Presidents Kennedy and Johnson for the nature of their top appointments should face up to this question: Where should they look for Cabinet officers? Kennedy and Johnson looked for them where Eisenhower looked for them, and where Roosevelt looked: in the large financial and industrial organizations. These organizations belong to the wealthy. They are part of their plantation, which in its broadest sweep is the market place itself.
Experts of greater if not complete independence of judgment are to be had, to be sure, from the leading universities, and Franklin D. Roosevelt and John F. Kennedy both drew heavily upon them for certain tasks. But scholars have neither the habit of command nor is their authority apt to be recognized by men practiced in the arts of expedient manipulation--Plato's men of the appetites. Any president has to look to the big enterprises, selecting competent men who are least compromised by egocentric self- service.
To be sure, it is not the quintet of Du Ponts, Rockefellers, Mellons, Fords and Pews that alone has supported the Republican Party in its struggles to protect and nourish big wealth and is now playing around the edges at least of the Democratic Party. They have had many collaborators among groups of lesser wealth, most of them strong Republicans in the past as now, even though some of them seem inclined to take fright as latter-day woozy fanatics come to the fore in the Republican Party.
When, as and if they become Democratic the Democratic Party will have to become more tractable along the lines David Rockefeller suggests; it will have to become more Republican. This not too difficult process may take place gradually and stealthily. But the power of money is such that it can easily come about.
Five
THE INHERITORS: II
Approximately 200,000 households of the upper layer of American wealthholding assets of $500,000 or more own 22 per cent of the private wealth of the country and 32 per cent of the investment assets, while another 500,000 households (worth $200- $500,000) own another 13 per cent of wealth and 22 per cent of investment assets--54 per cent in all of investment assets for 700,000 households out of 57. 9 million households. Add another 700,000 households--those worth from $100,000 to $200,000--and one has accounted for 43 per cent of all private wealth and 65 per cent of all investment assets. * (*Board of Governors of the Federal Reserve System, Survey of Financial Characteristics of Consumers, Washington, D. C. , August, 1966; pp. 151,136. )
It is these huge percentages of ownership that give these relatively small groups their enormous leverage in the American political economy and justify our referring to the ownership as "leverage wealth. "
It should, therefore, be evident that the super-wealthy and big-wealthy are settled within a somewhat larger contingent of contemporaries who differ financially only in that their holdings are less extensive in the pyramidal hierarchy of property. Relating to this property there is an all-pervading cult, forming a large part of what some refer to as
the American ideology. The part of this ideology that relates to property is, basically, Standard Doctrine, heavily sugar-coated.
For preliminary guidelines to the big holdings, we can do no better than to turn to the compendious TNEC report, based as it was on official questionnaires filled out by the companies. 1 The data in them are as "hard" as government surveillance can make them.
Summarizing this valuable governmental study in a report to, Senator Joseph C. O'Mahoney, chairman of the TNEC, Sumner T. Pike, chairman of the Securities and Exchange Commission, under date of September 24, 1940, wrote:
Thirteen family groups-including these three (Du Ponts, Mellons and Rockefellers)-- with holdings worth $2,700,000,000, own over 8 per cent of the stock of the 200 [largest nonfinancial] corporations.
Only one-half of the large shareholdings of individuals in the 200 corporations are in the direct form of outright ownership, the other half being represented by trust funds, estates, and family holding companies. The study clearly shows the importance of these instrumentalities for perpetuating the unit of control over a block of stock held by an individual or the members of a family.
Each large interest group has shown a strong tendency to keep its holdings concentrated in the enterprise in which the family fortune originated. . . The branching out of the Mellon family into a dominating position in half a dozen important corporations in as many industries is rather unusual and not duplicated among the other interest groups controlling any of the 200 corporations. Many large family interest groups, however, have greatly expanded their industrial sphere of influence by indirect means, viz.
, the acquisition of control over additional enterprises by the corporations which they control, such acquisitions being financed mainly out of undistributed profits.
In the case of about 40 percent of these 200 largest corporations, one family, or a small number of families, exercise either absolute control, by virtue of ownership of a majority of voting securities, or working control through ownership of a substantial minority of the voting stock. About 60 of the corporations, or an additional 30 per cent, are controlled by one or more other corporations. Thus, a small group of dominant security holders is not in evidence in only 30 percent of the 200 large corporations. [Emphasis added. ]
[Note: Although the TNEC confined itself to nonfinancial corporations, approximately the same pattern of ownership is shown by informal inquiry into purely financial enterprises such as banks and insurance companies. The same people own these that own the industrial corporations: Rockefeller, Du Pont, Ford, Mellon and others. ]
The financial stake of officers and directors in their own corporations is relatively small. [Note: This is because they, like workers lower down, are merely employees, subject to dismissal. The largest holdings of officers, said the report, are in the hands of those who represent dominant or controlling family groups. ]
The 20 largest shareholdings in each of the 200 corporations account, on the average, for nearly one-third of the total value of all outstanding stock. In the average corporation the majority of the voting power is concentrated in the hands of not much over 1 percent of the stockholders. [Emphasis added. ]
As the study showed, the value of the twenty largest record holdings in 208 common stock issues as a percentage of total value was:
Per Cent
Manufacturing companies 26. 7
Railroads 24. 9
Electric, gas and water utilities 45. 3
Others 17. 3
The relatively small percentage in the fourth category is accounted for by the fact that it included AT&T with its widely dispersed comparatively small shareholders.
But for the twenty largest stockholders to own such large percentages, on the average, of the leading companies testifies to the extremes of concentrated ownership in the American economy.
Most of the millions of individual stockholdings in the hands of a variety of run-of- the-mill people made up only 6 per cent of the ownership and voting power. The general anonymous stockholders, although up to twenty million by count in 1965, all together own very little and have as much to say as the Russians have over their rulers in the Kremlin.
"The great bulk of the 8 to 9 million domestic stockholders own only small amounts of stock and the dividends they receive represent but a minor proportion of their total income. About half of all stock-holders have an annual dividend income of less than $100 and holdings worth less than $2,000. The group which depends economically to a large extent on the dividends from corporate stocks or the market value of these stocks is very small and probably numbers not much more than 500,000 people.
"The ownership of the stock of all American corporations is highly concentrated. For example, 10,000 persons (0. 008 percent of the population) own one-fourth, and 75,000 persons (0. 06 percent of the population) own fully one-half, of all corporate stock held by individuals in this country. " 2
Foreign investors, it was pointed out, own more than 6 per cent of the common and nearly 4 per cent of the preferred stock of these companies, and "Foreign ownership exceeds 10 per cent of total stock outstanding in about one-tenth of the 200 corporations. " [Note: These foreign holdings are held by comparable individual large European interests. ]
These patterns persist down to the present, as shown conclusively by the Lampman, University of Michigan, Federal Reserve and many other studies, and also in what I shall refer to as The Dartmouth Study: Corporate Concentration and Public Policy, by Professors Martin L. Lindahl and William A. Carter of Dartmouth College.
Noting that the patterns persist does not mean that the position of the owners has remained stationary. Although the percentage of ownership in the economy may conceivably be no greater than the concentration of control, owing to the steadily increasing concentration of assets, it is unquestionably greater now than it ever was before. The only dropouts from the upper strata of ownership have been produced by the ending of a family line. None of the big fortunes pinpointed in the TNEC study has gone bankrupt. Under the impetus of economic and technical change, of course, some of the minor big fortunes have lost ground relative to the leaders; but as other elements have thrust their way forward, the essentials of the panorama have scarcely changed.
While it might be of some interest to pinpoint changes for the better or the worse within some fortunes, it is not within the scope of this exposition to make such an attractive digression. We may, therefore, be spared the details of who is worth $100 million more or less. The Ford Motor Company is reported to have taken a $250 million loss on its unsuccessful Edsel model, but the Ford family remains in the leading quartet of wealth. These big fortunes can afford to take big losses, and they do have their ups and downs. What they lose one day in one place they make up another day in another place. What permits them to do this is: heavy reserves, affording maneuverability.
The TNEC study broke itself down into types of control, either by family or corporation, as follows:
a. By majority ownership b. By predominant majority c. By substantial minority d. By small minority
But in most cases control of one corporation by another saw the controlling corporation itself under single or multiple-family control.
The Thirteen Largest TNEC Family Interest Groups
As measured by market or calculated value at the end of 1937, the thirteen wealthiest family interest groups, led by the Du Ponts, Mellons, Rockefellers and Fords, also included the following: 3
Family
McCormick (Chicago)
Hartford (New York)
Harkness (New York)
Duke (North Carolina)
Pew (Philadelphia)
Pitcairn (Pittsburgh)
Clark
Reynolds (North Carolina)
Kress (New York)
Main Corporations
International Harvester
Great Atlantic & Pacific Tea
Standard Oil (New Jersey)
Standard Oil (Indiana)
Standard Oil of California and
Socony Vacuum Oil
Duke Power, Aluminum Co. of America
Liggett and Myers Tobacco
Sun Oil
Pittsburgh Plate Glass
Singer (sewing machines)
R. J. Reynolds Tobacco
S. H. Kress (variety stores)
To be sure, as the study warned, "Many members of these groups undoubtedly had stock investments in one or more of the 200 corporations which did not appear among the 20 largest record shareholdings. . . . Many also had investments in other corporations, particularly in large financial corporations which are not covered by the study, and investments in other forms such as corporate bonds, tax-exempt securities, real estate, and bank deposits. It is quite possible that for some groups these outside investments had a larger aggregate value than their identified holdings in the 200 largest corporations. " 4
A point never made by the TNEC study is that this same pattern of concentrated ownership and control extends below the 200 largest companies to the 500 largest, the 1,000 largest, the 10,000 largest, etc. What is remarkable about the TNEC showing is not that there were shown ownership and control by such tiny groups but that there were such concentrated ownership and control over such mammoth corporate entities, which standard propaganda insists are widely owned by the rank-and-file citizenry as stockholders. As enterprises get smaller and smaller there is even less public participation in their ownership than in the biggest companies until one soon runs into the 100 per cent family-owned or individually owned closed corporation. It is no exaggeration to say that all money-making enterprises of whatever size, including the widely owned AT&T, are owned by a very small class of proprietors, Whatever property is scattered among nearly 90 per cent of the populace is mostly nonrevenue- producing: much-used cars, TV and radio sets, furniture-in brief, chattels.
The Standard Oil branch of the Harkness family, now with few surviving members and its once vast funds largely distributed, mainly to leading educational institutions, was found to be among the twenty largest stockholders in no fewer than 24 of the 200
largest companies, apparently a record. 5 While this particular ownership is no longer concentrated, the fact that it recently existed shows what is possible within the system.
Single
Family
1. Dorrance
2. Duke
3. Ford
4. Hartford
5. James
6. Kress
7. Mellon
8. Mellon
9. Mellon
10. Pew
Multiple
Family
1. Anderson-Clayton
Main
Corporation
Campbell Soup
Duke Power
Ford Motor
Great Atlantic & Pacific 100
Western Pacific RR 61. 18
S. H. Kress 79
Gulf Oil 69. 5
Koppers 52
Pittsburgh Coal 50. 9
Sun Oil 69
Anderson, Clayton 94-plus
(Houston)
Family Control by Majority Ownership 6
2. Clarke-Bourne-Singer Singer 50-plus
3. Pbillips-Olmsted- Long Island Lighting 47-plus
Childs
4. Bell-Darby-Cooper American Cyanamid
Biddle-Duke etal.
88. 77
A peculiarity about this last holding was that while most of the Class A voting stock
was owned by eight senior officers-almost 29 per cent by W. B. Bell, president-most of
the equity was represented by the Class B nonvoting stock. The twenty-two leading
stockholders, with three tied for twentieth place, held 88. 77 per cent of the voting stock. 7
The holdings of the Hartford family in the Great Atlantic & Pacific Tea Company, which does more than 6 per cent of all retail grocery business in the United States, are not precisely ascertainable now on the basis of the TNEC report. The Hartfords owned at least 61 per cent of the old preferred stock, exchanged for three shares of common in the recapitalization of 1958, and all of the voting common, exchanged for one share of new common. In the old arrangement there were 935,812 shares of nonvoting common, also exchanged share-for-share for new common, but because the TNEC did not inquire into the Hartford ownership, if any, of this stock, its possible present ownership position (assuming no sales or purchases) cannot be completely deduced.
But, assuming the Hartfords owned none of the nonvoting stock and retained all their other stock in the exchange, they would now own very close to 70 per cent control of the company. At the end of 1964 all its outstanding common had a market value of $936,850,025, leaving the Hartford share at about $650 million. At the end of 1959, 33. 98 of this outstanding stock was held by the John A. Hartford Foundation. I conclude, then, that the Hartford family through nominees still retains majority controlling ownership of this huge company by a wide margin.
Predominant Minority Control 8
A predominant minority was defined in the TNEC study as consisting of the ownership of 30 to 50 per cent of the stock. 9
Single Family Corporation Percentage of
(approximate number of Ownership
income recipients)
Percentage of
Ownership
100 82 100
1. Du Pont
(about 250)
2. Mellon
(about 10)
Mellon
3. Cudahy
(about 32)
4. Deere (4)
5. Pitcairn
(4 or more)
6. Straus
(14)
7. Kresge (6)
Multiple Family 15
1. Field-Simpson-Shedd
E. 1. du Pont de Nemours
(controlling General
Motors by 23 per cent. )
Aluminum Co. of
America
Pittsburgh (Consoli-
dation) Coal
Cudahy
Deere
Pittsburgh Plate Glass
R. H. Macy
S. S. Kresge
Marshall Field
44
34. 4 50. 9 48. 71 10 34. 12 11 35. 34 12 38. 67 13 44. 24 14
2. Rosenstiel-Jacobi-Wiehe- Schenley Distillers
Schwarzhaupt-Gergross
3. Weyerhaeuser-Clapp-Bell- Weyerhaeuser
McKnight
The largest number of family interest groups was found to use the device of control by means of a substantial minority ownership of stock, which permits controlling positions to be taken in some cases in a wide spectrum of big companies. These were as follows:
Control by Substantial Minority 16
Single Family
1. E. I. du Pont de Nemours &
Co. (family controlled)
2. Crane
3. Colgate
4. Firestone
5. Gimbel
6. McCormick
7. Hanna
8. Palmer
9. Rockefeller
10. Levis
11. Mellon
12. Rosenwald
13. Avery
14. Du Pont
15. Williams
Multiple Family
Corporation
General Motors
Crane
Colgate-Palmolive-Peet
Firestone Tire & Rubber
Gimbel Brothers
International Harvester
National Steel
New Jersey Zinc
Ohio Oil (now
Marathon Oil)
Socony Vacuum Oil Co.
(now Socony Mobil Oil)
Standard Oil of Calif.
Standard Oil (Indiana)
Standard Oil (New Jersey) case
Owens-Illinois
Pullman
Sears, Roebuck
U. S. Gypsum
U. S. Rubber
North American Co. (since
dissolved into constituent
public utility operating
companies)
10
to
30
per cent
in
each
1. Walters-Jenkins-Newcomer
2. Stone-Webster
3. Davies-Woodward-Igleheart
4. Block-Ryerson-Jones
5. Rand-Watkins-Johnson-
Peters
6. Widener-Elkins-Dula-
Ryan
7. Hillman-Shouvlin-Chalfant
S. Miller-Volkman-Schilling
9. James-Dodge-Hanna
10. Procter-Gamble-
Cunningham
11. Lynch-Merrill
12. Kirby-Woolworth-
Donahue-McCann
13. Hochschild-Loeb-
Sussman
Hochschild-Loeb-
Sussman
Small Minority Control 17 Family
1. Moore
2. Zellerbach
3. Crawford
4. Moore
5. Cornish
6. Du Pont-Phillips
7. Swift
S. Warner
Atlantic Coast Line RR
Engineers Public Service Co.
(since dissolved into constituent
operating units)
General Foods
Inland Steel
International Shoe
Liggett & Myers Tobacco
National Supply (oil
well supplies)
Pacific Lighting
Phelps Dodge
(copper)
10
to
30
per cent
in
each case
Procter and Gamble
(soap)
Safeway Stores (groceries)
F. W. Woolworth
Climax Molybdenum
American Metal
Corporation
American Can
Crown Zellerbach
Lone Star Gas
National Biscuit
National Lead
Phillips Petroleum
Swift
Warner Bros. Pictures
We have named fifty-seven single families and combined, cooperating multiple- family groups that exercise control of the largest corporations by majority, predominant minority, substantial minority and small minority ownership. There were thirty-seven single-family-control entities, although some of these, such as the Mellons, Du Ponts and Rockefellers, each controlled several big companies. There were sixty-four single families in the multiple-family groups named, although in some cases the names are not given in this text. Perhaps as many as 400 families composed the various multiple- control groups in the 200 largest corporations.
Some of these companies, as noted, have changed their modus operandi, notably the public utility companies. Some have changed their names, like the Ohio Oil Company. Others have gone out of existence by the merger route. It is neither necessary nor expedient to trace here each company through various subsequent permutations and combinations, for equities are what concern us.
Have the percentage positions of these families remained the same in all these companies? Probably not. In some cases they have undoubtedly increased their holdings, in others they are known to have decreased. Some may even have closed out their holdings. But, as pointed out earlier, if anyone has sold out in one place he has reinvested elsewhere, and possibly to better advantage. He is, therefore, still rich.
Less
than
10
per cent
Knowing the value of the property from the inside, all these groups know when the stock is overpriced and when to sell. As the income-tax returns since the war show, the higher income groups have been steadily taking capital gains, which are taxed at a maximum of 25 per cent, a bargain in relation to the upper income taxes. Wealthy holders usually show a strong tendency to sell some holdings in rising markets and to buy again in declines, thus increasing their percentile position (Standard Doctrine). So their percentages of ownership change from time to time. Sales would not necessarily show on the books of a company. For a man can always sell the stock short.
With the exception only of two as far as I have been able to ascertain, all these families are still extant and still highly solvent. The exceptions are the Harknesses and Arthur Curtiss James (1867-1941), who died leaving no heirs. James left his money to a foundation with the fairly unusual stipulation that the principal was to be distributed in twenty-five years, which was done.
