No More Learning

The Central Association of German Industrialists represented the first enduring coagulation of any large block of industrial in- terests in Germany. Excepting only the short-lived Central Fed- eration of German Industrialists (Zentralverband deutschen In- dustrieller), organized in 1856, there had been prior to 1879, no grouping which could be said to represent any considerable block of raw materials and manufacturing interests per se. The Handels- tag, or Convention of Commerce, founded in 1862 as a central co- ordinating institution for some 160 Chambers of Commerce in Germany, was not set up so as to serve the specialized needs of any broad line of business activity. This the Central Association at- tempted to do.
Its origin is commonly attributed to concern over the protective tariff. By and large the association seemed to be in favor of rela- tively moderate tariff schedules, but at the same time was definitely opposed to any outright surrender to the Franco-British free trade system. 2^ This position was strengthened during the decade of the seventies by virtue of changed international positions following the Franco-Prussian War,^* and by the altered domestic situation
22 One effort which led to the Interessengemeinschaft der zentralen Industriellen- verbande (Community of Interests of the Central Industrial Associations), 1906-8, seems to have enjoyed little popularity.
23 More or less formally inaugurated with the Anglo-French Treaty of Commerce in i860. The Germans followed with tariff-lowering "most favored nation" treaties negotiated with Italy in 1863, Switzerland in 1864, Norway, the Hanse Towns, Spain and the Netherlands in 1865, Austria in 1866, Portugal in 1867. Following the Austro- Prussian War in 1866, the terms of the tariff agreement between the two countries were extended to all other countries with whom special agreements had already been made. The Bismarck tariff represented a complete reversal of this trend.
24 The phenomenal recovery of French industry following the War of 1870 and the payments of reparations to the Germans was paralleled by a correspondingly sharp setback, assuming almost catastrophic proportions within the course of the next three years, in Germany.
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resulting from the great world-wide depression of 1873 and the subsequent beginning of a long period of decline in world price levels.
How import-^nt a role was played by the Central Association in the inauguration of the new protective policies ushered in by the Bismarck tariff of 1879 is a matter of dispute. But at any rate, the Association's principal interest seems at the very outset to have centered primarily in various forms of protective tariff legislation. From tariffs the outlook seems quickly to have expanded to include legislation touching upon a steadily widening range of economic problems.
These activities quickly brought the Central Association into conflict with other interests, especially the chemical industry. It was accused of promoting the welfare of the heavy--apparently quite largely raw materials--industrial field to the disadvantage of the finished goods field. Despite emphatic denials to the contrary, the Central Association was soon faced with organization of rival interests in the form of the Central Bureau for the Preparation of Trade Agreements (Zentralstelle fiir Vorbereitung von Handels- vertragen), established with headquarters in Berlin in 1879. This association seems to have met with but indifferent success, and thus to have been superseded entirely in 1895 by the much more com- prehensive and better organized Industrial Alliance (Bund der
Industriellen).
The purpose of the Industrial Alliance appears to have been
twofold. On the one hand it was to represent the interests of the finishing goods industries, which had been more or less neglected, if not openly opposed, by the Central Association. On the other hand, it was apparently hoped that cooperative relationships could readily be established between the two organizations on behalf of common industrial interests. ^^ Some at least expected either that the Alliance would absorb the Central Association or that the two would at some time in the future be fused into a single body.
Whatever the founders' expectations, the Industrial Alliance,
25 "The Bund was organized in 1895 as the result of a demand for an organization representing the interests of manufacturers of finished products, and also 'because it seemed desirable to find a liberal and general basis for the joint representation of commerce and industry as a counterpoise to the Agricultural Alliance. '" American Industries (Feb. 15, 1903), p- 3-
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thanks to comprehensive membership basis,^(R) low dues, and vigor- ous leadership, quickly became the leading industrial organization in Germany. Dedicated to "protection of the common interests of German industry as well as cooperation in all questions affecting it," the Alliance proceeded to the formation of legislative pressure blocs and the promotion of a comprehensive member service supplemented by a general public relations propaganda cam- paign.
Though friction with the Central Association of German In- dustrialists rendered fruitless many attempts to achieve a "united front," the exigencies of war ultimately compelled what the efforts of peacetimes could not achieve. As indicated above, the first real united industrial front came with the establishment of the govern- mentally regulated war Committee of German Industry. Further experience with the German Industrial Council paved the way for eventual union, achieved immediately following the revolu- tionary interlude," in the establishment of the National Federa- tion of German Industry (Reichsverband der deutschen Industrie --RDI).
The new organization swiftly grew to a position of commanding importance in the organizational fabric of German industry. The Federation brought together "445 national, 58 regional, and 70 local associations, 1,363 individual members, and 70 Chambers of Industry and Commerce. " ^^ Via such memberships, cartel affilia- tions increased from some 300 around 1922 to more than 1,500 during the middle twenties. As organized in 1931, members of the Federation were divided into 19 divisions, subdivided into 32 func- tional groups (Fachgruppen), in turn made up of 889 national, re- gional, and local trade associations and chambers of commerce and industry. -^
Spectacular as the growth indicated by such figures may appear, they fail to give any clear idea of how comprehensive and all in-
26 Membership was open to the following: manufacturing concerns in any field, independent engineers and chemists, industrial associations, leagues and federations. A special category of "extraordinary members" need only have German residence.
27 During the revolutionary interlude a preliminary form of what under the Nazis became the Labor Front was evolved; this was known as the "Works Committee of Industrial Employers and Employees of Germany. "
28 Wagenfiihr, op. cit. , p. 2.
29 Jahrbuch der Berufsverbande im deutchen Reiche, pp. 46-48.
32
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elusive this organizational meshwork had beeome by the early thir- ties. A couple of illustrations will suffice. Group 10 of the Federa- tion of German Industry is designated Machine Building. It included the following organizations: ^?
Federation of German Machine Building Associations , Federation of German Machine Tool Manufacturers
German Cutting and Stamping Machinery Association Federation of German Wood-Working Machine Manufacturers Association of Textiles Machine Makers
Federation of German Agricultural Machine Industries German Locomotive Alliance
Federation of German Steam-Driven Machine Producers Federation of Pump and Pump-Machinery Makers Special Federation of Gauge and Auxiliary Machinery Federation of Elevator Makers
Association of German Railway Car Builders Paper-Making Machinery Federation
Association of German Printing Machinery Producers Brewery Machinery Association
Federation of German Milling Machinery Makers
Association of Crusher and Dressing Mill Machinery Producers Association of German Armature Industries
Federation of German Appliance Making Industries
(76 Additional Associations)
Largest and most important of these is the Federation of German Machine Building Associations (Verein der deutschen Maschinen- bau Anstalten--VDMA). Not only is it the largest, but it is in turn a central association of the machine-building industry which in- cludes the bulk of all firms producing machinery in Germany as well as most of the other associations in the machine-producing field such as those listed above. Founded in 1892 with 29 concerns employing 13,000 workers, by 1930 it included some 1,424 firms, employing 359,000 workers. If one adds to those, members of some 81 affiliatedspecialtradeassociations,theVDMAinthatyearrepre- sented 2,150 firms employing 450,000 workers, or around 80 per- cent of all producers of machinery in Germany. ^^
The VDMA in turn divided its members into 13 "functional or trade groups" (Fachverbande), each made up of one or more "spe-
^olbid. , p. 47.
31 Exclusive of repair shops and firms having less than 25 workers. Wagenfiihr, op. cit. , p. 113. /
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34
cial" or trade associations. The central office of the VDMA served in three distinct capacities. As organizer, it set as its task (i) "pro- motion of the organic federation of German industry in special associations of individual trades and groups of trades"; (2) the performance of a wide range of service functions on behalf of membership, a service ranging from such things as the supply of routine information and the setting of uniform cost-accounting methods to promotion of cartels and the exercise of political pres- sures; ^^ and (3), the working out of special agreements and liaison activities with other similarly organized industries. ^^
The special or trade groups joined to the VDMA were organized along lines similar to the parent or central association. Through this machinery there was created a vast, inclusive, and tremen- dously efficient apparatus for centralizing information relating to every facet of technical, commercial, and political questions of every member directly or indirectly associated with the VDMA. In many respects members were free to accept or reject any portion of the services or the advice given on most points where interests were joined. But the history of the organization likewise shows that to an increasing extent agreements were leading to legally enforce- able compacts (cartel agreements and intercartel compacts such as the Avi-Abkommen) at the same time that the roots of the network
32 According to Wagenfiihr, op. cit. , p. 1 15, the work of the central office is divided as follows: I. Special problems of economic science, cartel problems, publications, editorship of the economic sections of the journal, Maschinenbau; II. Trade agree- ments, Tariff relations with foreign markets and competitive conditions abroad; III. German import tariffs; a) general questions and raw materials duties, b) duties on machinery; IV. Raw materials supply for the machine industry; V. Problems of transportation; VI. Taxes, special imposts, the Young Plan; VII. Banking and credit problems, conditions of payment, questions of the internal market; VIII. Legal ques-
tions, delivery terms, protection of legal rights; IX: a) Exhibitions and fairs (Gen- eral Machine and Appliance Making in Leipzig), advertising, b) information on sources of customer demand, VDMA address book; X. Technical-economic questions (inclusive of information on work materials, accident prevention, standards, pro- fessional training; XI. Cost accounting and book-balancing, economical conduct of business, specialization; XII. Insurance questions, insurance office of the machine in- dustry; XIII. Organization of the Machine industry, in particular the establishment of special trade associations; XIV. Statistics.
33 These include special agreements with the iron-producing industry, the cast- iron consuming association, the electro-technical industry, etc. Especially interesting is the so-called Avi Abkommen, or Avi-agreement, concluded between the steel in- dustry and the machine-tool industry; it called for special reductions in the price of steel used for machinery intended for export.
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were reaching down through the entire structure o? the industry. While the VDMA is not directly typical of more than the better- organized of the member groups of the National Federation, still the basic trends exemplified in its history are coherent with those shaping the organizational patterns of the less well coordinated in- dustries. And the speed with which the network was reaching down- wards from the large industries to the small, and outwards to include issues affecting the entire range of business, was truly phe-
nomenal.
A second illustration relates to the functional division of labor
between the Federation of German Industry and its sister organiza- tion, the Federation of German Employers' Associations (Vereini- gung der deutschen Arbeitgeberverbande), one of the member groups of the Central Committee of German Employers* Associa- tion mentioned above. But while the latter organization was a loose, more or less paper proposition, the Federation of German Em- ployers' Associations was a compact, well-organized body tied in directly with the membership of the National Federation of Ger- man Industry, made up almost entirely of manufacturing enter- prises belonging to the RDI, fully conscious of the role assigned it, and fully prepared to cooperate with the RDI, to the full extent of its ability. ^*
First organized in 1913 as a federation of some 61 national em- ployers' associations possessing some 249 subsidiary (mostly re- gional and local) associations, it grew by 1929 to include 180 Main or National employers' associations (Hauptverhdnde) having 2,900 subsidiary associations. By this time the division of labor with the RDI was fairly clear-cut and complete; the employers' association took care of all labor issues and the RDI of all more or less strictly economic and commercial problems. Each in its appropriate sphere constituted a well-nigh all-inclusive body in the industrial life of Germany as a whole. But while functionally separated, the two bodies appear to have worked in the closest harmony with each other. Policy direction, however, rested with the RDI. Though made up of the same basic membership ranks, crucial decisions
34 The Federation of German Employers' Associations and the RDI were, by their charters, committed to collaboration. See Neumann, op. cit. , pp. 236, 237.
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affecting both bodies naturally gravitated into the hands of the RDI, for the simple reason that specifically business interests deter- mined the position on labor, social issues, and the law.
It would be possible to continue tracing the organizational ramifications of the RDI almost indefinitely, and to show how its influence was dominant in most of the leading municipal and re- gional chambers of commerce and industry, how its officers swayed the whole of the elaborate machinery set up for the purpose of rationalizing industrial and commercial processes under the aus- pices of the National Board for Economy and Efficiency (Reichs- kuratorium fiir Wirtschaftlichkeit),^^ and how its influence cumu- latively permeated the rapidly expanding system of semigovern- mental corporations, control boards, and advisory offices established during the Social Democratic interlude. Yet such a pursuit would serve only to fill in details which would not at any important point seriously alter the larger picture as given.
It was this system which under the Nazi regime was made over into the still more highly centralized National Industry Group.
THE NATIONAL INDUSTRY GROUP (Reichsgruppe Industrie)
The enabling law for the Preparation of the Organic Recon- struction of Germany's Economic System (February 27, 1934) was designed to "serve the purpose of eliminating the excessive organ- ization of German business hitherto prevailing, with its resulting inactivity, as well as the obstruction and disturbances caused by
the rivalry of individual organizations. It is planned to carry out a comprehensive, strict, and uniform organization of all parts of in- dustry. " ^^ In effect the law cleared the way for the following: (1) extension of the organizational network to include all business, major and minor, throughout the entire Reich, membership now being made compulsory; (2) elimination of duplication, overlap- ping, and working to cross-purposes within the main lines of policy
35 This is true even though the National Board was supported by direct govern- mental subsidies. Subsidiary to it were The National Board for Agricultural Tech- nique, The German Standards Committee, The National Committee for Conditions and Terms of Delivery, The Committee for Economical Production, The Committee for Economical Management. Each of these, in turn, were central coordinating bodies for all activities in the entire Reich, falling into their respective bailiwicks.
^^News in Brief, II, No. 5 (March 15, 1934), p. 2.
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formulation and control; (3) vesting power to compel some degree of compliance in semi-autonomous "self-governing" bodies pos- sessing at least semilegal authority.
Under the new arrangement the National Federation of German Industry became, as the National Industry Group, one of seven National Groups ^^ dovetailed into the National Economic Cham- ber, and placed directly under the National Economic Minister. The transformation did not mean that all the old machinery was necessarily scrapped. For example, none of the leading national, regional, or local trade associations or central associations such as the VDMA were abolished. ^^ They might remain, much as before, as group pressure agencies, but with this provision, that all firms in each respective industry, member of the trade association or not, must belong to the appropriate division or subdivision of one of the National Groups. Contrariwise, all the functionally separated employers' associations were liquidated simultaneously with the dissolution of the trade unions, and the two sets of interests were fused together in the National Labor Front. The Groups--as with their predecessor bodies--were left with strictly business and tech- nical problems on their hands.
Just how the National Industry Group has been fitted into the new control structure can be simply explained. At the top of the control pyramid brought together under The Minister of Eco- nomics is the National Economic Chamber, "organized along two main lines, functional and regional. The first is a purely vertical division, including all enterprises and business associations falling into any trade or industrial group. There are six of these alto- gether. Each of the National Groups is in turn subdivided into, first. Economic, and then into Trade Groups (Fachgruppe) and Subtrade Groups (Fachuntergruppe). ^^ In the single case of the National Industry Group there was an intermediate step between
37 The others were Commerce, Banking, Insurance, Handicrafts, Power [and tourist industry]. Excepting only power, these groups parallel the appropriate divisions of the Central Committee of German Employers' Associations, the only previously ex- isting central policy-coordinating body for all German economic activity. See Robert A. Brady, The Spirit and Structure of German Fascism (New York, 1937), pp. 296-311.
38 Whether or not this generalization includes the National Federation of German Industry itself I have been unable to determine. Competent authorities seem uncer- tain, and though it seems a point simple to check, I have thus far been unable to do so.
39 See Neumann, op. cit. , pp. 242, 243.
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the Economic and the National Groups, known as 'Main Groups. ' " *? The division into Main Groups was, however, abol- ished about 1938.
Taking all the National Groups together, we find a total of ap- proximately 43 Economic Groups, 393 Functional Groups, and 6 national transportation groups directly under the minister of trans- portation. The overwhelming importance of the National Industry Group in this arrangement is shown by the fact that 28 in the first and 222 in the second of the group classifications fell into its bailiwick.
The regional organization brings all groups, national, trade or "functional," resident in each of 14 provinces into 23 Provincial Economic Chambers. *^ Each of these regional Chambers has powers parallel with those of the National Economic Chamber. *^ This is true also of the regional divisions of the several classes of Groups in relation to their respective national organizations.
Avoiding further detail so far as possible, the picture presented by the new realignment of German economic organization can be summarized as follows: (1) The old trade associations, business
40 Ibid, p. 300. There were seven of these main groups: (1) Mining, Iron and other metal Ore Production; (2) Machine-Building, Technical, Optical, and Fine Mechani- cal Industries; (3) Iron, Plate, and Metal Wares; (4) Stone and Earth, Wood, Build- ing, Glass, and Ceramics Industries; (5) Chemicals, Technical Oils and Fats, Paper and Paper-Making; (6) Leather, Textiles and Clothing; (7) Food Products Industries.
38
41 These are as follows: Economic Province
East Prussia
Silesia
Brandenburg Romerania
North Marx
Lower Saxony Westphalia Rhineland
Hessia
Central Germany Saxony
South-West Germany Bavaria
.
Headquarters of Chamber Konigsberg
Breslau
Berlin
Stettin
Hamburg
Bremen and Hanover Dortmund and Dusseldorf Cologne Frankfort-on-Main Magdeburg and Weimar Dresden
Karlsruhe and Stuttgart Munich
Saarbriicken
Saar
There are five more in Austria and Sudetenland.
42 The function of the provincial economic chambers are even wider than those of the National Economic Chamber. They are also clearing offices (Ausgleichstellen) for the distribution of public contracts among businessmen domiciled in their territory. See Neumann, op. cit. , p. 245.
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39
federations, alliances, etc. --excepting in some cases only the peak or central associations (Spitzenverbdnde)--exist much as before. But whether membership still remains voluntary is not certain. The trade association may properly be regarded as a policy- initiating, or policy-promoting body. (2) Much as under the Ameri- can NRA, when trade associations were in large part transformed into Code authorities without losing their independent status, so the German business associations are organized into Groups. Mem- bership in the appropriate Group, however, is compulsory for both members and non-members of trade associations. The functions of the Group are to discuss, coordinate, and execute policies in the control of price and raw materials and in the distribution of orders and the supervision of cartels.
(3) The Group arrangement represents a minor alteration in the preexisting system of groups or divisions of the various national and central coordinating machinery (Spitzenverbdnde), of which the National Federation of German Industry was typical. (4) Cartels whose policies were largely coordinated through the Cartel Bureau (Kartelstelle) of the National Federation of German Industry are now coordinated through the machinery of the National Industry Group. *^ The same holds for cartels in fields of business brought into the other coordinate Groups of Commerce, Banking, and the like. (5) Power is vested in both the National Economic Chamber and in the various Provincial Economic Chambers to make deci- sions in accordance with various types of enabling legislation. This power is derived from the Minister of Economics (Reichswirt-
schaftsminister) and is at least semilegal in effect. This hierarchy then provides the policy-enforcing or policy-executing machinery of German business.
THE CENTRALIZATION OF POWER TO DETERMINE POLICY WITHIN THE NEW NETWORK
It may be observed at the outset that the leitmotiv of the Nazi organizational plan is complete centralization of power to deter- mine policy in all cases, with respect to all activities, and with re- gard to all phases or aspects of policy. ** This complete antithesis of
43 On the relation between groups and cartels (which is critical) see the reform edict of the minister of economics of Nov. 12, 1936, in Neumann, op. cit. , p. 272.
4* Thus, since May, 1942, all labor issues are united in the federal Trustees of
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.
? democratic organization is commonly called "Fascist Totalitarian- ism," and is said to rest upon three basic principles: The Leader Principle, the Authority Principle, and the Total Principle. In effect these mean simply that all society, all occupations, all busi- nesses are organized into all-inclusive hierarchies of control and governed in such a way that (a) all competencies are appointed from above and held at the discretion of each superior office in the hierarchy, that (b) all duties and all responsibilities are set from above, and that (c) each superior authority reserves the right at will to extend control to every phase and facet of the activities of each inferior body or grouping.
What this means to the economic organization of the country in practice may be readily shown.
1 An increasing number of combines or corporations are or have become partnerships (Otto Wolff), or Kommanditgesellschaften (wherein one partner is fully liable while the other is restricted to his--or their--shares, as in the case of Friedrich Flick since 1937); in other words they are limited liability companies. *^
2. Within the individual units, the power of the management as against (a) labor, (b) stockholders, and (c) the general public has been immensely enhanced, (a) Within factory walls the manager or his delegate is recognized by law to be the "Leader," and the employees to be his 'Tollowers. " His formal power ranges over all activities of and all relations with labor on the job. *^ (b) The law which limits dividend disbursements to 6 percent, when coupled to the de facto practice of cooptative recruitment of directorial and managerial ranks and the de jure ''leadership" principle, in effect
Labor, under the Ministry of Labor (headed by Fritz Sauckel), the much vaunted labor front being merely an "educational"--terrorizing--agency. All business issues are centralized in the National Economic Chamber, all agriculture in the National Food Estate, all cultural activities in the National Chamber of Culture, all provin- cial government in the Reich, all local government in the Communal Thing {Ge- meindetag), all executive, legislative and judicial authority in the Fuhrer.
45 The reasons are as follows: a) because of internal financing, the appeal to the capital market is less important; b) the three above-mentioned forms are not subject to publicity.
46 Subject only to the superior competent authority of the Labor Trustees, the employer under law has the right and the power to determine (1) hours, rest pauses, etc. , (2) time, amounts, and nature of payment, (3) basis of calculation--day, hourly, or piecework--of wages, (4) nature, amounts and method of collection of fines, (5) termination of employment (except as limited by statutory rules), and (6) "The utili- zation of remuneration forfeited by the unlawful termination of an employment. "
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transfers the run of the stockholders into a class of "rentiers," de- prived of all power to participate in policy formulation on any im- portant issue, (c) And, finally, the new regime encourages the ex- tension and exercise of cartels and cartel-like controls in which there is no effective public representation whatsoever.
*^ Here is the ultima ratio of the process described by Berle and Means as the "splitting of the property atom. " *^
3. The big concerns have been encouraged to become bigger. Amalgamations, combinations, have been promoted rather than retarded in practically all fields. Particularly noteworthy are the expansion of such firms as the Dye Trust (I. G. Farbenindustrie A. G. ), which has become almost a complete monopoly in several of the more important heavy and light chemical lines; the Krupp ar- mament works, which has taken over much of the giant Skoda plants in former Czechoslovakia; and the great new Hermann
Goringwerke, which has taken over portions of the Thyssen inter- ests and leading Austrian iron and steel works. But the same tend- ency is found in shipping, local and river transport,*^ and many of the light industries--notably textiles.
4. Much the same holds for cartels. As Professor Pribram has pointed out, despite "repeated official declarations intended to dis- courage the spread of monopolist tendencies . . . up to the pres- ent the cartelization movement seems to have held the upper hand over any admonitions to the contrary. " ^^ Under the new laws promulgated early in the Nazi regime (in particular that of July 15,
1933) the number of cartels, the range of policies brought under
47 That is, no direct representatives of consumers, cooperative organizations, work- ers, or any other affected portion of the public.
48 De facto there is next to nothing to distinguish the average German stockholder (that is, the typical small stockholder, unless included for one reason or another in the small "inside" directorial or managerial circles) under the new regime from the typical French "rentier" class or the holder of German government bonds.
49 Not only have amalgamations been encouraged within these fields--e. g. , the formal fusion of the North German Lloyd and the Hamburg Amerika line--but there has also occurred a good deal of intraservice fusion, notably between rail and ter- minal trucking facilities, and between river and canal fleets and land transportation. An excellent and very compact summary of the concentration movement under the Nazi regime is given lay Dr. Giinter Keiser, "Der jungste Konzentrationsprozess," Die
Wirtschaftskurve, II (1939), 136-56, 214-34. See also Maxine Yaple Sweezy, "Distribu- tion of Wealth and Income under the Nazis," Review of Economic Statistics, XXI (Nov. , 1939), 178-84. For additional material on the growth of combines see Neu- mann, op. cit. , pp. 288-92.
60 Karl Pribram, Cartel Problems (Washington, D. C. , 1935), pp. 262-63.
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cartel controls, and the rigidity of the controls have all increased markedly. Compulsory features have been added in many cases, requiring membership of hitherto outside firms, facilitating the establishment of compulsory selling syndicates and greatly ex- panding control over such things as plant capacity, pricing policies, cost-accounting methods, etc.
An appraisal of the speed with which cartel activities have grown ^^ is greatly complicated by the practice followed under the Nazis of blanketing entire industries with cartel-like controls of one sort or another, the specific purposes of which may vary a good deal from case to case, but which make it next to impossible in many instances to tell where cartel policies end and governmental controls begin. All cartel price-control measures are, for example, under the control of a National Price Commissioner, who bases his decisions in almost every case on the advice and the proposals of the groups as coordinated by the National Economic Chamber. ^^ j^ a general way it may be said that the Nazi government has operated so as to universalize the cartel type of controls over the whole of the
German national system in much the way that Colbert attempted to expand guild controls over the whole of the economic life of the ancien regime,^^
61 E. g. , "According to a report published by the German Institute for Business Cycle Research (in its Wochenbericht of Dec. 6, 1933), between July and November, 1933. about 30 cartels were reorganized, mainly by the inclusion of outsiders; and about 40 lines of industry changed from free competition to various systems of mar- ket control. " Ibid. , p. 263.
52 See the discussion in Neumann, op. cit. , pp. 307-9.
53 "Specifically this means legal authority to do a number of things: control in- vestment, whether by establishment of new plants or expansion of old; control bor- rowing on the market or increase in capital by self-financing; fix prices, quotas, and penalties; protect small enterprises, etc. Under these authorities, for example, con- struction of new plants was forbidden in the chalk industry. For differing period of time, production was limited and new plant construction was forbidden in the fol- lowing industries: jute-weaving, paper and pulp, textile goods, cement and hollow glass, cigar and cigar-boxes, high tension electric cable, zinc-rolled products, clocks and watches (with the exception of wrist-watches), nitrogen, superphosphates, stone objects and materials, peat moss, radio, smoking tobacco, horseshoes, hosiery dyeing, rubber tires, white lead, red oxide of lead, litharge, white zinc, lithopone, staining and earth dyes, pressed and rolled lead products, tubing, and insulation in a num- ber of cases, notably in such industries as cement, hollow glass, zinc-rolling, paper,
paper cartons, and stone objects. In the smoking-tobacco industry measures were taken to protect small producers by preventing expansion of the large. " Brady, The Spirit and Structure of German Fascism, pp. 340-41. See also various issues of News in Brief; Heinz Mullenseifen, Von der Kartellpolitik zur Marktordnung und Preisiiber- wachung (Berlin, 1935); and Marktordnungsgrundsatze der Reichsgruppe Industrie (undated).
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But while some of these measures are designed specifically to de- fend the interests of small business, nevertheless, in the main, the cartels may be regarded as "self-governing bodies" typically dom- inated by the large concerns. ^* Consequently the expansion of the cartel apparatus serves--in contradistinction to the pre-Nazi con- dition in many respects--to enhance the power of the great com- bines by rounding out and supplementing the controls which they require for the full instrumentation of their monopolistic inter- ests; their power is subject to check only by the regulatory power of the government.
5. Correlative with the outward expansion of the business or- ganization network through the Groups to include all industrial, commercial, and financial activity in the Reich has gone a reshap- ing of lines of control into a definite hierarchical pattern, which gathers together all effective power to determine and enforce deci- sions and center them in the upper reaches of the pyramid. Within the central offices the following facts determine the typical location of policy-determining power; (a) the center of gravity in the Na- tional Economic Chamber unquestionably resides in the member- ship of the National Industry Group; ^^ (b) the center of gravity in the National Industry Group with equal certainty is located in the heavy industries; (c) the heavy industries are led in every sig- nificant respect by the giant combines. These facts must be coupled to the rule that the intent and effect of the changed conditions in the general economic system at large is to (d) formalize and uni- versalize the cooptative principle in the recruiting of executive staffs. Keeping in mind, then, that the hierarchical principle of
5* "The class that has fared the worst (under the Nazis) so far is the middle class --officials, small shopkeepers and artisans--who were Hitler's first enthusiastic fol- lowers. . . . The shopkeeper, who hoped to get rich from the elimination of Jewish competition, has been forced to absorb the difference between increased wholesale and fixed retail prices, and small artisans are being crowded to the wall for lack of raw materials. . . . 34. 7 per cent of 375,741 retailers net less than 125 marks a month (fifty dollars at official exchange rates), which is considerably less than a skilled worker receives. As a result there is a great dying off of independent middle-class enter- prise. . . . German industry is undergoing a process of concentration which tends
to concentrate industrial control into a few mammoth concerns. " New York Times, Sept. 3, 1937. See the discussion in Neumann, op. cit. , p. 274, and on the elimination of small businesses, ibid. , pp. 263-65, 282-84.
55 This can be shown in a number of ways; by reference to leading officers, by identity of policies initiated and carried through; by the dominance of the heavy industries in rearmament, war, and reemployment programs, etc. The analyses of the personnel have been made by Neumann, op, cit. , pp. 388-92.
43
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organization in Germany (i) identifies at each point of delegation executive with judicial and legislative powers, and (2) traces all authority from the top down (all responsibility from the bottom up), it will be seen that the net effect is--subject only to govern- mental check--^^ to locate economic hegemony in the closely-knit managements of the large combines in the heavy industries. (R)^
6. The specific doctrinal content of the propaganda fed out to all parties of interest through the media available to the new con- trol apparatus is in many respects indistinguishable in basic as- sumptions, its view of human nature and society, its criteria of truth and falsehood, its social valuations, and its leading appeals and arguments from that which has been long characteristic of the "welfare capitalism" of such huge industrial combines as the Dye Trust, Krupp, Siemens and Halske-Siemens-Schuckert, and the A. E. G. The main differences are twofold. In the first place, propa- ganda directed to different interest groups--labor, the general public, farmers, and others--has been integrated, coordinated, and in large part centralized. And in the second place, the propaganda has been generalized to cover the whole of the German business system.
Thus the Nazis have provided means for achieving the ultimates in the tendencies underlying the organizational efforts which pre- ceded their entrance onto the scene. The pattern of control com- mon to all large-scale business enterprise is here expanded so as to encompass the entire range of economic activities, and to regiment and direct all parties of interest throughout the entire country. This hierarchical pattern--coupled with the concept of occupa- tionally and functionally self-contained, all-inclusive, definitely circumscribed, and centrally directed trade and group categories which are ranged in a graduated order of power, duties, and im- portance so as to include the activities of all Germany--constitutes the essence of the "Corporate State. " ^^
56 See chapters VIII and IX.
57 Excepting, in part only, agriculture, transportation, and handicrafts.
58 " 'Corporativism' is chiefly preoccupied with securing a smooth and undisturbed
function of Capitalism by bringing about, in each branch of industrial production, a benevolent harmonization, a renunciation of class-war, between owners' associa- tions and workers' syndicates. " Aurel Kolnai, The War against the West (New York, 1939)' P- 325- This is a half-truth which underestimates the importance of the "cor- porative" idea for other purposes. Added to Kolnai's statement is the idea of more
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"status capitalism" and the state
At no point is there so much confusion and difference of opinion on the National Socialist system as in the nature of the relationship between the state and capitalistic enterprise. Detailed knowledge of the facts in and of themselves do not make the picture any easier to summarize for the uninformed reader. Certainly a great deal of capitalistic enterprise has been and is being liquidated in whole or in part. Many of the more important entrepreneurial activities and powers have been curtailed or eliminated entirely. Many fields of economic activity have been wholly preempted by the govern- ment, and the network of controls emanating from the leading offices of the state reach into every nook and cranny of the nation's economic life.
Three additional developments make the picture doubly dif- ficult to interpret properly. First, the Nazi propaganda itself is ostensibly, and in many respects emphatically, anticapitalistic. The Nazis claim, in fact, to have abolished capitalism entirely, and to have established in its place a pre-Romanic system in which prop- erty rights held in fee simple are transmuted into the equivalent of the "fixed family inheritance," and where the content and quality of inheritance rights are (ultimately) fixed by the state to correspond with a hierarchically arranged system of social or class gradations in turn founded upon occupational differentiations as determined by bio-social inheritance factors. This idea they refer to as the Stdndestaat--literally a State of Estates, or of classes, or Social- economic Castes. ^^
Secondly--and perhaps more important--the infiltration of con- trols exercised from central headquarters, state or private, effects a metamorphosis in the very nature of the problems at stake. Prob- lems of monopoly controls, becoming politicized as an incidence to the wielding of coercive authority, are necessarily handled with a view to many factors other than mere price and marketing advan-
or less self-contained, employer-controlled, hierarchically arranged, occupational categories which serve for modern industrialism in much the same way the medieval guilds did for handicraft societies. See Chapter VIII and see also Neumann, op. cit. , pp. 228-38, "The Myth of the Corporate State. "
59 See, e. g. , Kolnai's discussion of the writings of Hans Bliiher, Houston Stewart Chamberlain, Nietzsche, and others, particularly Chapters I, II, III, VII, and VIII.
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tage. Only the historically untutored, or politically and philo- sophically naive could suppose that the power phase of coordinated monopoly controls would be handled in terms of "duopoly," "oli- gopoly," "imperfect competition," and the like. (R)? The proper terms of reference are those associated with what Weber refers to as BiXrokratie, Patrimonialisrnus, Patriarchalismus, and Feudalis-
And finally, the outbreak of the Second World War has placed Goring's much publicized Four Year Plan (Vierjahresplan) in the limelight, seeming thereby, to call for recalculation of all the varia- ble factors in an already overly confused picture. This complication is doubly baffling for the simple reason that it is so very difficult to learn much about the Four Year Plan--or, indeed, to learn whether there is even the substance of anything more than a comprehensive plan of military conquest at all.
Without entering very far into the issues involved at this point, it is possible to clarify the picture--even in the absence of much needed evidence at points--by recalling to the reader's mind that the Nazi state is made up not of one single central controlling bureaucracy, but of at least four such bureaucracies; these are, re- spectively, the civil service, the army, the party, and the economic. While differing from each other in points of view and interest in many places, these four bureaucracies are not separate and inde- pendent, but interlaced and interdependent. Civil and criminal law, and the whole of the legislative, executive, judicial and ad- ministrative machinery of the Third Reich have been centralized, unified,(R)^ ^nd brought into line with the basic hierarchical pattern of the Stdndestaat. Into this fabric has been introduced the Nazi party bureaucracy; it is at present almost impossible to determine
60 Irrespective of the logical or formal merits of such works as Edward Chamber- lain's The Theory of Monopolistic Competition (Cambridge, Mass. , 1933) or Joan Robinson's The Economics of Imperfect Competition (London, 1933), writers on eco- nomics have committed the fatal error of supposing that the simple hedonism and the circumspect marginalism of competitive equilibrium analysis could be trans- posed or merely modified by monopoly forms. The maximizing of profits rests in- creasingly on entirely different influences, powers, and factors than they are led to suppose. And even this objective may be so fundamentally altered by accretions to power, and by compromise with other desiderata of control, as to be almost entirely incompatible with the presumptive model behavior these authors are led to assume for their genus hotno monopolisticus.
61 Max Weber, Grundriss der Sozialokonomik (1925), in particular, pp. 650-753.
62 See Karl Loewenstein, "Law in the Third Reich," Yale Law Journal, XLV (March, 1936), 779-815.
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where one begins and the other ends. (R)^ The Nazification of the army, following the removal of von Fritsch and the old guard just before the invasion of Poland, served to fuse this rapidly expanding bureaucracy jointly with the state apparatus and the Nazi party. The organization of the National Economic Chamber, and its cor- relative labor, agricultural, and cultural "estates," ^* completes the picture by dovetailing with the other hierarchies at a thousand and one points, personalities, machinery, competencies, and functions.
The net product of this four-way fusion has been referred to by people interested in the economic angle as "status capitalism," meaning a monopolistically organized, militaristically minded, hierarchically graduated and "feudalistically" directed (R)^ autocracy in which the upper social reaches, after having made the necessary compromises with the nouveaux puissant demagogery of platform and political tract, band together to constitute a governing class within a state expanded on a footing highly reminiscent of Plato's microcosmic model, the Sparta of Lycurgus. It is in this setting that the concept of the "Junker" has come to the fore again. ^^ For the term "Junker" has been generalized to mean not merely the old landed aristocracy of the Prussian Marches, but something more nearly like the term "Tory" in England ^^--literally, a "nature- determined" and self-contained "ruling class. " (R)^
63 This holds, for example, with the whole of the Party Tribunal system, which has been incorporated into the regular legal machinery of Germany (Loewenstein, op. cit. ). An even more striking example is the incorporation of the NSBO (National Socialist Business Cell Organization) directly into the Labor Front. Similar examples could be multiplied almost indefinitely.
64 Analogous to the National Economic Chamber (which includes all economic activities and interests in Germany, transportation alone excluded), are the Na- tional Food Estate, which comprehends all agricultural activities and interests, the National Chamber of Culture, responsible for the whole "cultural" program, and the Federal Trustees of Labor (under the Ministry of Labor), the coordinating body for the interests and activities of labor.
65 Meaning, specifically, a suzerain relationship with each competency held "in fief" on a pseudo-contractual basis, fixed in custom, and resting upon means for in- suring throughout the social pyramid fixity of social station, fixity of occupation, and ultimately a high degree of fixity of residence.
66 See Karl Brandt, "Junkers to the Fore Again," Foreign Affairs, XIV (Oct. , 1935), 120-34. Brandt, of course, means more than is implied above. Actually, he finds a steady and cumulative infiltration of the old Junker ranks into the civil, military, economic, and party ranks--many of them in leading positions.
67 In fact, this is exactly what the Nazis (before the outbreak of war with England) defined the word "Tory" to mean. It is no accident that the top-flight finishing schools for Nazi party leaders reserve for their graduates the honorary title of "Junker. "
68 Actually, as in Plato's famous illustration of the metals and in Pareto's concep-
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Whereas in a feudal society the economic resources of the baronry were rooted in agricultural holdings, in the adapted capitalism of the Third Reich the gigantic strength of the new "Junker class" is drawn from industrial, commercial, and financial properties. And to the extent that the feudal nature of the economic relationships in medieval society was not compromised by virtue of the fact that the nobility possessed legal, civil, and military rights in addi- tion to the economic, so also this new fusion called "Fascist Totali- tarianism" is no less an expression of monopoly controls simply because similar elements are mixed into the "Junker" social com- position. ^^
In fact, a carefully reasoned analysis of the past developments summarized in this chapter will show not only that the Nazi state grew by fairly normal processes out of the evolution of capitalistic forms in Germany, but also that the bureaucratic fusions traced out above are not only consistent with, but absolutely essential to, a continuation of such previous lines of growth. Without them, capitalism in Germany unquestionably could not long have sur- vived under any circumstances. With them, it may be enabled to endure for a considerable period of time in the future.
From the standpoint of practical propaganda, it seemed advan- tageous to Nazi officialdom to describe this new arrangement as noncapitalistic, or even anticapitalistic. The "profit motive," it is said, no longer dominates business decisions. In its place has come "service to the community. " This is, of course, exactly what is meant by the American authors, Mooney and Reiley, when they lay down the dictum on behalf of highly organized American business that the real function of capitalism is to make "profits through service, profit in this sense meaning the compensatory material gain or reward obtained through service. " ^^ It reflects a point of view which is consonant with that expressed in the famous "You and Industry" series of the National Association of Manufacturers.
tion of the "circulating elite," provisions are made for especially gifted outside of- the-ruling-class recruits to rise to the top. These are regarded, however, primarily as sport cases--exceptions to the rule.
69 Of course, it may be correcdy upheld that this analogy with feudalism is un- happy, because feudalism is opposed to bureaucratization and contains the essential element of personal relationship. Nevertheless, it would seem to illuminate the na- ture of the property holdings and spheres of economic control in the Third Reich.
70 James D. Mooney and Alan C. Reiley, Onward Industry! (New York, 1931), p. 342.
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In making "business responsible to the community" through the revamped control network of the "'new social order," the Nazi leaders profess to be promoting "self-government" or "self- management" in industry. It is also interesting to note that much of the time spent by officials in German central business offices has to do with what they term problems of "fair trade practices," "fair prices," rules against "selling below cost," and the like/^
Now an inevitable corollary of making such a system of busi- ness "self-management" work is the possession of the necessary power to punish offenders. It was on this particular rock that the price and production control measures of NRA were rent asunder. The Nazis have made no such mistake. That many concerns would be liquidated when the central control apparatus possessed the necessary power to force "free riders" into line was inevitable. This accounts for many of the cases of forced liquidation of small con- cerns. But even the large and giant enterprise is not necessarily exempt from the laws of its own making, for the simple reason that domestication of warfare does not necessarily do away with the basis of conflict. It may, however, change a good many of the rules. Thus many of the largest businessmen in Germany were forced to
hand over their properties to competitors because they were Jews. And Thyssen, of the heavy industries, apparently chose to play a lone hand and got caught in a combine which he was unable to overcome. Like Schacht, at the critical point he played with the wrong crowd of "insiders," and, as has happened to many unsuc- cessful promoters in American business (Fisk, Drew, Gould), was forced outJ^
71 See in particular Marktordnungsgrundsdtze der Reichsgruppe Industrie, a primer of rules for "regulating the market" according to the new "fair trade practice rules. "
72 Insull, Mitchell, and Whitney are in a different class only because they were caught via regulatory machinery which the business community either assented to, or, opposing, had had forced on them by political forces which held that only through such controls could the business community, and with it the capitalistic system, be saved from the disaster its own malpractices were bringing down upon it. Numerous observers have found in the spectacular rise of the Hermann Goring Works proof of an inherent Nazi tendency towards "Socialization," Nothing could be farther from the truth, as the party-approved Berliner Tageblatt, Dec. 2, 1938 ("Vom Wachstum des 'Reichswerke'-Konzerns") has pointed out at some length. Kurt Lachmann in "The Hermann Goring Works," Social Research (Feb. , 1941), pp. 24-40, finds the
company a new version of the postwar Stinnes or Haniel groups, and a type of "in- dustrial empire building" which bears a dose "resemblance to the amassing of lands and fortunes by the feudal lords of the seventeenth century. " The analogy is intrigu-
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