No More Learning

6 See the summary of the jurist, Rudolf Callman, Das deutsche Kartellrecht (Ber-
lin, 1934).
7 All data, unless otherside indicated, are given as of the last more or less "pros-
perous" year, 1929. Even such data serve only as indication of a general movement which it is next to impossible to summarize in simplified terms. As Levy has well said, "The industrial organisation represented by cartels and trusts can hardly be elucidated by statistics. " Hermann Levy, Industrial Germany, a Study of Its Monop- oly Organisations and Their Control by the State (Cambridge, England, 1935), p. 15.
? 26 GERMAN INDUSTRY
Three companies produced 37. 93 percent of total output, and
employed 37. 22 percent of all labor.
(b) Under law the coal industry was divided into ten producing dis-
tricts, each of which was governed by a special coal syndicate, and made subordinate to a national coal association and the federal coal council. ^
Steel and Iron
(a) Three concerns produced 68. 8 percent of all pig iron; one con-
cern produced 50 percent.
Four concerns produced 68. 3 percent of all crude steel; one con- cern produced 43 percent. ^
(b) One concern, the United Steel Works, held the following cartel quotas: pig iron, 38. 445; crude steel, 38. 298; "A"-Products, 40. 023; bar iron, 30. 724; band iron, inland and foreign, 38. 955; thick sheet, 39. 742; rolled wire, 29. 161; wire, 22. 224; pip^* 50-613.
Electro-technical (manufacture of electrical machinery and goods) 1. 9 percent of all firms employed 66. 1 percent of all persons. Two firms, AEG and Siemens-Halske-Siemens-Schuckert, completely
dominated both "heavy" and "light" current fields. Electric power
"Two-thirds of the current production and delivery of all Ger- man public electrical enterprises (concerns producing power for sale to third parties) are concentrated in the hands of seven con- cerns. " Two companies delivered over 40 percent of the total power consumed in 1929-30. 1?
Chemicals
One company, the vast I. G. Farbenindustrie A. G. , owned 35 per-
cent of all invested capital and employed over one-third of all employees. il
8 The second largest of these three companies was owned by the Prussian state. It produced 8. 15 percent of the total output, employed 6. 72 percent of the labor, and owned 17. 21 percent of the known coal reserves. The "forced cartels" or coal syndicates included three governing the lignite industry. Later a Gaskokssyndikat was organized and attached thereto. Under the law, private industry, modified only by the interest of the Prussian fiskus as owner and mine operator, regulated itself with a semblance of quasi-legal authority to enforce its decisions--the Social Demo- cratic version of what came subsequently to be known as the principle of "self- management" (Selbstverwaltung) in business.
9 This one concern, the Vereinigte Stahlwerke, was likewise a heavy producer of machinery, the largest producer of coal, the largest participant in Ruhrgas (largest long-distance gas supply system in Germany) and an extensive producer of power, chemicals, fertilizer, etc.
10 These two largest concerns were known as "mixed enterprises," being owned jointly by private interests, the Reich, various states, and local city and communal groups. Both of them, in turn, were tied in with coal, lignite, gas producing, and other groups.
11 These percentages greatly underestimate the relative importance of the I. G. at that time. Including partially or completely owned and controlled subsidiaries, its
GERMAN INDUSTRY
Potash
A closed syndicate ("forced cartel") governed the entire industry, as in coal. Four of the leading 9 concerns were organized in the Kalibleck, controlling about 77 percent of the industry's quotas. ^^
Shipping
Two companies, the Hamburg-Amerika and the North German
Lloyd, almost completely dominated all overseas shipping. ^^
Industrial cartels. --According to estimates made by different experts, there were four cartels in Germany in 1865. Thereafter occurred the following spectacular growth in numbers: 1875, 8;
1887, 70; i8go, 117; 1900, 300; 1911, 600; 1922, 1,000; 1925, 1,500; " 1930, 2,100. ^^ Data collected by the Cartel Bureau. of the National Federation of German Industry for the year 1926 listed 1,543 cartels to w^hich its various subsidiary special trade and in-
dustry groups belonged. They were distributed as follows: ^^
Milling
Iron making
Smelting and semi-manufac-
tures
Machine industry
Iron, steam boiler, and ap
15 optics 73 Metalware
Wood 17 Leather
147 Stone and earth Building industry
r
56
78
44 46 30 36 10 20 91 36
107 201
paratus
Railway car construction . . . 1
Motor vehicles and wheels . . Iron and steel ware
Electric manufacturers, fine
mechanical equipment and
48 Ceramics
Glass industries
8 Chemical industries 234 Oil and fats
Paper Textiles
relative size was pretty close to twice that of the figures given. It has since grown relative much more important in the whole structure of the Nazi economic system.
12 The balance was similarly organized. Control was so complete that prices, pro- duction, plant capacity, markets, conditions and terms of delivery, patents, etc. , could be and at times actually were controlled lock, stock, and barrel.
13 Before the Nazis came into power these two were fused in a community of interest which had become for all practical purposes as rigid as formal amalgamation. To the above figures might be added data on banking (where control was centralized in the four "D" banks), forwarding (particularly in Berlin and Hamburg), depart- ment and retail store trade (Karstadt's, Leonard Tietz, Wertheim), etc.
14 An official government estimate for 1925 placed the figure at 2,500, but it ap- pears to have included many nonindustrial cartels and similar organizations. See Wagenfiihr, Kartelle, p. xiii.
15 Idem. The estimate excludes "cartels and cartel-similar organizations in agri- culture, banking, exchanges, transportation, insurance and the free professions. "
16 Ibid. , p. xiv.
.
? 27
? 28 GERMAN INDUSTRY
Clothing
Brewing, malting, and mill-
71 Food and luxuries Shipping and forwarding .
.
49 4 1543
97 Total Sugar and foodstuffs 24
ing
According to an estimate of the German Business Cycle Institute all raw and semimanufactured goods produced within Germany and about half of all finished industrial goods were in 1938 bound by mo- nopoly or by cartel agreements. See Neumann, op. cit. , p. 291.
Trade associations, federations, and business coordinating groups. ^''--So numerous and so varied in details of organization and functions are the pre-Nazi trade and industrial associations that statistical summary is next to impossible. Some idea of the level of development may be had by reference to the membership rolls of the Central Committee of German Employers' Associa- tions. This body was made up of industrial, trade, and financial associations, organized on a national, regional, and local basis. Counting all these together, there were 2,272 associations within
14 central business associations,^^ in turn divided into 8 groups. ^^ Even this listing is incomplete, and the web of business organiza- tion not included under the Central Committee seems at some points to have been very extensive. -^
In any of these fields or in respect to any of this organiza- tional machinery it is equally impossible to summarize neatly (1) the limits of power within, amongst or between monopoly or semi-monopoly groupings, (2) the degree to which the various
17 It will help to clarify the following discussion if certain distinctions are kept in mind: (1) cartels, syndicates, and the like are organizations for the control of pro- duction and commodity markets; (2) employers' associations are organizations for control of the labor market; and (3) central federations of trade associations are politi- cal pressure groups (Standesverbdnde) or organizations for the control of public opin- ion and the government. A scheme of the various types of business organization in the Weimar Republic is found in Neumann, op. cit. , pp. 238, 239.
18 Respectively, the National Committee of German Agriculture, National Federa- tion of German Industry, Federation of German Employers' Associations, National Association of German Handicrafts, National Association of German Transportation, Employers' Association for the German Newspaper Industry, Hansa League for Trade, Commerce and Industry, Central Federation of German Retail Trade, Na- tional Association of German Wholesale and Overseas Trade, League of Wholesale Employers Associations, National Association of Bank Managements, Central As- sociation of German Bank and Banking Trades, National Association of Private In- surance, Employers' Association of German Insurance Enterprises.
19 Respectively, Agriculture, Industry, Handicrafts, Transportation, Miscellaneous, Commerce, Banking, and Insurance.
20 For a list of associations not affiliated directly or indirectly with the Central Committee, see Wagenfiihr, op. cit. , p. 1, footnote 1.
.
? GERMAN INDUSTRY 29
trades and employers' associations were able to centralize and to enforce policy decisions, (3) the areas in which a large meas- ure of "free competition" was still to be found, or (4) the exact nature of governmental control, regulation, or participation, federal, state, or local. One is safe in concluding only that in general the centralizing trends were uniform, unbroken, mutually reinforcing, and additive. Cumulatively they promoted monopoly powers, centralized policy determination, and necessitated an inter- lacing of governmental and business authorities until by the ad- vent of the Nazis little more than systematization and streamlining were required for inauguration of the much heralded "corporative economy. "
The most important, by all odds, of these German business- coordinating, political pressure groups was the National Fed- eration of German Industry (Reichsverband der deutschen In- dustrie--RDI), to which the present National Industry Group is the Nazified successor. The National Federation of German In- dustry was, in its turn, a postwar fusion of two predecessor organiza- tions, the Central Association of German Industrialists, founded in 1879,-^ and the Industrial Alliance, dating from 1895. The his- tory of its origin and growth, from more or less haphazard first be- ginnings of the present all-inclusive and highly streamlined, in- dustrial policy-control network, shows a logical unfolding of the possibilities inherent in a large-scale industrial capitalism, when morganatically wedded to a powerful centralized state which is dominated by consciously expansionist imperial ambitions. Im- portant as is the history of the evolution of the National Industry
Group in and of itself, its larger significance is found in the fact that its historical antecedents were dominated by forces typical and symptomatic of this fusion in the whole of German national life.
EVOLUTION OF THE NATIONAL FEDERATION OF GERMAN INDUSTRY
The history of the two predecessor organizations is marked by partial conflict, absorbing at times the bulk of associational energy,
21 Handworterbuch der Staatswissenschaft (Jena, 1928), 4th ed. VIII, p. 502. This date checks likewise with data given out by the Reichsverband der deutschen In- dustrie. Wagenfiihr, however, fails in his extraordinarily comprehensive compendium to mention this date at all; I have been unable to account for the discrepancy.
? GERMAN INDUSTRY
and by occasional cooperation. Though representing divergent interests at many points, their respective histories brought them into increasingly closer contact with one another. Preliminary at- tempts at partial or complete fusion before the First World War made but little headway. ^- The exigencies of war economy brought them formally together for the first time (1914) in the War Com- mittee of German Industry. In 1918 this gave way to the German Industrial Council, which was in turn superseded by the National Federation of German Industry.
The Central Association of German Industrialists represented the first enduring coagulation of any large block of industrial in- terests in Germany. Excepting only the short-lived Central Fed- eration of German Industrialists (Zentralverband deutschen In- dustrieller), organized in 1856, there had been prior to 1879, no grouping which could be said to represent any considerable block of raw materials and manufacturing interests per se. The Handels- tag, or Convention of Commerce, founded in 1862 as a central co- ordinating institution for some 160 Chambers of Commerce in Germany, was not set up so as to serve the specialized needs of any broad line of business activity. This the Central Association at- tempted to do.
Its origin is commonly attributed to concern over the protective tariff. By and large the association seemed to be in favor of rela- tively moderate tariff schedules, but at the same time was definitely opposed to any outright surrender to the Franco-British free trade system. 2^ This position was strengthened during the decade of the seventies by virtue of changed international positions following the Franco-Prussian War,^* and by the altered domestic situation
22 One effort which led to the Interessengemeinschaft der zentralen Industriellen- verbande (Community of Interests of the Central Industrial Associations), 1906-8, seems to have enjoyed little popularity.
23 More or less formally inaugurated with the Anglo-French Treaty of Commerce in i860. The Germans followed with tariff-lowering "most favored nation" treaties negotiated with Italy in 1863, Switzerland in 1864, Norway, the Hanse Towns, Spain and the Netherlands in 1865, Austria in 1866, Portugal in 1867. Following the Austro- Prussian War in 1866, the terms of the tariff agreement between the two countries were extended to all other countries with whom special agreements had already been made. The Bismarck tariff represented a complete reversal of this trend.
24 The phenomenal recovery of French industry following the War of 1870 and the payments of reparations to the Germans was paralleled by a correspondingly sharp setback, assuming almost catastrophic proportions within the course of the next three years, in Germany.
30
? GERMAN INDUSTRY 31
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-
? GERMAN INDUSTRY
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
? GERMAN INDUSTRY
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. /
33
? GERMAN INDUSTRY
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.
? GERMAN INDUSTRY
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.
35
? GERMAN INDUSTRY
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.
36
? GERMAN INDUSTRY
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.
37
? GERMAN INDUSTRY
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.
? GERMAN INDUSTRY
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. .