That this is so largely arises from the fact that peacetime endeavors in the major capitalistic countries to extend the network and expand the
controls
of business organization were almost with- out exception based upon former wartime experience.
Brady - Business as a System of Power
" Adam Smith, The Wealth of Na- tions, Cannan ed.
, pp.
66-67, 128.
Italics mine.
This latter, of course, is exactly what is done by NRA, price maintenance, "unfair trade practice," marketing control and other recent types of legislation, which are to be found in similar form in prac- tically all other countries, totalitarian and non-totalitarian alike; except for the word "necessary" one must now substitute the word "compulsory" in about half the casesl
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Power is compulsive, and when distributed unequally between bargaining groups is irreconcilable with "free contract. " Fee sim- ple distributes power unevenly between the "haves" and the "have-nots"; monopoly heightens and complicates the dispropor- tionalities in the graduated ranks of both. Law and the courts as frequently underline as correct the resultant distortion. It is this configuration of coercive forces, disproportionately matched, which accounts for the usual and inherently lop-sided "contract," and not the nature of the "rights" of bargaining groups. Power, in private hands, comes up against such claims as water comes to a wall, taking advantage of every crevice, depression, resource, or structural weakness. The proper expression is not "expansion of power" from these property nuclei, but cumulative permeation of power, as the history of the unfolding controls of all the great com- bines, cartels, trade associations, and Spitzenverbdnde abundantly shows.
Now it is a common characteristic of all monopoly-oriented groupings, major and minor, that each newly acquired leverage is typically employed for further collusive, rather than for com- petitive, efforts. Not "monopolistic competition" but "monopo- listic collusion" paces the gathering up and centralization of power to determine business policies over ever widening areas. ^ In plans lying behind the strategies of price fixation such things as produc- tion control, market allocations, and similar economic programs become increasingly the vehicles for strengthening tactical position in the pressure politics of collusive Realpolitik; they are not ends in themselves as so many recent economic theorists have mistakenly assumed. * But more than that, as struggle for strategic position
s See Callman, Das deutsche Kartellrecht and Unlautere Wettbewerb; Lucas, In- dustrial Reconstruction, for the British story; and the various reports of the LaFollette Committee, the Temporary National Economic Committee, and the indictments of the Anti-Trust Division of the Department of Justice and the Federal Trade Com- mission.
4 E. g. , and most notoriously, Edward Chamberlain, The Theory of Monopolistic Competition, and Joan Robinson, The Economics of Imperfect Competition. (Not,
M. Keynes, though many of his proposals in this connection appear as
however,
the product of "split-personality. ") Chamberlain by implication (Appendix E, "Some Arguments in Favor of Trade-Mark Infringement and 'Unfair Trading' ") and Mrs. Robinson explicitly recognize as much when they admit that their examination of monopolistic practices assume the absence of collusive intent or strategies reaching beyond the end of maximum gains. But it will no longer do to insist that an economist qua economist can only remain true to himself when he acts naively towards half to two-thirds of his problem, or, becoming sophisticated, insists on
J.
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broadens out over wider and wider areas, both ends and means be- come increasingly enmeshed in more or less distinctly and canoni- cally social and political issues--issues which, to employ the lan- guage of Karl Mannheim, reach to the ''roots of domination" and thus become "vested with a public interest" in a new and revolu- tionary sense of the term.
Why this is so may be read directly from the record by the more astute who have steeped themselves in the raw materials of the combination and business organization movements. But there is a certain "internal logic" to these transmutations of monopoly- minded policy which may be thrown into fluoroscopic relief by a less direct and time-consuming method. Consider first the nature of the new business self-bureaucratization.
THE NATURE OF BUSINESS BUREAUCRATIZATION
To say that business enterprise in all major capitalistic countries is becoming bureaucratic is to add nothing new. It is so well ac- cepted in the technical literature as to no longer require proof. ^ Obviously the vast control apparatus and the elaborate organiza- tional machinery of large-scale enterprises, of cartels and trade associations, and of their various peak associations call for func- tional division of duties, for circumscription of tasks and fixation of special responsibilities, for hierarchies of command and subor- dination, for special systems of recruitment and training of per- sonnel at different levels of competence. Obviously the growth in size and complexity of the individual business enterprise, the spread of ever more inclusive cartel and trade association net- works, the gathering up and centralizing of policies in series of
throwing the baby out with the bathwater simply because in his family tree such a baby must surely be illegitimate. The earlier economists, as well as the earlier political theorists (e. g. , Machiavelli, Bodin, Hobbes, Filmer, Locke, Bentham, Burke) made no such mistake. For the orthodox tradition, after the lame synthesis of John Stuart Mill, the separation of economics and politics became an issue as important as the separation of church and state, but at a time when, in contrast with the latter, the real historical interdependence between the two was growing ever closer and more rigorous with the passage of time.
5 See, in particular, Mooney and Reiley, Onward Industry! on "The Principles of Organization and Their Significance to Modern Industry"; Marshall Dimock and Howard K. Hyde, in TNEC Monograph No. 11, Bureaucracy and Trusteeship, and the various summary volumes of the huge German Enqueteausschuss, in particular the Gesamtbericht. See also, Louis D. Brandeis' provocative volume, The Curse of Bigness (New York, 1936).
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interlocking Spitzenverbdndej the formalization of relationships not only amongst these various business groupings but vis-a-vis the ever widening system of governmental regulation (whether friendly or hostile to business) and the ever greater attention paid to expert staff counsel, not to mention the science of management and ad- ministration itself--obviously these mean steady and cumulative bureaucratization of business. On present showing it is possible to predict that in the normal course of events the time will shortly arrive when all business activity, big and little, and from center to circumference, will be enmeshed in bureaucratic machinery, will conduct its activities in terms of bureaucratic dicta, following bureaucratic procedures, and complying with bureaucratic cri- teria.
Business, that is to say, is becoming organized; that organization is becoming large scale, highly centralized, and complex; and such centralization and complexity define the area of bureaucratic con- trol. But there are many types of bureaucracies, good and bad. The question is not, "Is business being bureaucratized? " but rather, "What type of bureaucracy is coming to dominate in business circles? "
There are three clues which merit especially close and careful inspection. First is the system of recruitment and training. The more one pages through the literature and publicity of the giant corporations and the networks of business and employer organiza- tion brought together under the central policy direction of the Spitzenverbdnde the more one is struck by the increasing attention devoted to this subject. A variety of motives dominate. A common incentive is specialized training for specialized jobs. Uppermost in many cases is the desire to take control over jobs away from the trade unions. ^ In many cases this objective appears to be more nar- rowly conceived as the recruitment of an absolutely loyal corps of workers from which the future managerial forces will be selected. ''
6 See Sidney and Beatrice Webb, The History of Trade Unionism (New York, 1920). In the early days employers fought apprenticeship programs, since these were employed by unions for the purpose of restricting labor supply. Now the roles are in many cases reversed, unions opposing apprenticeship plans designed to break down their own monopoly controls over labor supply on the one hand, and their partial control over the attitude of the lower managerial corps recruited directly from union ranks. This was particularly clear in the case of Dinta. See p. 283.
7 This seems to have been the original purpose of Dinta when it was organized in
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Quite generally the purpose is to attach managerial--and some- times even nonmanagerial--ranks directly to the individual com- pany or trade so as to cut down the high expense associated with turnover of an executive and staff personnel which it is becoming increasingly costly to "break in. " ^ Again, and perhaps more com- monly in recent years, the device provides an extremely effective method for the spread of antitrade union propaganda.
Trends here move on three closely related levels. Most common and perhaps best known are apprenticeship programs. One line of emphasis in these programs calls for systematic and far-reaching attempts to overhaul public-school educational programs on more purely vocational lines. This feature has been particularly marked in England and Germany. Under the Nazis, and to a lesser extent in Italy and Japan, the program of Dinta and other closely allied groups has been extended to cover all educational training in the country. The second line of emphasis calls for greatly extend- ing formal company-controlled apprenticeship training systems throughout industry in general. More recently in the United States, governmentally sponsored, but privately directed, local, state and national apprenticeship training programs have been worked out on a basis sufficiently comprehensive to forecast the time when they will include all jobs requiring some degree of skill. The various Spitzenverbdnde have without exception shown a lively and sustained interest in these systems for sifting, shaping, guiding, and controlling the lower levels of future labor ranks.
A parallel interest has led in the United States to ''foremanship training. " Both the National Association of Manufacturers and the United States Chamber of Commerce and their various sub- sidiary and member bodies have paid much attention to this feature of recruitment, since it is recognized that the foreman is the "front line representative of management. " Ideally, "foremanship train- ing" performs somewhat the same functions for the nonexecutive
1926, and of the National Association of Manufacturers when it first began to show an active interest--c. 1910-12--in apprenticeship programs.
8 A particularly important problem where automatic machinery has been de- veloped to the point where staff is largely of an engineering or semi-engineering supervisory character, and in cases where processes have become so highly specialized machine tool production, airplane manufacture and repair--that the costs of spoil- age, quite aside from the direct costs of training, from faulty workmanship are high and may ramify, bottle-neckwise, far beyond the individual operation or process.
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managerial ranks that apprenticeship and vocational education do for those who habitually handle the machines.
Within these two levels, training is in many instances almost entirely technical. But increasingly--notoriously in such cases as Ford, General Motors, Standard Oil of New Jersey, Mitsui, I. G. Farbenindustrie, Siemens and Halske, and particularly Dinta-- there has been added schooling in economics, sociology, history, and other subjects which may be manipulated to support the gen- eral social and philosophical point of view of management. It is probably safe to say that no large company, trade association, Spitzenverband, or governmental employee-training program is now entirely free of this ideological coloring. In many cases, com- pany propaganda plays a role as important or even more important than the formal technical training itself. This is particularly apt to be the case in company "colleges," such as that of the Standard Oil Company of New Jersey. (R)
Through these methods business is attempting to create its own "officialdom" ^? and its own "civil service," ^^ dedicated to business ends and loyal to business philosophies. However much the content of specific programs may vary in detail, the general tendency here is to evolve specialized training for specialized jobs, to delimit, de- fine, and circumscribe each and every specialized task, to define responsibilities and duties within each bracket of competence, to arrange these competencies in a rationally articulated hierarchy of command and subordination in which vertical movement is lim-
9 See also literature of the Goodyear Tire and Rubber Co. on the "Goodyear In- dustrial Union," which offers, amongst other courses, one on "Business Science" deal- ing with "The individual in self-analysis, his relation to others, his attitude towards his job and his understanding of the proper approach to the job. " (Circular of the Goodyear Tire and Rubber Co. ) How many of these "schools" and "colleges" there may be, what ground they cover, what differences they show from one country to another, and to what uses they are being put nobody knows. A careful and critical study is much needed.
10 A particularly penetrating book was written by Kurt Wiedenfeld (one of the more acute German economists subsequently to enlist in the Nazi services), called Kapitalismus und Beamtentum: Produzententum und Konsumententum in der Welt- markt-Wirtschaft (1932). See also, TNEC Monograph No. 11.
11 One of the common shortcomings of the more recent books on wage theory, as, e. g. , J. R. Hicks, The Theory of Wages, (London, 1932), is that employers are assumed to take a purely passive role vis-^-vis labor in that he is treated as a bar- gainer who does not really bargain since he is interested only in the wage-cost: labor-efficiency calculus, and whose only choices are (a) the sea in which he fishes, and (b) the bait he will use (bait is all of one sort; it varies only by more-or-less).
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ited and defined by "seniority," formal rules, and other formally graduated systems of employer-controlled rewards and punish- ments, and to direct the whole of these efforts along a more or less common ideological front.
Above foreman ranks, the story is somewhat different. A line somewhat similar to that found in governmental circles between "civil service" and "political appointees" seems to run between the two lower levels of business staff on the one hand and the direc- torial and upper managerial ranks on the other. Here, as has been pointed out, the evidence seems to show that "position," "pull," "family," "contacts," "family wealth," "nepotism," "sinecure," "in- dulgences," and the like are becoming increasingly important. These upper layers seem to be "inbreeding" in business, just as the leading families of the upper wealth brackets from which they are mostly drawn intermarry within the charmed circles of the Social Register. There can be no question but that cooptation is
the rule and not the exception throughout all business large and small, and that the practice holds as generally for the trade associa- tions and their various Spitzenverbdnde as it does in principle for the more compact corporate set up. ^^ But more, that within the upper executive and directorial layers, cooptation is increasingly from socially acceptable ranks, and that the rules that guide selec- tion come more and more to be woven of the same cloth as those which define the limits, the attitudes, the codes, and the social and political philosophies of self-conscious ruling-class status.
Before pursuing the implications of these developments a bit further, it will be useful to consider briefly the two other "clues" to the nature of business bureaucracy hinted at above. The first of these relates to the fact that all attempts to rationalize business organization lead, under liberal-capitalistic political conditions, to dual, overlapping, and, in part, "competing," managements which become increasingly costly, inefficient, cumbersome, and confusing with the passage of time, and which sooner or later require, by more or less common agreement, surgical treatment. It is a well-
known fact that few efforts to coordinate, for example, private natural monopolies over territories coextensive with their natural potentialities have been successfully carried through without ac-
12 See pp. 259-65, above.
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303
tive governmental aid. The American Telephone and Telegraph Company is a partial exception, as are a few local tram and electric power systems. Railway unification, however, has nowhere been carried through except by government fiat. The Interstate Com- merce Commission has striven for railway unification for years. The railway unification which led to the British "Big 4" in the early twenties and the development of the unified rail networks of Germany and Japan were forced through on the initiative of their respective governments. The same holds for most electric power "grid" schemes, unification of postal and telegraph systems, and most local and metropolitan transit networks.
The monopoly urge, in other words, seems to be typically stopped before monopoly has been really achieved. The results the reasons why need not detain us at this point, for they require independent analysis, case by case and industry by industry ^^ however, belie at least in part the superficial impression. They seem to be about as follows: (1) monopoly efforts are funneled in- creasingly through the machinery of trade association, Chamber of Commerce, and Spitzenverband; (2) within these councils a broad line separates the inner governing cliques made up of the corporate giants and their medium and smaller satellite concerns; (3) the former divide markets, manipulate prices and production, and in general so direct affairs that, the total possible "take" being
treated as given, each of the former receives his due allotment where the gains are relatively speaking assured, and the latter are granted the more or less unprofitable fringes; (4) there is a cumu- lative pressure to "settle into the allotted groove," and not to encroach upon "most-favored company" territory, nor to push entirely out those whose existence on sufferance is deemed a con- tinuous advantage for propaganda and other reasons; (5) disputes concerning position are increasingly handled by the equivalent of negotiation, arbitration, "treaty-making," special grant and privi- lege, etc. ; (6) enterprise management is kept in a largely fraction- alized state within each industry or trade, more or less irrespective
of geographic, technological, and other features; ^*
13 Further combination may be stopped by fear of Anti-Trust prosecution, as in the United States.
14 Patent pooling, standard grades and labels, simplification of types and varieties, cartel and syndicate practices, and the like, do not militate against this generaliza-
(7)
increasingly,
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the leading functions ot the trade association or Spitzenverband becomes the guidance and leadership on all social and political issues. Finally, so long as either the internal coordinative functions or the external representative tasks of the central associations are pursued in the face of partially or largely antagonistic political authorities, the two facets will be dovetailed into a single program known as "self-government in business. " ^^
Consequently, the more "self-government in business" there is, the more governmental regulation there must be. And the more governmental regulatory machinery expands, the more complete and thorough betomes the duplication of managerial and admin- istrative hierarchies between government and private enterprise. Governmental regulatory agencies have shown a more or less com- mon pattern of development: (i) they tend to become permanent bodies well staffed with expert panels; (2) they find that regulation which has been instituted at any point--price, market allocation, or the like
business policies of regulated concerns; (3) regulation gradually comes to embrace the entire trade or industry; (4) it gathers into its hands increasingly legislative and judicial as well as administra- tive authority. Under pressure to expand functions along these
lines, regulatory authorities gradually begin to compile informa- tion which runs the gamut of business and industry interests; to organize information, prosecution, negotiation, and its own inter- nal administration along functional lines characteristic of the industry as a whole; to build up staffs until they come to approxi- mate the business administration which they face constantly across the conference table or the courtroom; and to acquire powers sometimes negative and more frequently positive--which involve de facto participation in the management of the enterprises falling into the authority's bailiwick. ^^
tion, for these represent cost cutting, orgnization simplifying, and strategic manipu- lation factors. There is little or no evidence that they tend to "rationalize" the industry either to the public good, or to cut down the plethora of separate manage- ments. So far as the public good is concerned, these devices usually appear in com- binations which retard the pace of change; they tend to slow down the weeding out which would occur under either "normal" competitive or monopoly conditions.
15 See pp. 227-39, above.
16 It would be possible to show this in great detail by dissecting any of a large number of governmental regulatory authorities in the United States or abroad. The
--leads them step by step to cover the whole range of
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There are some reasons for regarding the typical governmental regulatory body as organizationally superior to those evolved by the businesses they regulate/^ but that is quite another matter. Of key importance in the present connection are two by-products of the developments traced above. First, as pointed out above, there tends to be duplication all the way up and down the line between government and business administrative machines. And second, a large and increasing percentage of staff, and of the necessary facili- ties in terms of office space, office personnel, files, and the para- phernalia for grinding out countless memoranda is taken up with the tactics of manoeuvre, concealment and uncovering of key in- formation, legalistic haggling, enforcement and evasion, and so on, ad infinitum, brought about and dependent upon the conflicting interests expressed in such dual administrative control.
Facing this situation, what do the Spitzenverbdnde propose to do? First, they tend to duplicate in their own central headquarters
chairman of one of the largest Federal regulatory agencies--perhaps the best known
--
that his Commission Avould ultimately be compelled to duplicate every scrap of in- formation, every leading staff officer and specialist, concerning companies and trade associations they were charged to regulate in the public interest. Perhaps not in absolute numbers, he thought, since they might never be under compulsion to be- come as inefficiently organized as the industry, taken as a whole, patently was. But certainly on a scale capable ultimately of taking over the entire industry without serious hitch should business management and staffs be suddenly stricken, let us say, by a highly selective desire for permanent vacations. A similar judgment was given by equally highly placed German and British regulatory authorities with respect to their own administrative machineries.
17 Partly because they have come into the picture later than the companies and administrative bodies which they seek to regulate; partly because they tend to be manned by experts and not by business "politicos"--civil service requirements for staff, bad as they may be in many instances, are obviously superior to the staffs they face in training, in singleness of purpose, and in the quality of their loyalty; partly because they bear responsibilities which are matters of public record wherein their actions and decisions are constantly subject to either legislative or judicial review; and partly because they have arisen in most countries after the trend towards cen- tralization of governmental regulatory authority in the hands of the federal--as against local, state, and provincial--has asserted itself. To an increasing extent, there is less duplication here than division of authority so that local bodies take over primarily the residue functions which relate to purely local matters. There is, how- ever, a contrary tendency to set up governmental regulatory bodies which have to do not with a single industry or set of narrowly related industries, but with business functions (e. g. , securities and trading, surplus commodities, pure food and drug). This means that each business must face not one but a series of regulatory bodies. And at many points the functions and prerogatives of these latter are bound to duplicate and overlap each other.
hazarded the guess in private conversation with the author some four years ago
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the regulatory set-up ^^--thereby tending in many respects to fur- ther duplicate functions, staff, and facilities--of their own mem- bership. Not uncommonly, as an interesting by-play, they, or their member associations, or the strategically placed corporations which shape their leading policies attempt to entice governmental staff to join their own payrolls at higher salaries. ^^ But most signifi- cantly, they seek direct representation on committees, commis- sions, advisory bodies, and other governmental agencies which were either established at the outset for the specific purpose (or subsequently acquired the power) of determining in whole or in part the very policies which guide the administrative bodies them- selves.
Thus the Federation of British Industries claimed before the outbreak of war to be directly represented on the Board of Trade Advisory Council and Council for Art and Industry, the War Of- fice Technical Coordinating Committee on General Stores and Motor Transport Coordinating Committee, the Ministry of Health Joint Advisory Committee on River Pollution and the Town and Country Planning Advisory Committee, and the Ministry of Agri- culture's Standing Committee on River Pollution. But this is only the beginning. It claimed that its representations before govern- mental bodies have resulted in adoption of its own plans for fiscal policy, tariff policy, imperial trade, commercial treaties. ^^ There is scarcely a governmental committee or commission which affects its
18 This is most readily shown in the departmentalization of the various Spitzen- verbdnde, the range of the expanding committee and staff functions, the nature of the regional and functional groupings of membership, the content of regular reports to members in their official publications and annual congresses, etc. The same holds for many of their own member associations and certain of their larger member cor- porations. See the annual reports of the National Association of Manufacturers; the
Yearbook and Register of British Manufacturers, put out by the Federation of British Industries; the speeches, and especially the organizational data given in the ap- pendices, collected in the book of M. Rene P. Duchemin (President d'honneur de la Confederation Gen^rale du Patronat Frangais), Organisation syndicate Patronale en France; and see also Fascist Era, the yearbook of the Fascist Confederation of In- dustrialists; and sketches by Dr. Horst Wagenfiihr of the Reichsverband der deutschen Industrie and the Verein Deutscher Maschinenbau Anstalten in his Kartelle in Deutschland.
19 Probably one-half of the leading figures amongst the directorial, executive, and staff ranks of the leading Spitzenverbdnde have gone directly from governmental regulatory bodies to the firms and associations which they formerly regulated. Higher salaries are the common reason given. A careful study might reveal many others.
20 See, in particular, the NAM pamphlet "Industry and Action. "
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Members' interests at any given point upon which it did not claim membership or influence of decisive importance. Since the out- break of hostilities, under the system of war control bodies, this fusion has been rendered almost complete.
The British picture is not unusual but is typical for the liberal- capitalistic countries as a group. ^^ But it becomes quickly altered in some respects drastically--the instant monopoly and business coordinative drives move from a "liberal" to an "authoritarian" environment. As evidenced in Germany and Italy, though by some- what different routes, the inauguration of totalitarianism results in a general overhauling of business machinery along the following lines: (1) "streamlining," that is, a considerable mass of overlap- ping and duplicate trade association, regional and national, and peak association machinery is cut away. ^^ (2) Correlatively, the com- bination and cartel movement is greatly strengthened; large and increasing numbers of small concerns are eliminated; compulsory association membership becomes the rule. (3) The relationships between governmental committees and commissions are altered in several ways, but in general these relationships become func- tional instead of "fighting," coordinative instead of duplicating and overlapping, and "self-government" follows lines of mana- gerial decentralization rather than principles of checks and bal- ances between governmental and private authorities. The basis of
the "efficiency" claims of all totalitarian systems is the cutting thorugh and setting aside of conflicting machinery which has arisen (paradoxically, as a result of governmental "interference") to co- ordinate and simplify business itself, or to prevent the inefficient disposal of social resources according to the common formulae of "business as usual," or both. Finally, (4) the former "self-govern- ing" bodies are more or less formally vested with legal or quasi- legal powers to formulate policy within the larger "totalitarian" directives, and to implement decisions with powers of enforcement.
21 See the sources cited in footnote 18 above.
22 This could readily be shown by following through in detail the change in any given line of industry or trade. But such "streamlining," coupled with other changes indicated above, may well mean in many cases quite new and greatly elaborated ma- chinery. For example, unorganized trades will now be organized; unfederated will now be federated; relationships between and amongst central associations and their various functional and regional divsions will be handled by various combinations of compacts, ad hoc and permanent committees, and so on.
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Great and far-reaching as many of these changes may be in detail, they are, however, fully and without important exception in line with preceding trends. This could be shown in great detail by tracing through the successive changes, for example, which led to the formation in 1917 of the Reichsverband der deutschen Indus- trie out of two bodies representing respectively the heavy and light manufacturing industries, and the steps taken to transform the re- sultant body in 1933 into the Reichsgruppe Industrie. Or, again, by those whereby the former General Confederation of Italian In- dustry was made over into the Fascist Confederation of Industrial- ists. Another example is offered in the changes which signalized the pretty complete overhauling of the Confederation Generale de la Production Fran^aise, following the famous Matignon Agreement in 1936, into the Confederation Generale du Patronat Fran^ais. The formal dissolution in late 1940 of this latter body, which was modeled more or less directly after the Fascist pattern in Italy, seems to have been preparatory to remodeling along more dis- tinctly Nazi lines.
Whether traced along lines of structure, function, or authority, these changes would be found consistent with past trends. They represent a very considerable "tightening" up, to be sure, but even the more rigorous and authoritarian controls are consistent with past lines of growth. Still another check is provided by noting the nature of the changes these various associations and their Spitzen- verbdnde undergo between so-called "emergency" and "normal" periods. Quite aside from the fact that it has now become custom- ary to justify all "tightening" up by appeal to "emergency" con- ditions,^^ and that we have at least two major attempts to carry through far-reaching reorganization of business-governmental re- lationships in peacetimes--those of the NRA and the various Bri- tish industrial reorganization schemes ^^--the ease with which
23 This is the case with all the various British industrial reorganization schemes such as those for railroads, cotton textiles, coal and steel, and with controls estab- lished under such laws as the Miller-Tydings, the Robinson-Patman, and the various state marketing and resale price maintenance laws. Much the same, of course, was true of the whole of the NRA and the AAA.
24 Not to mention a series of attempts made in practically every country in the world immediately following the great war to carry over wartime controls inrg
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these transitions have been made between peace and war and back again to peace fully bears out the above contention, the main differ- ence being that the binding sanctions are qualitatively quite dif- ferent. In these respects, the Second World War has differed from the First in that the transition from peace to war is greatly facili- tated by the much higher level of business organization, in which authorities, controls, and group objectives are more completely worked out along lines required for ready adaptation to war con- ditions.
That this is so largely arises from the fact that peacetime endeavors in the major capitalistic countries to extend the network and expand the controls of business organization were almost with- out exception based upon former wartime experience. ^^ Thus it comes about that it is precisely in war and emergency times that the dominance of big business in the councils of state comes most clearly to the fore. What was true of the United States in 1917-18, in the depression and the period of NRA, and in the National Defense efforts of 1940-41 can be duplicated in all other major capitalist countries. Mr. Knudsen, Edward Stettinius, and Bernard Baruch are paralleled by Mr. Ogura in Japan, Lord Beaverbrook in England, and Hermann Goring (himself a leading industrialist), Friedrich Flick, and their group in Germany.
Now the essence of the newer strategies of wartime controls where the military arm is, in effect, regarded as merely the "cutting edge" of a belligerently mobilized industrial system taken as a whole--is authoritarian hierarchy with totalitarian coverage. Thus, since war controls represent an ever simpler transmutation from normal peacetime conditions, our third clue to the nature of evolving business bureaucracy lies in these factors. Let us examine them a bit more carefully.
peacetime conditions--one of the by-products of which was the formation of many of the Spitzenverbdnde themselves. Particularly interesting in this connection are the attempts made in the United States to formulate a national council out of the various "war advisory committees" established by leading trade associations during the war to represent business interests in the various war-control boards. An attempt to bring all these together into a single national organization, made at an Atlantic City con- vention in 1919, broke down. The plan, it seemed, was prematurel
25 This was especially true of NRA, largely an adaptation of Mr. Hoover's Trade Practice conventions, in turn based directly on war control ideas.
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THE "slant" of the HIERARCHICAL OR "scalar" PRINCIPLE
So far as structure and control factors are concerned, trade associ- ations and their Spitzenverhdnde tend to be modeled after the pat- tern of the typical large-scale corporation. The managerial hier- archy of command and subordination follows typically the "line" or "military" form of organization: any necessary breakdown in function and staff is so dovetailed into the "line" of authority as to take maximum advantage of expert counsel and whatever prin- ciples of decentralization of management may be appropriate in each separate case. Policy-making power lies typically in the direc- torial and managerial ranks, and is not subject to check from be- low. So far as concerns the lower reaches of the hierarchy of com- mand and the labor that performs the functions which management directs, the system is completely authoritarian (antidemocratic); all duties and responsibilities are fixed from above except when counter-organization of labor or other organized special interest groups may be able to force concessions via governmental or direct- action pressure.
More recently, as has been outlined in numerous places,^^ man- agement has succeeded in largely freeing itself from owner or investor control. Conversely, labor is increasingly able to make its voice heard and its power felt only so far as it operates under the protection of government. The trade union may be the power that forces the government to act, but without government intervention the trade union finds itself increasingly unable effectively to make its influences felt or even to recruit its members. A first condition to trade-union bargaining power is favorable law. That is to say, even in labor relations organized business finds itself facing the government.
Free in large part of direct investor control,^^ managements which for one reason or another are primarily interested in execu- tive and not in larger policy matters, may be able greatly to ration-
26 See the works of such authors as Berle, Means, Bonbright, Gordon, and others, referred to in Chapter VII.
27 Here again government takes the place of the disenfranchised. Something the equivalent of the Securities and Exchange Commission is now to be found in most capitalist countries.
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311
alize productive operations where formerly such changes were in- hibited by investor interest in higher returns. ^(R) But even where this proves both possible and, from the point of view of manage- ment, desirable, management now largely swings free from all direct controls other than those which may be imposed upon it by governmental authority; this fact will and apparently does mean that the executive and managerial end will be handled by paid functionaries, the better to allow the leading figures within these ranks to focus the massed power of their pendulous corporations upon larger issues of policy. Business leadership not only acquires political interests, but it turns to the political arena already backed by enormous, fully mobilized, and easily focused power. There are but few good modern parallels for this situation in the field of in-
ternal-pressure politics. For most apt comparison one must turn to the massed and personally manipulable powers of ancient and tribal armies of legionaries and retainers, or to the medieval bar- onry of the crusading knights.
So far as this picture holds, the appropriate medium for express- ing, and the machinery for canalizing and focusing, the social and political power of management is the trade association and its Spitzenverbdnde. To the extent that paid functionaries in the hier- archy of management are enabled to handle matters on an authori- tative but expert or "civil service" basis (because they have been recruited from an especially trained and ideologically precondi-
tioned corps), to that extent will policy matters be the more com- pletely funneled through supra-managerial apparatus organized for this specific purpose. Such rationalization, simplification, and centralization as may on occasion be attempted within these latter bodies become, thus, merely problems of efficient organization ^^ of largely, if not primarily, political bodies.
28 A number of railroad reorganizations (e. g. , the New York, New Haven and Hartford) have greatly improved operations, road, rolling stock, and service facili- ties which cannot possibly--except perhaps in the very long run--benefit stockhold- ers. For all practical purposes the roads are run expertly, the compromise now being not between owner-income interests and public service demands--the ICC keeping an ever watchful eye on affairs--but between career-management and public service, the ICC now regarding prospective changes with a friendlier attitude.
29 In many cases, perhaps making the rule and not the exceptions, career men run associations, and much association activity seems a by-product of expansion of point- less tasks and "services," bureaucratically overstaffed and incompetently run by
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But the question of how far and in what ways rational organiza- tion of the productive properties underlying management, or the manipulative machinery lying over these directorial levels, may be afiEected by the new functional segregation is somewhat beside the point at present. It is doubtful if the run of recent improvements below the upper layers is as great as one might be led to suspect at first. ^^ But the significant point is that trade associations and their Spitzenverbdnde are largely, if not in many cases exclusively, poli- tical-pressure bodies. This remains true even in those cases where trade associations act as coordinating bodies for cartels, or where they themselves have taken on cartel functions. The records are, of course, unsatisfactory, since here as elsewhere they leave next to no traces, such collusive practices as they may resort to proceeding by rules known from times immemorial within inner political party circles, and not by the etiquette of written statements and formal contracts. ^^ Secrecy, long the essence of national diplomacy, becomes entirely natural and normal, as the Spitzenverband be- comes a politically potent pressure group.
But the main concern of the supra-managerial business organiza- tions is not, strictly speaking, economic. Even where it is so, the issues at stake are increasingly burdened with social, philosophical, and political problems. That this is true can readily be substanti- ated by any reader who will take the trouble to leaf through a few thousand pages of trade-association literature, or who can find time to sit in on a few hundred of their congresses and conventions. What he will find is that the issues relate predominately, at some remove or other, to known, felt, or feared challenges by labor or
functionaries whose main efforts are devoted to proving to a gullible membership that the completely or primarily useless is of overwhelming importance.
80 See the records of plant reorganizations reproduced in the pages of the Bulletin of the International Management Institute (now defunct).
81 Thus, when the author of the TNEC Monograph No. i8. Trade Association Survey, dealing with trade associations in the United States, finds little ground for the belief that trade associations have "engaged in collusive restraints of trade," he cites as proof not evidence, but the lack of it! Which is only to say that he has con- fused not only the nature of trade-association activity, but also the nature of such collusion and of its characteristic proofs. The evidence of NRA might have disabused the author, who was familiar with its practices, of this naive interpretation. But if nothing else, he might have turned to a brief review of the last year's crop of anti- trust indictments for proof that the very reverse was true. Political machines rarely keep vouchers or reduce understandings to the written form, as Lincoln Steffens was not the first to discover, nor Clarence Darrow (cf. his review of NRA) the last.
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other groups--operating independently or through regular poli- tical channels--to the tenets underlying the capitalistic system as a whole.
As political-pressure bodies, the trade associations and their Spitzenverbdnde will be found responsible to their membership on the principle of representation, de jure or de facto according to property holdings and clique groupings. In practice, except per- haps for some of the associations representing smaller businesses,^^ clearly most of them are as closely controlled by a few of the busi- ness giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel. That is to say, where the structure of organization and methods of control recognized in constitution and by-laws do not permit--which typically they do--centralized, self-perpetuating control, the Realpolitik of power and clique effects a like result. This picture is so well accepted in association circles throughout the world and is so typical and general as to seem clearly beyond dispute in point of fact.
Both above and below the level of corporate managerial circles, the "scalar chain" or principle of graduated hierarchical controls obtains. Leadership, so far as the respective underlying hierarchy of command and subordination is concerned, is typically self- appointed, self-perpetuating, and autocratic. In the submanagerial zones, this leadership impinges on the nonproperty interests of labor and the general public. But in the supra-managerial zones it bears largely, and in some respects exclusively, on business interests in general. Authority in both ranges from the top down, and re- sponsibility from the bottom up. Below, authority coordinates the non- or but partially-property minded in an operative complex policy being predetermined and given. Above, authority coordi- nates big and little business in a policy complex forged as a by- product of the Realpolitik practiced by their own self-appointed general staffs. The same individuals, the same groups and cliques, the same interests dominate in each sphere; in each the principle of
82 Although the evidence seems to indicate dearly that many of the leading small businessmen's associations have been formed on the initiative of the large. This is the case with many of the British associations, and with the vast network of trade or "guild" associations which have sprung into existence in Japan over the past five years.
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organization, relating as it does to policy issues, is that of an inher- ently undemocratic, authoritarian hierarchy. And in neither is it the property interest of the bulk of the corporate property holders which dominates the stage. Yet the issues are increasingly of a "system-defending" or ideological character which reach to the "roots of domination" in a capitalistically organized world.
THE CONTENT OF THE NEW OUTLOOK
Contrary to certain implications of current usage, "totalitarian- ism," like "bureaucracy," is not necessarily undesirable if it is taken to mean a social-psychological outlook possessing at once a coherent unifying philosophy and a general program of action which comprehend the totality of organized social life. In this sense, even democracy, as a theoretically coherent web of postulates, free- doms, and qualified restraints, is "totalitarian. " But the question naturally arises as to what the aim and content of a general doc- trinal and programmatic position may be, when it appears that its formulators are responsible neither to the general public nor even to the property interests upon whose sanctions their authoritative powers rest. And how understand--how, indeed, even begin to formulate--a program when it seems impossible to define the in- terests to be promoted?
The difficulty, however, is more apparent than real. The leading managerial and directorial figures within the inner business sancta are real, not fictitious people, and they are drawn from, or have been absorbed into, the upper layers of wealth and income whose stakes it is their function to defend. ^^ Under current conditions, they are called upon to defend these general interests in an environ- ment wherein the issues are increasingly so drawn as to appear in some sense or other to jeopardize the whole system of evolving status and special-class privilege whose mobilized resources they have acquired "emergency powers" to command. And for the open- ing struggle they have largely fought themselves free of the pro- cedural and other forms of red tape imposed upon them by law under the general business rule of "live and let live"--in a vast
33 It is at this point that Burnham's Managerial Revolution flies off at a danger- ous tangent and leads him to an analysis as misleading as it is superficially plausible.
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315
political environment hostile to undue centralization of naked economic power. It cannot be forgotten that the world of relatively small-scale middle-class business of the not distant past, out of whose rich gleanings the great monopoly-oriented economic em- pires of the present gathered their first strengths, feared arbitrary political authority above all else. In limiting the state to laissez faire, they were careful to see that its functions were so defined as to make the state the specialized guardian of its own duty not to interfere as the tool of any hostile interest.
The history of government regulation of business has been pri- marily the history of attempts of small business to employ govern- ment to defend their interests against the encroachments of busi- ness monopolies,^* and of the latter to wrest the initiative from the small. ^^ The business giants, operating to an increasing extent in these matters through trade associations and their Spitzenverhdnde, seem to have found an effective means for neutralizing this opposi- tion, and to be in a fair way to the achievement of a "unified" and "harmonious" outlook of the business world vis-a-vis labor and any other challenging interest.
Real conflicts of interests within the business world have not been eliminated by these means, but to some degree they have been coordinated. Such successes as the various Spitzenverhdnde seem to have achieved in their legislative and allied efforts in the several capitalistic countries seem to stem in large part from the fact that they have been able to act as though business were united in bringing their collective pressures to bear upon government. It holds as a corollary to this that the bitterest and most ruthless at- tacks will be made upon those businesses large or small which re- fuse to play the game according to the new rules. The more "self- government in business," the more quickly the "price cutter," the business "alien," or any other footloose tycoon will be brought to
3* The vast and overwhelming bulk of complaints against the exercise of monopoly controls coming into the United States Department of Justice's Anti-Trust Division come, as Mr. Arnold has frequently pointed out, from business circles. The pressure for enactment of state and federal antitrust controls, as--for that matter--the bulk of the business regulatory machinery, emanates from similar circles.
35 As, for example, in the bulk of the resale price maintenance laws, agricultural marketing-agreement enabling acts, etc. , now to be found on the statute books of most capitalistic countries.
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heel by any means at the disposal of the central direction. The more complete the authority and the more centralized the power to act, the more quickly and drastically such action will be taken. ^^
Thus, there slowly emerges an apparent single view, a seeming common cause, and appearance of a general business "harmony," the semblance of a certain common business social philosophy which takes on form and content step by step with the growth and expansion of the centralized influence of the great peak associa- tions. ^^ And in proportion as this seeming internal unification takes place in organized business, one finds slowly being evolved parallel ideas vis-^-vis all other interests which, however and by whichever route they may come in conflict with any given business or aspect of business control, have no alternative but to appear to challenge the business world as a whole. Given comprehensive organization --the common ideal of the trade association all over the world this posture of affairs appears inevitable in the very nature of the case. If conflicting interests, as, for example, in the case of labor, are organized on an equally comprehensive basis, the effect will be thrown in much sharper relief. And it is an effect that has gradually become universally evident throughout the capitalistic world of the last half century.
How do the trade, employer, and business Spitzenverbdnde then proceed to meet challenges which they are led to interpret as in con- flict with the tenets underlying the capitalistic world as such? By somewhat varying routes, organized business amongst the several capitalistic countries has arrived at pretty much a common set of solutions. For the sake of brevity, and because they recapitulate a part of what has been said above, these may be summarized as follows:
3<< Consequently, the ejection or strategic demotion from the central councils of a Hjalmar Schacht, a Herr Thyssen or a Robert Stewart, not to mention the Jews when the opportune moment comes, becomes thoroughly understandable and a matter of course. Whoever does not play according to the accepted rules will be thrown out, just as whoever is weak will be absorbed in the strategies that lead to business mergers, and their expulsion or absorption is proof not of the weakness" but of the strength of organized business.
37 Which does not mean, of course, that the old conflicts do not exist, but that in a certain sense they have been "domesticated. " It is noteworthy that in the United States the growth of centralized business organization has been paralleled by both increasing concern over the fate of small business, and by its increased mortality (see the Prologue of the TNEC reports). In both Germany and Italy, the plight of little business, long before the outbreak of war, was becoming steadily worse.
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Control over popular organizations: the company union is father to the idea of universal, comprehensive, all-inclusive business-controlled joint labor-employer membership federations, of which the German Labor Front and the Italian General Confederation of Labor ^^ are the highest development to date. Similar ideas have run through the literature of American, French, and British business. An attempt was made to set up such a body in the United States in 1912; the Federation of British Industries was originally intended to include both labor and employers. The programs of De Mun, Harmel, and the French Social Catholic movement evolved similar ideas before the turn of the twentieth century ^^; the new French industrial re- organization plans follow similar lines. The ideas and patterns of the company union are applied wherever any other form of popular organization--of farmers, consumers, little businessmen, profession- als, women--has struck root. The idea is everywhere and in all coun- tries the same: mass organization centered around the ideologies of the upper business and social hierarchies and controlled by the self- appointed and self-perpetuating "natural" leaders from those ranks. The militarization of employer-employee relations: by a reassertion of authority in the hands of the employer similar to that which ob- tains in the army. This can be read from all complaints in the litera- ture of the Spitzenverbdnde and their subsidiary bodies when faced with effective labor protest, as in the events centered around the Bri- tish General Strike in 1926, the movements of the French Popular Front centered in the Matignon Agreement of June, 1936, the rise of the CIO in the United States and complaints demanding modifica- tion of the National Labor Relations Board, and in the successes of German, Italian, and Japanese employers, scored on the initiation of Fascist-type systems. A corollary is the militarization of legislative (substitution of the "edict" for statute law) and judicial (through the procedures of martial law) powers, with the consequent disappear- ance of the line between civil and military, the discipline of war and peace. The regimen of the "unorganized" industrial plant such as that of Ford is here prototypal of objectives seen as desirable by spokesmen who may have power to suggest or act in the larger sphere. The evolution of a ''harmony-of-all-interests'* propaganda in which the employer appears as benevolent pater familias: such was the blending which underlay the social legislation of Bismarck, the pro- grams of De Mun and Du Pin in the French Social Catholic move- ment, the Papal Encyclicals of Rerum Novarum in 1891 and Quad- ragesimo Anno in 1931, the "Clerical Fascism" of Dollfuss and Schuschnigg in Austria and of Franco in Spain, the NRA and some
38 Salvemini, Under the Axe of Fascism, Chapter VII. 89 See above, pp. 58-66.
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of the American New Deal Legislation, the Japanese National Har-
monizing Movement, and, of course, the whole of "welfare capital-
ism. " The employer as "patron" or "trustee" becomes the beau ideal
of the business world. Correlatively the trustee concept still is ap-
plied in all other relationships of real or potential conflict between
organized business and the general public. The parallel to "indus-
trial relations" is "public relations," and this latter is growing by
every known criterion of relative importance in a sort of geometric
ratio to all other corporate publicity interests, both in the United
States and abroad. ^^ "Public relations" advances the concept of a nat-
ural "harmony" of interest between business and the public, business
and the consumer, business and social and economic progress. The
relationship is that of "trustee of the people's property and wel-
*i
fare. "
4. The"educationalemphasis"lookstwoways:towards"neutralizing"
the hostile amongst adults, while engraining "loyal" staff and espe- cially the younger generation "through the doctrine of the organiza- tion itself. " "Neutralization" involves recognition, wherever the Realpolitik of strategy may determine, of trade unions and simi- lar organizations; emphasis upon "cooperation" by promotion of labor-employer community activities; regional decentralization of plants; legal restraints upon the "abuse" of labor power; use of police power, strike breakers, espionage at need; the mobilization of the middle and professional classes into patriotic and other feder- ations; *2 attacks on opposition leadership under the guise of attack- ing "racketeering"; encouragement of fear of "aliens," "fifth-col- umnists," and other menaces which encourage in turn emphasis upon group loyalties, patriotic sentiments; especial types of interest programs and propaganda for women, children, and the aged, etc. Conversely, education of the young calls for control over apprentice- ship training; purge of school textbooks; vocational emphasis with belief in an eventual occupational stratification in which there is a one-to-one correspondence between economic station and presump- tive I. Q. ; *^ evolution of a system of rewards and punishments which
40 For example, the NAM public-relations program was first granted a small sum of money in 1934. By 1937 public-relations expenditures were larger than those for all purposes combined before 1934--a sum which was estimated, at commercial rates, to equal in that year around $36,000,000 for the whole United States. Since that year these expenditures have been probably doubled.
41 See Batchelor, Profitable Public Relations. Bureaucracy and Trusteeship. The Nazi motto, Gemeinnutz geht vor Eigennutz, carries the precise equivalent for Ger- man businessmen for the dictum, "A widespread, favorable attitude of mind is a first essential to effective trusteeship in big business. People must expect and assume that managers will look out for interests other than their own. Managers in turn will then attempt to live up to expectations. " TNEC Monograph No. ii, p. 130.
42 See pp. 287-90. 43 See pp. 280-86.
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turn on the axis of loyalty to the concern; the substitution of non- commercial for commercial incentives; of group and "social" for individual and personal incentives.
The key to control is political: executive authority and policy-form- ing power are concentrated in the same cooptatively renewed ranks, and these recognize that the key to power is twofold; (1) consolida- tion of all the "ins" in a solid, interest-conscious bloc; (2) a popular following, the key to which is alliance with any faction, movement, or party which has or may acquire popular following without dis- turbing the general social structure of command and subordination. This means compromise with the nouveau puissant as they are co- opted into the movement on all matters relating to "the take"--an old practice in relationships between political rings and powerful vested interests all over the world, but now generalized to entire national economics, and rationalized with an eye to sterilization of "take" knowledge and demand for participation below the upper ranks. And for these lower reaches, the evolving programs of the or- ganized business world look to well-ordered, and especially trained and loyal cadres of hierarchically controlled employees over whom as "leaders" they have complete charge--as Gignoux of the Con- federation Generale du Patronat Fran^ais expressed the matter "not only of men but of souls. "
The new power complexes are inherently expansive: two things are united in this reaching for political power. One is the tendency of all democratically irresponsible f>ower aggregations to expand with- out limit. And the other is the fact that the "life styles" of the units which form the cells of the new power pyramids have each and all been dominated by a tendency to expand without limit--a fact with which all great business leaders have been thoroughly familiar and which has been traced at great length by Sombart and others. Given control or power decisively to influence the national state, imperial expansion is inevitable. The more or less rational combination of fully articulated systems of protection and privilege combined with imperial expansion, on the one hand, and the integrative pressures of a rationally articulated industrial technology, on the other, lead logically to the concept of the next largest politically omnicompetent and coherently organized imperial area, "great-space economics"
(Grossraumwirtschaften). ^*
44 All through the Godesberg and Munich discussions the Federation of British Industries was carrying on negotiations with the Reichsgruppe Industrie. "On March 16, the day after the fall of Prague, the Dusseldorf discussions culminated in the signature in London of an agreement between agents of the Federation of British Industries and the Reichsgruppe Industrie to 'replace destructive competition by constructive cooperation. ' It contemplated the creation of a series of Anglo-German cartels. " Frederick L. Schuman, Night Over Europe, p. 107. Similar conversations
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"The soul of Amenhotep is higher than Orion, and it is united with the underworld"--so runs a melancholy passage from the ancient Egyptian "Book of the Dead. " The roots of power of the several Spitzenverbdnde are intertwined in the sanctions of evolv- ing imperial class status, but monopoly-oriented business which attempts to evade effective democratic restraints can dominate government only through control over the thinking processes of the mass of the people who dwell at the base of the social pyramid. "Dangerous thoughts," as the Japanese are so acutely aware, breed democratic heresies. Antidemocratic "totalitarianism" can triumph only through ultimate consolidation of its "authoritarianism" by the seizure of political controls. Every single step in the path which leads in our times to use of the expedients which spell ultimate
resort to the coup d'etat are now sufficiently well known to be recognizable at a glance. And nothing fundamental in history, pro- gram, structure of organization, or social outlook divides clearly the policies of the Spitzenverbdnde within the "totalitarian" coun- tries from those of the liberal-capitalist states. Within Germany, Italy, Japan, and France these bodies made the critical decisions without which the final destruction of democracy could not have taken place.
Is it possible that the lesson will be learned elsewhere before it is too late?
were carried on between Japanese interests and the Federation of British Industries through a good deal of the crisis period when the Japanese took over Manchukuo. Nothing is to be found in the literature of the National Association of Manufactur- ers to indicate disapproval of the structure of controls effected through the ma- chinery of German and Italian Spitzenverbdnde, though considerable sympathy is frequently expressed that these latter should be so closely controlled by the govern- ment--a sentiment, incidentally, which the leading figures on the inner business circles in the totalitarian countries rarely reciprocate. Yet the Germans thought of NRA in 1935 as the equivalent of what they had brought on themselves, and won- dered not a little that there should be so much complaint among American business- men against their own program of "self-government in business" (The Germans use the same term), which they themselves had clearly helped to shape and guide from its initial stages on--and which must, so these same persons argued, be surely seen
as the inevitable pattern of the future if business and the capitalistic system are to survive in America as elsewhere.
? BIBLIOGRAPHY
OFFICIAL AND SEMIOFFICIAL SOURCES
Annuario Statistico Italiano, Series 2, Vol. VII (1917-18).
Commerce, U. S. Dept. of. Special Agents Series: No. 98, "Commercial Organizations in France"; No. 102, "Commercial Organizations in
the United Kingdom. " Washington, D. C. , 1915.
Bureau of Foreign and Domestic Commerce. Commercial and In-
dustrial Organizations of the United States.
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297
Power is compulsive, and when distributed unequally between bargaining groups is irreconcilable with "free contract. " Fee sim- ple distributes power unevenly between the "haves" and the "have-nots"; monopoly heightens and complicates the dispropor- tionalities in the graduated ranks of both. Law and the courts as frequently underline as correct the resultant distortion. It is this configuration of coercive forces, disproportionately matched, which accounts for the usual and inherently lop-sided "contract," and not the nature of the "rights" of bargaining groups. Power, in private hands, comes up against such claims as water comes to a wall, taking advantage of every crevice, depression, resource, or structural weakness. The proper expression is not "expansion of power" from these property nuclei, but cumulative permeation of power, as the history of the unfolding controls of all the great com- bines, cartels, trade associations, and Spitzenverbdnde abundantly shows.
Now it is a common characteristic of all monopoly-oriented groupings, major and minor, that each newly acquired leverage is typically employed for further collusive, rather than for com- petitive, efforts. Not "monopolistic competition" but "monopo- listic collusion" paces the gathering up and centralization of power to determine business policies over ever widening areas. ^ In plans lying behind the strategies of price fixation such things as produc- tion control, market allocations, and similar economic programs become increasingly the vehicles for strengthening tactical position in the pressure politics of collusive Realpolitik; they are not ends in themselves as so many recent economic theorists have mistakenly assumed. * But more than that, as struggle for strategic position
s See Callman, Das deutsche Kartellrecht and Unlautere Wettbewerb; Lucas, In- dustrial Reconstruction, for the British story; and the various reports of the LaFollette Committee, the Temporary National Economic Committee, and the indictments of the Anti-Trust Division of the Department of Justice and the Federal Trade Com- mission.
4 E. g. , and most notoriously, Edward Chamberlain, The Theory of Monopolistic Competition, and Joan Robinson, The Economics of Imperfect Competition. (Not,
M. Keynes, though many of his proposals in this connection appear as
however,
the product of "split-personality. ") Chamberlain by implication (Appendix E, "Some Arguments in Favor of Trade-Mark Infringement and 'Unfair Trading' ") and Mrs. Robinson explicitly recognize as much when they admit that their examination of monopolistic practices assume the absence of collusive intent or strategies reaching beyond the end of maximum gains. But it will no longer do to insist that an economist qua economist can only remain true to himself when he acts naively towards half to two-thirds of his problem, or, becoming sophisticated, insists on
J.
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POLITICAL POLICIES
broadens out over wider and wider areas, both ends and means be- come increasingly enmeshed in more or less distinctly and canoni- cally social and political issues--issues which, to employ the lan- guage of Karl Mannheim, reach to the ''roots of domination" and thus become "vested with a public interest" in a new and revolu- tionary sense of the term.
Why this is so may be read directly from the record by the more astute who have steeped themselves in the raw materials of the combination and business organization movements. But there is a certain "internal logic" to these transmutations of monopoly- minded policy which may be thrown into fluoroscopic relief by a less direct and time-consuming method. Consider first the nature of the new business self-bureaucratization.
THE NATURE OF BUSINESS BUREAUCRATIZATION
To say that business enterprise in all major capitalistic countries is becoming bureaucratic is to add nothing new. It is so well ac- cepted in the technical literature as to no longer require proof. ^ Obviously the vast control apparatus and the elaborate organiza- tional machinery of large-scale enterprises, of cartels and trade associations, and of their various peak associations call for func- tional division of duties, for circumscription of tasks and fixation of special responsibilities, for hierarchies of command and subor- dination, for special systems of recruitment and training of per- sonnel at different levels of competence. Obviously the growth in size and complexity of the individual business enterprise, the spread of ever more inclusive cartel and trade association net- works, the gathering up and centralizing of policies in series of
throwing the baby out with the bathwater simply because in his family tree such a baby must surely be illegitimate. The earlier economists, as well as the earlier political theorists (e. g. , Machiavelli, Bodin, Hobbes, Filmer, Locke, Bentham, Burke) made no such mistake. For the orthodox tradition, after the lame synthesis of John Stuart Mill, the separation of economics and politics became an issue as important as the separation of church and state, but at a time when, in contrast with the latter, the real historical interdependence between the two was growing ever closer and more rigorous with the passage of time.
5 See, in particular, Mooney and Reiley, Onward Industry! on "The Principles of Organization and Their Significance to Modern Industry"; Marshall Dimock and Howard K. Hyde, in TNEC Monograph No. 11, Bureaucracy and Trusteeship, and the various summary volumes of the huge German Enqueteausschuss, in particular the Gesamtbericht. See also, Louis D. Brandeis' provocative volume, The Curse of Bigness (New York, 1936).
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299
interlocking Spitzenverbdndej the formalization of relationships not only amongst these various business groupings but vis-a-vis the ever widening system of governmental regulation (whether friendly or hostile to business) and the ever greater attention paid to expert staff counsel, not to mention the science of management and ad- ministration itself--obviously these mean steady and cumulative bureaucratization of business. On present showing it is possible to predict that in the normal course of events the time will shortly arrive when all business activity, big and little, and from center to circumference, will be enmeshed in bureaucratic machinery, will conduct its activities in terms of bureaucratic dicta, following bureaucratic procedures, and complying with bureaucratic cri- teria.
Business, that is to say, is becoming organized; that organization is becoming large scale, highly centralized, and complex; and such centralization and complexity define the area of bureaucratic con- trol. But there are many types of bureaucracies, good and bad. The question is not, "Is business being bureaucratized? " but rather, "What type of bureaucracy is coming to dominate in business circles? "
There are three clues which merit especially close and careful inspection. First is the system of recruitment and training. The more one pages through the literature and publicity of the giant corporations and the networks of business and employer organiza- tion brought together under the central policy direction of the Spitzenverbdnde the more one is struck by the increasing attention devoted to this subject. A variety of motives dominate. A common incentive is specialized training for specialized jobs. Uppermost in many cases is the desire to take control over jobs away from the trade unions. ^ In many cases this objective appears to be more nar- rowly conceived as the recruitment of an absolutely loyal corps of workers from which the future managerial forces will be selected. ''
6 See Sidney and Beatrice Webb, The History of Trade Unionism (New York, 1920). In the early days employers fought apprenticeship programs, since these were employed by unions for the purpose of restricting labor supply. Now the roles are in many cases reversed, unions opposing apprenticeship plans designed to break down their own monopoly controls over labor supply on the one hand, and their partial control over the attitude of the lower managerial corps recruited directly from union ranks. This was particularly clear in the case of Dinta. See p. 283.
7 This seems to have been the original purpose of Dinta when it was organized in
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Quite generally the purpose is to attach managerial--and some- times even nonmanagerial--ranks directly to the individual com- pany or trade so as to cut down the high expense associated with turnover of an executive and staff personnel which it is becoming increasingly costly to "break in. " ^ Again, and perhaps more com- monly in recent years, the device provides an extremely effective method for the spread of antitrade union propaganda.
Trends here move on three closely related levels. Most common and perhaps best known are apprenticeship programs. One line of emphasis in these programs calls for systematic and far-reaching attempts to overhaul public-school educational programs on more purely vocational lines. This feature has been particularly marked in England and Germany. Under the Nazis, and to a lesser extent in Italy and Japan, the program of Dinta and other closely allied groups has been extended to cover all educational training in the country. The second line of emphasis calls for greatly extend- ing formal company-controlled apprenticeship training systems throughout industry in general. More recently in the United States, governmentally sponsored, but privately directed, local, state and national apprenticeship training programs have been worked out on a basis sufficiently comprehensive to forecast the time when they will include all jobs requiring some degree of skill. The various Spitzenverbdnde have without exception shown a lively and sustained interest in these systems for sifting, shaping, guiding, and controlling the lower levels of future labor ranks.
A parallel interest has led in the United States to ''foremanship training. " Both the National Association of Manufacturers and the United States Chamber of Commerce and their various sub- sidiary and member bodies have paid much attention to this feature of recruitment, since it is recognized that the foreman is the "front line representative of management. " Ideally, "foremanship train- ing" performs somewhat the same functions for the nonexecutive
1926, and of the National Association of Manufacturers when it first began to show an active interest--c. 1910-12--in apprenticeship programs.
8 A particularly important problem where automatic machinery has been de- veloped to the point where staff is largely of an engineering or semi-engineering supervisory character, and in cases where processes have become so highly specialized machine tool production, airplane manufacture and repair--that the costs of spoil- age, quite aside from the direct costs of training, from faulty workmanship are high and may ramify, bottle-neckwise, far beyond the individual operation or process.
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managerial ranks that apprenticeship and vocational education do for those who habitually handle the machines.
Within these two levels, training is in many instances almost entirely technical. But increasingly--notoriously in such cases as Ford, General Motors, Standard Oil of New Jersey, Mitsui, I. G. Farbenindustrie, Siemens and Halske, and particularly Dinta-- there has been added schooling in economics, sociology, history, and other subjects which may be manipulated to support the gen- eral social and philosophical point of view of management. It is probably safe to say that no large company, trade association, Spitzenverband, or governmental employee-training program is now entirely free of this ideological coloring. In many cases, com- pany propaganda plays a role as important or even more important than the formal technical training itself. This is particularly apt to be the case in company "colleges," such as that of the Standard Oil Company of New Jersey. (R)
Through these methods business is attempting to create its own "officialdom" ^? and its own "civil service," ^^ dedicated to business ends and loyal to business philosophies. However much the content of specific programs may vary in detail, the general tendency here is to evolve specialized training for specialized jobs, to delimit, de- fine, and circumscribe each and every specialized task, to define responsibilities and duties within each bracket of competence, to arrange these competencies in a rationally articulated hierarchy of command and subordination in which vertical movement is lim-
9 See also literature of the Goodyear Tire and Rubber Co. on the "Goodyear In- dustrial Union," which offers, amongst other courses, one on "Business Science" deal- ing with "The individual in self-analysis, his relation to others, his attitude towards his job and his understanding of the proper approach to the job. " (Circular of the Goodyear Tire and Rubber Co. ) How many of these "schools" and "colleges" there may be, what ground they cover, what differences they show from one country to another, and to what uses they are being put nobody knows. A careful and critical study is much needed.
10 A particularly penetrating book was written by Kurt Wiedenfeld (one of the more acute German economists subsequently to enlist in the Nazi services), called Kapitalismus und Beamtentum: Produzententum und Konsumententum in der Welt- markt-Wirtschaft (1932). See also, TNEC Monograph No. 11.
11 One of the common shortcomings of the more recent books on wage theory, as, e. g. , J. R. Hicks, The Theory of Wages, (London, 1932), is that employers are assumed to take a purely passive role vis-^-vis labor in that he is treated as a bar- gainer who does not really bargain since he is interested only in the wage-cost: labor-efficiency calculus, and whose only choices are (a) the sea in which he fishes, and (b) the bait he will use (bait is all of one sort; it varies only by more-or-less).
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ited and defined by "seniority," formal rules, and other formally graduated systems of employer-controlled rewards and punish- ments, and to direct the whole of these efforts along a more or less common ideological front.
Above foreman ranks, the story is somewhat different. A line somewhat similar to that found in governmental circles between "civil service" and "political appointees" seems to run between the two lower levels of business staff on the one hand and the direc- torial and upper managerial ranks on the other. Here, as has been pointed out, the evidence seems to show that "position," "pull," "family," "contacts," "family wealth," "nepotism," "sinecure," "in- dulgences," and the like are becoming increasingly important. These upper layers seem to be "inbreeding" in business, just as the leading families of the upper wealth brackets from which they are mostly drawn intermarry within the charmed circles of the Social Register. There can be no question but that cooptation is
the rule and not the exception throughout all business large and small, and that the practice holds as generally for the trade associa- tions and their various Spitzenverbdnde as it does in principle for the more compact corporate set up. ^^ But more, that within the upper executive and directorial layers, cooptation is increasingly from socially acceptable ranks, and that the rules that guide selec- tion come more and more to be woven of the same cloth as those which define the limits, the attitudes, the codes, and the social and political philosophies of self-conscious ruling-class status.
Before pursuing the implications of these developments a bit further, it will be useful to consider briefly the two other "clues" to the nature of business bureaucracy hinted at above. The first of these relates to the fact that all attempts to rationalize business organization lead, under liberal-capitalistic political conditions, to dual, overlapping, and, in part, "competing," managements which become increasingly costly, inefficient, cumbersome, and confusing with the passage of time, and which sooner or later require, by more or less common agreement, surgical treatment. It is a well-
known fact that few efforts to coordinate, for example, private natural monopolies over territories coextensive with their natural potentialities have been successfully carried through without ac-
12 See pp. 259-65, above.
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tive governmental aid. The American Telephone and Telegraph Company is a partial exception, as are a few local tram and electric power systems. Railway unification, however, has nowhere been carried through except by government fiat. The Interstate Com- merce Commission has striven for railway unification for years. The railway unification which led to the British "Big 4" in the early twenties and the development of the unified rail networks of Germany and Japan were forced through on the initiative of their respective governments. The same holds for most electric power "grid" schemes, unification of postal and telegraph systems, and most local and metropolitan transit networks.
The monopoly urge, in other words, seems to be typically stopped before monopoly has been really achieved. The results the reasons why need not detain us at this point, for they require independent analysis, case by case and industry by industry ^^ however, belie at least in part the superficial impression. They seem to be about as follows: (1) monopoly efforts are funneled in- creasingly through the machinery of trade association, Chamber of Commerce, and Spitzenverband; (2) within these councils a broad line separates the inner governing cliques made up of the corporate giants and their medium and smaller satellite concerns; (3) the former divide markets, manipulate prices and production, and in general so direct affairs that, the total possible "take" being
treated as given, each of the former receives his due allotment where the gains are relatively speaking assured, and the latter are granted the more or less unprofitable fringes; (4) there is a cumu- lative pressure to "settle into the allotted groove," and not to encroach upon "most-favored company" territory, nor to push entirely out those whose existence on sufferance is deemed a con- tinuous advantage for propaganda and other reasons; (5) disputes concerning position are increasingly handled by the equivalent of negotiation, arbitration, "treaty-making," special grant and privi- lege, etc. ; (6) enterprise management is kept in a largely fraction- alized state within each industry or trade, more or less irrespective
of geographic, technological, and other features; ^*
13 Further combination may be stopped by fear of Anti-Trust prosecution, as in the United States.
14 Patent pooling, standard grades and labels, simplification of types and varieties, cartel and syndicate practices, and the like, do not militate against this generaliza-
(7)
increasingly,
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the leading functions ot the trade association or Spitzenverband becomes the guidance and leadership on all social and political issues. Finally, so long as either the internal coordinative functions or the external representative tasks of the central associations are pursued in the face of partially or largely antagonistic political authorities, the two facets will be dovetailed into a single program known as "self-government in business. " ^^
Consequently, the more "self-government in business" there is, the more governmental regulation there must be. And the more governmental regulatory machinery expands, the more complete and thorough betomes the duplication of managerial and admin- istrative hierarchies between government and private enterprise. Governmental regulatory agencies have shown a more or less com- mon pattern of development: (i) they tend to become permanent bodies well staffed with expert panels; (2) they find that regulation which has been instituted at any point--price, market allocation, or the like
business policies of regulated concerns; (3) regulation gradually comes to embrace the entire trade or industry; (4) it gathers into its hands increasingly legislative and judicial as well as administra- tive authority. Under pressure to expand functions along these
lines, regulatory authorities gradually begin to compile informa- tion which runs the gamut of business and industry interests; to organize information, prosecution, negotiation, and its own inter- nal administration along functional lines characteristic of the industry as a whole; to build up staffs until they come to approxi- mate the business administration which they face constantly across the conference table or the courtroom; and to acquire powers sometimes negative and more frequently positive--which involve de facto participation in the management of the enterprises falling into the authority's bailiwick. ^^
tion, for these represent cost cutting, orgnization simplifying, and strategic manipu- lation factors. There is little or no evidence that they tend to "rationalize" the industry either to the public good, or to cut down the plethora of separate manage- ments. So far as the public good is concerned, these devices usually appear in com- binations which retard the pace of change; they tend to slow down the weeding out which would occur under either "normal" competitive or monopoly conditions.
15 See pp. 227-39, above.
16 It would be possible to show this in great detail by dissecting any of a large number of governmental regulatory authorities in the United States or abroad. The
--leads them step by step to cover the whole range of
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There are some reasons for regarding the typical governmental regulatory body as organizationally superior to those evolved by the businesses they regulate/^ but that is quite another matter. Of key importance in the present connection are two by-products of the developments traced above. First, as pointed out above, there tends to be duplication all the way up and down the line between government and business administrative machines. And second, a large and increasing percentage of staff, and of the necessary facili- ties in terms of office space, office personnel, files, and the para- phernalia for grinding out countless memoranda is taken up with the tactics of manoeuvre, concealment and uncovering of key in- formation, legalistic haggling, enforcement and evasion, and so on, ad infinitum, brought about and dependent upon the conflicting interests expressed in such dual administrative control.
Facing this situation, what do the Spitzenverbdnde propose to do? First, they tend to duplicate in their own central headquarters
chairman of one of the largest Federal regulatory agencies--perhaps the best known
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that his Commission Avould ultimately be compelled to duplicate every scrap of in- formation, every leading staff officer and specialist, concerning companies and trade associations they were charged to regulate in the public interest. Perhaps not in absolute numbers, he thought, since they might never be under compulsion to be- come as inefficiently organized as the industry, taken as a whole, patently was. But certainly on a scale capable ultimately of taking over the entire industry without serious hitch should business management and staffs be suddenly stricken, let us say, by a highly selective desire for permanent vacations. A similar judgment was given by equally highly placed German and British regulatory authorities with respect to their own administrative machineries.
17 Partly because they have come into the picture later than the companies and administrative bodies which they seek to regulate; partly because they tend to be manned by experts and not by business "politicos"--civil service requirements for staff, bad as they may be in many instances, are obviously superior to the staffs they face in training, in singleness of purpose, and in the quality of their loyalty; partly because they bear responsibilities which are matters of public record wherein their actions and decisions are constantly subject to either legislative or judicial review; and partly because they have arisen in most countries after the trend towards cen- tralization of governmental regulatory authority in the hands of the federal--as against local, state, and provincial--has asserted itself. To an increasing extent, there is less duplication here than division of authority so that local bodies take over primarily the residue functions which relate to purely local matters. There is, how- ever, a contrary tendency to set up governmental regulatory bodies which have to do not with a single industry or set of narrowly related industries, but with business functions (e. g. , securities and trading, surplus commodities, pure food and drug). This means that each business must face not one but a series of regulatory bodies. And at many points the functions and prerogatives of these latter are bound to duplicate and overlap each other.
hazarded the guess in private conversation with the author some four years ago
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the regulatory set-up ^^--thereby tending in many respects to fur- ther duplicate functions, staff, and facilities--of their own mem- bership. Not uncommonly, as an interesting by-play, they, or their member associations, or the strategically placed corporations which shape their leading policies attempt to entice governmental staff to join their own payrolls at higher salaries. ^^ But most signifi- cantly, they seek direct representation on committees, commis- sions, advisory bodies, and other governmental agencies which were either established at the outset for the specific purpose (or subsequently acquired the power) of determining in whole or in part the very policies which guide the administrative bodies them- selves.
Thus the Federation of British Industries claimed before the outbreak of war to be directly represented on the Board of Trade Advisory Council and Council for Art and Industry, the War Of- fice Technical Coordinating Committee on General Stores and Motor Transport Coordinating Committee, the Ministry of Health Joint Advisory Committee on River Pollution and the Town and Country Planning Advisory Committee, and the Ministry of Agri- culture's Standing Committee on River Pollution. But this is only the beginning. It claimed that its representations before govern- mental bodies have resulted in adoption of its own plans for fiscal policy, tariff policy, imperial trade, commercial treaties. ^^ There is scarcely a governmental committee or commission which affects its
18 This is most readily shown in the departmentalization of the various Spitzen- verbdnde, the range of the expanding committee and staff functions, the nature of the regional and functional groupings of membership, the content of regular reports to members in their official publications and annual congresses, etc. The same holds for many of their own member associations and certain of their larger member cor- porations. See the annual reports of the National Association of Manufacturers; the
Yearbook and Register of British Manufacturers, put out by the Federation of British Industries; the speeches, and especially the organizational data given in the ap- pendices, collected in the book of M. Rene P. Duchemin (President d'honneur de la Confederation Gen^rale du Patronat Frangais), Organisation syndicate Patronale en France; and see also Fascist Era, the yearbook of the Fascist Confederation of In- dustrialists; and sketches by Dr. Horst Wagenfiihr of the Reichsverband der deutschen Industrie and the Verein Deutscher Maschinenbau Anstalten in his Kartelle in Deutschland.
19 Probably one-half of the leading figures amongst the directorial, executive, and staff ranks of the leading Spitzenverbdnde have gone directly from governmental regulatory bodies to the firms and associations which they formerly regulated. Higher salaries are the common reason given. A careful study might reveal many others.
20 See, in particular, the NAM pamphlet "Industry and Action. "
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Members' interests at any given point upon which it did not claim membership or influence of decisive importance. Since the out- break of hostilities, under the system of war control bodies, this fusion has been rendered almost complete.
The British picture is not unusual but is typical for the liberal- capitalistic countries as a group. ^^ But it becomes quickly altered in some respects drastically--the instant monopoly and business coordinative drives move from a "liberal" to an "authoritarian" environment. As evidenced in Germany and Italy, though by some- what different routes, the inauguration of totalitarianism results in a general overhauling of business machinery along the following lines: (1) "streamlining," that is, a considerable mass of overlap- ping and duplicate trade association, regional and national, and peak association machinery is cut away. ^^ (2) Correlatively, the com- bination and cartel movement is greatly strengthened; large and increasing numbers of small concerns are eliminated; compulsory association membership becomes the rule. (3) The relationships between governmental committees and commissions are altered in several ways, but in general these relationships become func- tional instead of "fighting," coordinative instead of duplicating and overlapping, and "self-government" follows lines of mana- gerial decentralization rather than principles of checks and bal- ances between governmental and private authorities. The basis of
the "efficiency" claims of all totalitarian systems is the cutting thorugh and setting aside of conflicting machinery which has arisen (paradoxically, as a result of governmental "interference") to co- ordinate and simplify business itself, or to prevent the inefficient disposal of social resources according to the common formulae of "business as usual," or both. Finally, (4) the former "self-govern- ing" bodies are more or less formally vested with legal or quasi- legal powers to formulate policy within the larger "totalitarian" directives, and to implement decisions with powers of enforcement.
21 See the sources cited in footnote 18 above.
22 This could readily be shown by following through in detail the change in any given line of industry or trade. But such "streamlining," coupled with other changes indicated above, may well mean in many cases quite new and greatly elaborated ma- chinery. For example, unorganized trades will now be organized; unfederated will now be federated; relationships between and amongst central associations and their various functional and regional divsions will be handled by various combinations of compacts, ad hoc and permanent committees, and so on.
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Great and far-reaching as many of these changes may be in detail, they are, however, fully and without important exception in line with preceding trends. This could be shown in great detail by tracing through the successive changes, for example, which led to the formation in 1917 of the Reichsverband der deutschen Indus- trie out of two bodies representing respectively the heavy and light manufacturing industries, and the steps taken to transform the re- sultant body in 1933 into the Reichsgruppe Industrie. Or, again, by those whereby the former General Confederation of Italian In- dustry was made over into the Fascist Confederation of Industrial- ists. Another example is offered in the changes which signalized the pretty complete overhauling of the Confederation Generale de la Production Fran^aise, following the famous Matignon Agreement in 1936, into the Confederation Generale du Patronat Fran^ais. The formal dissolution in late 1940 of this latter body, which was modeled more or less directly after the Fascist pattern in Italy, seems to have been preparatory to remodeling along more dis- tinctly Nazi lines.
Whether traced along lines of structure, function, or authority, these changes would be found consistent with past trends. They represent a very considerable "tightening" up, to be sure, but even the more rigorous and authoritarian controls are consistent with past lines of growth. Still another check is provided by noting the nature of the changes these various associations and their Spitzen- verbdnde undergo between so-called "emergency" and "normal" periods. Quite aside from the fact that it has now become custom- ary to justify all "tightening" up by appeal to "emergency" con- ditions,^^ and that we have at least two major attempts to carry through far-reaching reorganization of business-governmental re- lationships in peacetimes--those of the NRA and the various Bri- tish industrial reorganization schemes ^^--the ease with which
23 This is the case with all the various British industrial reorganization schemes such as those for railroads, cotton textiles, coal and steel, and with controls estab- lished under such laws as the Miller-Tydings, the Robinson-Patman, and the various state marketing and resale price maintenance laws. Much the same, of course, was true of the whole of the NRA and the AAA.
24 Not to mention a series of attempts made in practically every country in the world immediately following the great war to carry over wartime controls inrg
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these transitions have been made between peace and war and back again to peace fully bears out the above contention, the main differ- ence being that the binding sanctions are qualitatively quite dif- ferent. In these respects, the Second World War has differed from the First in that the transition from peace to war is greatly facili- tated by the much higher level of business organization, in which authorities, controls, and group objectives are more completely worked out along lines required for ready adaptation to war con- ditions.
That this is so largely arises from the fact that peacetime endeavors in the major capitalistic countries to extend the network and expand the controls of business organization were almost with- out exception based upon former wartime experience. ^^ Thus it comes about that it is precisely in war and emergency times that the dominance of big business in the councils of state comes most clearly to the fore. What was true of the United States in 1917-18, in the depression and the period of NRA, and in the National Defense efforts of 1940-41 can be duplicated in all other major capitalist countries. Mr. Knudsen, Edward Stettinius, and Bernard Baruch are paralleled by Mr. Ogura in Japan, Lord Beaverbrook in England, and Hermann Goring (himself a leading industrialist), Friedrich Flick, and their group in Germany.
Now the essence of the newer strategies of wartime controls where the military arm is, in effect, regarded as merely the "cutting edge" of a belligerently mobilized industrial system taken as a whole--is authoritarian hierarchy with totalitarian coverage. Thus, since war controls represent an ever simpler transmutation from normal peacetime conditions, our third clue to the nature of evolving business bureaucracy lies in these factors. Let us examine them a bit more carefully.
peacetime conditions--one of the by-products of which was the formation of many of the Spitzenverbdnde themselves. Particularly interesting in this connection are the attempts made in the United States to formulate a national council out of the various "war advisory committees" established by leading trade associations during the war to represent business interests in the various war-control boards. An attempt to bring all these together into a single national organization, made at an Atlantic City con- vention in 1919, broke down. The plan, it seemed, was prematurel
25 This was especially true of NRA, largely an adaptation of Mr. Hoover's Trade Practice conventions, in turn based directly on war control ideas.
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THE "slant" of the HIERARCHICAL OR "scalar" PRINCIPLE
So far as structure and control factors are concerned, trade associ- ations and their Spitzenverhdnde tend to be modeled after the pat- tern of the typical large-scale corporation. The managerial hier- archy of command and subordination follows typically the "line" or "military" form of organization: any necessary breakdown in function and staff is so dovetailed into the "line" of authority as to take maximum advantage of expert counsel and whatever prin- ciples of decentralization of management may be appropriate in each separate case. Policy-making power lies typically in the direc- torial and managerial ranks, and is not subject to check from be- low. So far as concerns the lower reaches of the hierarchy of com- mand and the labor that performs the functions which management directs, the system is completely authoritarian (antidemocratic); all duties and responsibilities are fixed from above except when counter-organization of labor or other organized special interest groups may be able to force concessions via governmental or direct- action pressure.
More recently, as has been outlined in numerous places,^^ man- agement has succeeded in largely freeing itself from owner or investor control. Conversely, labor is increasingly able to make its voice heard and its power felt only so far as it operates under the protection of government. The trade union may be the power that forces the government to act, but without government intervention the trade union finds itself increasingly unable effectively to make its influences felt or even to recruit its members. A first condition to trade-union bargaining power is favorable law. That is to say, even in labor relations organized business finds itself facing the government.
Free in large part of direct investor control,^^ managements which for one reason or another are primarily interested in execu- tive and not in larger policy matters, may be able greatly to ration-
26 See the works of such authors as Berle, Means, Bonbright, Gordon, and others, referred to in Chapter VII.
27 Here again government takes the place of the disenfranchised. Something the equivalent of the Securities and Exchange Commission is now to be found in most capitalist countries.
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alize productive operations where formerly such changes were in- hibited by investor interest in higher returns. ^(R) But even where this proves both possible and, from the point of view of manage- ment, desirable, management now largely swings free from all direct controls other than those which may be imposed upon it by governmental authority; this fact will and apparently does mean that the executive and managerial end will be handled by paid functionaries, the better to allow the leading figures within these ranks to focus the massed power of their pendulous corporations upon larger issues of policy. Business leadership not only acquires political interests, but it turns to the political arena already backed by enormous, fully mobilized, and easily focused power. There are but few good modern parallels for this situation in the field of in-
ternal-pressure politics. For most apt comparison one must turn to the massed and personally manipulable powers of ancient and tribal armies of legionaries and retainers, or to the medieval bar- onry of the crusading knights.
So far as this picture holds, the appropriate medium for express- ing, and the machinery for canalizing and focusing, the social and political power of management is the trade association and its Spitzenverbdnde. To the extent that paid functionaries in the hier- archy of management are enabled to handle matters on an authori- tative but expert or "civil service" basis (because they have been recruited from an especially trained and ideologically precondi-
tioned corps), to that extent will policy matters be the more com- pletely funneled through supra-managerial apparatus organized for this specific purpose. Such rationalization, simplification, and centralization as may on occasion be attempted within these latter bodies become, thus, merely problems of efficient organization ^^ of largely, if not primarily, political bodies.
28 A number of railroad reorganizations (e. g. , the New York, New Haven and Hartford) have greatly improved operations, road, rolling stock, and service facili- ties which cannot possibly--except perhaps in the very long run--benefit stockhold- ers. For all practical purposes the roads are run expertly, the compromise now being not between owner-income interests and public service demands--the ICC keeping an ever watchful eye on affairs--but between career-management and public service, the ICC now regarding prospective changes with a friendlier attitude.
29 In many cases, perhaps making the rule and not the exceptions, career men run associations, and much association activity seems a by-product of expansion of point- less tasks and "services," bureaucratically overstaffed and incompetently run by
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But the question of how far and in what ways rational organiza- tion of the productive properties underlying management, or the manipulative machinery lying over these directorial levels, may be afiEected by the new functional segregation is somewhat beside the point at present. It is doubtful if the run of recent improvements below the upper layers is as great as one might be led to suspect at first. ^^ But the significant point is that trade associations and their Spitzenverbdnde are largely, if not in many cases exclusively, poli- tical-pressure bodies. This remains true even in those cases where trade associations act as coordinating bodies for cartels, or where they themselves have taken on cartel functions. The records are, of course, unsatisfactory, since here as elsewhere they leave next to no traces, such collusive practices as they may resort to proceeding by rules known from times immemorial within inner political party circles, and not by the etiquette of written statements and formal contracts. ^^ Secrecy, long the essence of national diplomacy, becomes entirely natural and normal, as the Spitzenverband be- comes a politically potent pressure group.
But the main concern of the supra-managerial business organiza- tions is not, strictly speaking, economic. Even where it is so, the issues at stake are increasingly burdened with social, philosophical, and political problems. That this is true can readily be substanti- ated by any reader who will take the trouble to leaf through a few thousand pages of trade-association literature, or who can find time to sit in on a few hundred of their congresses and conventions. What he will find is that the issues relate predominately, at some remove or other, to known, felt, or feared challenges by labor or
functionaries whose main efforts are devoted to proving to a gullible membership that the completely or primarily useless is of overwhelming importance.
80 See the records of plant reorganizations reproduced in the pages of the Bulletin of the International Management Institute (now defunct).
81 Thus, when the author of the TNEC Monograph No. i8. Trade Association Survey, dealing with trade associations in the United States, finds little ground for the belief that trade associations have "engaged in collusive restraints of trade," he cites as proof not evidence, but the lack of it! Which is only to say that he has con- fused not only the nature of trade-association activity, but also the nature of such collusion and of its characteristic proofs. The evidence of NRA might have disabused the author, who was familiar with its practices, of this naive interpretation. But if nothing else, he might have turned to a brief review of the last year's crop of anti- trust indictments for proof that the very reverse was true. Political machines rarely keep vouchers or reduce understandings to the written form, as Lincoln Steffens was not the first to discover, nor Clarence Darrow (cf. his review of NRA) the last.
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other groups--operating independently or through regular poli- tical channels--to the tenets underlying the capitalistic system as a whole.
As political-pressure bodies, the trade associations and their Spitzenverbdnde will be found responsible to their membership on the principle of representation, de jure or de facto according to property holdings and clique groupings. In practice, except per- haps for some of the associations representing smaller businesses,^^ clearly most of them are as closely controlled by a few of the busi- ness giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel. That is to say, where the structure of organization and methods of control recognized in constitution and by-laws do not permit--which typically they do--centralized, self-perpetuating control, the Realpolitik of power and clique effects a like result. This picture is so well accepted in association circles throughout the world and is so typical and general as to seem clearly beyond dispute in point of fact.
Both above and below the level of corporate managerial circles, the "scalar chain" or principle of graduated hierarchical controls obtains. Leadership, so far as the respective underlying hierarchy of command and subordination is concerned, is typically self- appointed, self-perpetuating, and autocratic. In the submanagerial zones, this leadership impinges on the nonproperty interests of labor and the general public. But in the supra-managerial zones it bears largely, and in some respects exclusively, on business interests in general. Authority in both ranges from the top down, and re- sponsibility from the bottom up. Below, authority coordinates the non- or but partially-property minded in an operative complex policy being predetermined and given. Above, authority coordi- nates big and little business in a policy complex forged as a by- product of the Realpolitik practiced by their own self-appointed general staffs. The same individuals, the same groups and cliques, the same interests dominate in each sphere; in each the principle of
82 Although the evidence seems to indicate dearly that many of the leading small businessmen's associations have been formed on the initiative of the large. This is the case with many of the British associations, and with the vast network of trade or "guild" associations which have sprung into existence in Japan over the past five years.
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organization, relating as it does to policy issues, is that of an inher- ently undemocratic, authoritarian hierarchy. And in neither is it the property interest of the bulk of the corporate property holders which dominates the stage. Yet the issues are increasingly of a "system-defending" or ideological character which reach to the "roots of domination" in a capitalistically organized world.
THE CONTENT OF THE NEW OUTLOOK
Contrary to certain implications of current usage, "totalitarian- ism," like "bureaucracy," is not necessarily undesirable if it is taken to mean a social-psychological outlook possessing at once a coherent unifying philosophy and a general program of action which comprehend the totality of organized social life. In this sense, even democracy, as a theoretically coherent web of postulates, free- doms, and qualified restraints, is "totalitarian. " But the question naturally arises as to what the aim and content of a general doc- trinal and programmatic position may be, when it appears that its formulators are responsible neither to the general public nor even to the property interests upon whose sanctions their authoritative powers rest. And how understand--how, indeed, even begin to formulate--a program when it seems impossible to define the in- terests to be promoted?
The difficulty, however, is more apparent than real. The leading managerial and directorial figures within the inner business sancta are real, not fictitious people, and they are drawn from, or have been absorbed into, the upper layers of wealth and income whose stakes it is their function to defend. ^^ Under current conditions, they are called upon to defend these general interests in an environ- ment wherein the issues are increasingly so drawn as to appear in some sense or other to jeopardize the whole system of evolving status and special-class privilege whose mobilized resources they have acquired "emergency powers" to command. And for the open- ing struggle they have largely fought themselves free of the pro- cedural and other forms of red tape imposed upon them by law under the general business rule of "live and let live"--in a vast
33 It is at this point that Burnham's Managerial Revolution flies off at a danger- ous tangent and leads him to an analysis as misleading as it is superficially plausible.
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POLITICAL POLICIES
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315
political environment hostile to undue centralization of naked economic power. It cannot be forgotten that the world of relatively small-scale middle-class business of the not distant past, out of whose rich gleanings the great monopoly-oriented economic em- pires of the present gathered their first strengths, feared arbitrary political authority above all else. In limiting the state to laissez faire, they were careful to see that its functions were so defined as to make the state the specialized guardian of its own duty not to interfere as the tool of any hostile interest.
The history of government regulation of business has been pri- marily the history of attempts of small business to employ govern- ment to defend their interests against the encroachments of busi- ness monopolies,^* and of the latter to wrest the initiative from the small. ^^ The business giants, operating to an increasing extent in these matters through trade associations and their Spitzenverhdnde, seem to have found an effective means for neutralizing this opposi- tion, and to be in a fair way to the achievement of a "unified" and "harmonious" outlook of the business world vis-a-vis labor and any other challenging interest.
Real conflicts of interests within the business world have not been eliminated by these means, but to some degree they have been coordinated. Such successes as the various Spitzenverhdnde seem to have achieved in their legislative and allied efforts in the several capitalistic countries seem to stem in large part from the fact that they have been able to act as though business were united in bringing their collective pressures to bear upon government. It holds as a corollary to this that the bitterest and most ruthless at- tacks will be made upon those businesses large or small which re- fuse to play the game according to the new rules. The more "self- government in business," the more quickly the "price cutter," the business "alien," or any other footloose tycoon will be brought to
3* The vast and overwhelming bulk of complaints against the exercise of monopoly controls coming into the United States Department of Justice's Anti-Trust Division come, as Mr. Arnold has frequently pointed out, from business circles. The pressure for enactment of state and federal antitrust controls, as--for that matter--the bulk of the business regulatory machinery, emanates from similar circles.
35 As, for example, in the bulk of the resale price maintenance laws, agricultural marketing-agreement enabling acts, etc. , now to be found on the statute books of most capitalistic countries.
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heel by any means at the disposal of the central direction. The more complete the authority and the more centralized the power to act, the more quickly and drastically such action will be taken. ^^
Thus, there slowly emerges an apparent single view, a seeming common cause, and appearance of a general business "harmony," the semblance of a certain common business social philosophy which takes on form and content step by step with the growth and expansion of the centralized influence of the great peak associa- tions. ^^ And in proportion as this seeming internal unification takes place in organized business, one finds slowly being evolved parallel ideas vis-^-vis all other interests which, however and by whichever route they may come in conflict with any given business or aspect of business control, have no alternative but to appear to challenge the business world as a whole. Given comprehensive organization --the common ideal of the trade association all over the world this posture of affairs appears inevitable in the very nature of the case. If conflicting interests, as, for example, in the case of labor, are organized on an equally comprehensive basis, the effect will be thrown in much sharper relief. And it is an effect that has gradually become universally evident throughout the capitalistic world of the last half century.
How do the trade, employer, and business Spitzenverbdnde then proceed to meet challenges which they are led to interpret as in con- flict with the tenets underlying the capitalistic world as such? By somewhat varying routes, organized business amongst the several capitalistic countries has arrived at pretty much a common set of solutions. For the sake of brevity, and because they recapitulate a part of what has been said above, these may be summarized as follows:
3<< Consequently, the ejection or strategic demotion from the central councils of a Hjalmar Schacht, a Herr Thyssen or a Robert Stewart, not to mention the Jews when the opportune moment comes, becomes thoroughly understandable and a matter of course. Whoever does not play according to the accepted rules will be thrown out, just as whoever is weak will be absorbed in the strategies that lead to business mergers, and their expulsion or absorption is proof not of the weakness" but of the strength of organized business.
37 Which does not mean, of course, that the old conflicts do not exist, but that in a certain sense they have been "domesticated. " It is noteworthy that in the United States the growth of centralized business organization has been paralleled by both increasing concern over the fate of small business, and by its increased mortality (see the Prologue of the TNEC reports). In both Germany and Italy, the plight of little business, long before the outbreak of war, was becoming steadily worse.
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317
Control over popular organizations: the company union is father to the idea of universal, comprehensive, all-inclusive business-controlled joint labor-employer membership federations, of which the German Labor Front and the Italian General Confederation of Labor ^^ are the highest development to date. Similar ideas have run through the literature of American, French, and British business. An attempt was made to set up such a body in the United States in 1912; the Federation of British Industries was originally intended to include both labor and employers. The programs of De Mun, Harmel, and the French Social Catholic movement evolved similar ideas before the turn of the twentieth century ^^; the new French industrial re- organization plans follow similar lines. The ideas and patterns of the company union are applied wherever any other form of popular organization--of farmers, consumers, little businessmen, profession- als, women--has struck root. The idea is everywhere and in all coun- tries the same: mass organization centered around the ideologies of the upper business and social hierarchies and controlled by the self- appointed and self-perpetuating "natural" leaders from those ranks. The militarization of employer-employee relations: by a reassertion of authority in the hands of the employer similar to that which ob- tains in the army. This can be read from all complaints in the litera- ture of the Spitzenverbdnde and their subsidiary bodies when faced with effective labor protest, as in the events centered around the Bri- tish General Strike in 1926, the movements of the French Popular Front centered in the Matignon Agreement of June, 1936, the rise of the CIO in the United States and complaints demanding modifica- tion of the National Labor Relations Board, and in the successes of German, Italian, and Japanese employers, scored on the initiation of Fascist-type systems. A corollary is the militarization of legislative (substitution of the "edict" for statute law) and judicial (through the procedures of martial law) powers, with the consequent disappear- ance of the line between civil and military, the discipline of war and peace. The regimen of the "unorganized" industrial plant such as that of Ford is here prototypal of objectives seen as desirable by spokesmen who may have power to suggest or act in the larger sphere. The evolution of a ''harmony-of-all-interests'* propaganda in which the employer appears as benevolent pater familias: such was the blending which underlay the social legislation of Bismarck, the pro- grams of De Mun and Du Pin in the French Social Catholic move- ment, the Papal Encyclicals of Rerum Novarum in 1891 and Quad- ragesimo Anno in 1931, the "Clerical Fascism" of Dollfuss and Schuschnigg in Austria and of Franco in Spain, the NRA and some
38 Salvemini, Under the Axe of Fascism, Chapter VII. 89 See above, pp. 58-66.
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of the American New Deal Legislation, the Japanese National Har-
monizing Movement, and, of course, the whole of "welfare capital-
ism. " The employer as "patron" or "trustee" becomes the beau ideal
of the business world. Correlatively the trustee concept still is ap-
plied in all other relationships of real or potential conflict between
organized business and the general public. The parallel to "indus-
trial relations" is "public relations," and this latter is growing by
every known criterion of relative importance in a sort of geometric
ratio to all other corporate publicity interests, both in the United
States and abroad. ^^ "Public relations" advances the concept of a nat-
ural "harmony" of interest between business and the public, business
and the consumer, business and social and economic progress. The
relationship is that of "trustee of the people's property and wel-
*i
fare. "
4. The"educationalemphasis"lookstwoways:towards"neutralizing"
the hostile amongst adults, while engraining "loyal" staff and espe- cially the younger generation "through the doctrine of the organiza- tion itself. " "Neutralization" involves recognition, wherever the Realpolitik of strategy may determine, of trade unions and simi- lar organizations; emphasis upon "cooperation" by promotion of labor-employer community activities; regional decentralization of plants; legal restraints upon the "abuse" of labor power; use of police power, strike breakers, espionage at need; the mobilization of the middle and professional classes into patriotic and other feder- ations; *2 attacks on opposition leadership under the guise of attack- ing "racketeering"; encouragement of fear of "aliens," "fifth-col- umnists," and other menaces which encourage in turn emphasis upon group loyalties, patriotic sentiments; especial types of interest programs and propaganda for women, children, and the aged, etc. Conversely, education of the young calls for control over apprentice- ship training; purge of school textbooks; vocational emphasis with belief in an eventual occupational stratification in which there is a one-to-one correspondence between economic station and presump- tive I. Q. ; *^ evolution of a system of rewards and punishments which
40 For example, the NAM public-relations program was first granted a small sum of money in 1934. By 1937 public-relations expenditures were larger than those for all purposes combined before 1934--a sum which was estimated, at commercial rates, to equal in that year around $36,000,000 for the whole United States. Since that year these expenditures have been probably doubled.
41 See Batchelor, Profitable Public Relations. Bureaucracy and Trusteeship. The Nazi motto, Gemeinnutz geht vor Eigennutz, carries the precise equivalent for Ger- man businessmen for the dictum, "A widespread, favorable attitude of mind is a first essential to effective trusteeship in big business. People must expect and assume that managers will look out for interests other than their own. Managers in turn will then attempt to live up to expectations. " TNEC Monograph No. ii, p. 130.
42 See pp. 287-90. 43 See pp. 280-86.
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319
turn on the axis of loyalty to the concern; the substitution of non- commercial for commercial incentives; of group and "social" for individual and personal incentives.
The key to control is political: executive authority and policy-form- ing power are concentrated in the same cooptatively renewed ranks, and these recognize that the key to power is twofold; (1) consolida- tion of all the "ins" in a solid, interest-conscious bloc; (2) a popular following, the key to which is alliance with any faction, movement, or party which has or may acquire popular following without dis- turbing the general social structure of command and subordination. This means compromise with the nouveau puissant as they are co- opted into the movement on all matters relating to "the take"--an old practice in relationships between political rings and powerful vested interests all over the world, but now generalized to entire national economics, and rationalized with an eye to sterilization of "take" knowledge and demand for participation below the upper ranks. And for these lower reaches, the evolving programs of the or- ganized business world look to well-ordered, and especially trained and loyal cadres of hierarchically controlled employees over whom as "leaders" they have complete charge--as Gignoux of the Con- federation Generale du Patronat Fran^ais expressed the matter "not only of men but of souls. "
The new power complexes are inherently expansive: two things are united in this reaching for political power. One is the tendency of all democratically irresponsible f>ower aggregations to expand with- out limit. And the other is the fact that the "life styles" of the units which form the cells of the new power pyramids have each and all been dominated by a tendency to expand without limit--a fact with which all great business leaders have been thoroughly familiar and which has been traced at great length by Sombart and others. Given control or power decisively to influence the national state, imperial expansion is inevitable. The more or less rational combination of fully articulated systems of protection and privilege combined with imperial expansion, on the one hand, and the integrative pressures of a rationally articulated industrial technology, on the other, lead logically to the concept of the next largest politically omnicompetent and coherently organized imperial area, "great-space economics"
(Grossraumwirtschaften). ^*
44 All through the Godesberg and Munich discussions the Federation of British Industries was carrying on negotiations with the Reichsgruppe Industrie. "On March 16, the day after the fall of Prague, the Dusseldorf discussions culminated in the signature in London of an agreement between agents of the Federation of British Industries and the Reichsgruppe Industrie to 'replace destructive competition by constructive cooperation. ' It contemplated the creation of a series of Anglo-German cartels. " Frederick L. Schuman, Night Over Europe, p. 107. Similar conversations
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"The soul of Amenhotep is higher than Orion, and it is united with the underworld"--so runs a melancholy passage from the ancient Egyptian "Book of the Dead. " The roots of power of the several Spitzenverbdnde are intertwined in the sanctions of evolv- ing imperial class status, but monopoly-oriented business which attempts to evade effective democratic restraints can dominate government only through control over the thinking processes of the mass of the people who dwell at the base of the social pyramid. "Dangerous thoughts," as the Japanese are so acutely aware, breed democratic heresies. Antidemocratic "totalitarianism" can triumph only through ultimate consolidation of its "authoritarianism" by the seizure of political controls. Every single step in the path which leads in our times to use of the expedients which spell ultimate
resort to the coup d'etat are now sufficiently well known to be recognizable at a glance. And nothing fundamental in history, pro- gram, structure of organization, or social outlook divides clearly the policies of the Spitzenverbdnde within the "totalitarian" coun- tries from those of the liberal-capitalist states. Within Germany, Italy, Japan, and France these bodies made the critical decisions without which the final destruction of democracy could not have taken place.
Is it possible that the lesson will be learned elsewhere before it is too late?
were carried on between Japanese interests and the Federation of British Industries through a good deal of the crisis period when the Japanese took over Manchukuo. Nothing is to be found in the literature of the National Association of Manufactur- ers to indicate disapproval of the structure of controls effected through the ma- chinery of German and Italian Spitzenverbdnde, though considerable sympathy is frequently expressed that these latter should be so closely controlled by the govern- ment--a sentiment, incidentally, which the leading figures on the inner business circles in the totalitarian countries rarely reciprocate. Yet the Germans thought of NRA in 1935 as the equivalent of what they had brought on themselves, and won- dered not a little that there should be so much complaint among American business- men against their own program of "self-government in business" (The Germans use the same term), which they themselves had clearly helped to shape and guide from its initial stages on--and which must, so these same persons argued, be surely seen
as the inevitable pattern of the future if business and the capitalistic system are to survive in America as elsewhere.
? BIBLIOGRAPHY
OFFICIAL AND SEMIOFFICIAL SOURCES
Annuario Statistico Italiano, Series 2, Vol. VII (1917-18).
Commerce, U. S. Dept. of. Special Agents Series: No. 98, "Commercial Organizations in France"; No. 102, "Commercial Organizations in
the United Kingdom. " Washington, D. C. , 1915.
Bureau of Foreign and Domestic Commerce. Commercial and In-
dustrial Organizations of the United States.
