( Originally Published 1952 )
'The Wall Street reactionaries are not satisfied with being rich. They want to increase their power and their privileges, regardless of what happens to the other fellow.'
`They are gluttons of privilege. . . . They want a return of the Wall Street economic dictatorship.' President Harry S. Truman September 18, 1948.
A FEW HUNDRED BUSINESS CORPORATIONS OWN MOST OF THE plants, employ most of the workers, control most of the capital and occupy the 'main economic and financial commanding heights in the United States.
Some 250 corporate giants own almost two-thirds of the nation's manufacturing facilities, the Federal Trade Commission stated in its first post-war report on the ever continuing concentration of economic power. Since America claims to have within its borders sixty per cent of the world's industrial plant, those 250 corporations probably control nearly two-fifths of all modern industry on earth.
The 113 largest among them possess 46 per cent of the total capital assets of all manufacturers, the Commission stated; and the largest 78 alone grew so rich during the war that, merely with their liquid working capital, they would be able to buy up nine-tenths of all industrial enterprises in the United States.
Most Americans are unaware of the true size and power of the corporations; for the popular press Scarcely mentions what little information on the anatomy of Big Business is off and on disclosed in Washington. For example, few newspaper readers ever saw the table, Dec. 31, 1949', which was published in 1950 by the Joint Congressional Committee on the Economic Report. It showed that the wealthiest 48 companies-19 banks, 10 insurance concerns, 6 railways and 13 industrial corporations—owned assets of over $120 billion, or over one-sixth of America's national wealth, which a footnote put at $6841 billion.
The 11 largest billionaire corporations had assets of $62 billion, as much as all the properties of the U.S. Federal government.
The biggest of them all, the American Telephone and Telegraph Co., a great power in industry and radio, apart from being a near-monopoly in the communications field, owned $ 10 3/4 billion—more than the value of all private and public real estate in forty-four of the nation's forty-eight states. Second and third were the Metropolitan Life and Prudential Insurance companies. Together with two other insurance and mortgage giants, they owned $26 billion, or as much as the value of all private and public land and buildings in New York and Chicago. Fourth, with $6 1/4 billion, was the relatively young Bank of America, the nation's biggest bank and the predominant economic force on the West Coast. (It has 'concentrated more economic power in one small group of men—perhaps only one man—than probably has ever happened before in the business life of our country', stated a Federal Reserve Board report on June 13, 1951.)
Of the 250 industrial giants, only 13 were big enough to be listed among these 48 billionaire corporations. The leading ones were the Standard Oil Co. (New Jersey) with $3 1/2 billion, General Motors Corp. with $2 billion, U.S. Steel Corp. with $2 1/2 billion, and the chemical trust E.I. du Pont de Nemours with $11 billion. Others were the Consolidated Edison, General Electric, Bethlehem Steel and American Power and Light companies. These are some famous industrial concerns which, despite their wealth and power and, in some cases, their far-flung trade and production empires abroad, ranked below the `billionaires': the Ford Motor and Cities Service companies, each with assets of just under $1 billion; the Union Carbide and Chemical, Westinghouse Electric, American Tobacco, International Harvester, Anaconda Copper Mining, and Chrysler corporations, each with about $700 million assets; the Aluminum Co. of America, a near-monopoly in its field, and the Goodyear Tire and Rubber Co., with around $500 million each; the Eastman Kodak, U.S. Rubber, United Fruit, and Allied Chemical and Dye corporations with between $30o and $400 million; the Radio Corp. of America, International Business Machines Corp., Celanese Corp. of America, and Coca-Cola Co., with $200 to $300 million each.
The incomes of the billionaire corporations make government revenues look modest. The first nine, in 1949, had a total annual sales income of $21 billion—half as much as all the enormous U.S. Government revenues from taxes, duties and other imposts; or more than the combined national incomes of Canada, Mexico and Cuba, the three neighbours of the United States.
General Motors was the greatest single earner, eclipsing the revenues of every one of the forty-eight states of the union. Its sales of nearly $5 3/4 billion were equal to 2 per cent of all goods and services produced in America. Second was Standard Oil (New Jersey), which sold $3 1/3 billion worth of goods a year; and the combined sales of the three leading Standard Oil sister companies were $5 1/4 billion. The American Telephone and Telegraph Co. earned close to $3 billion. The sales of U.S. Steel were $2.3 billion a year, covering a range of goods from steel shapes for construction to various kinds of intricate machinery, from rails, cables, pipes, drums, wire and sheets to naval, cargo and passenger ships and floating dry docks, from fertilizers and household appliances to entire homes.
As employers of labour, the eleven leading industrial concerns, together, eclipsed 'Big Government'—as Big Business derogatorily calls the Federal administration since its ever-growing tasks now require over two million employees. American Telephone and Telegraph had around 600,000 workers, General Motors over 400,000, United States Steel nearly 300,000, and General Electric 180,000. The employees of those four concerns, with their families, outnumbered the population of eleven of the nation's forty-eight states.
The spokesmen of the corporations are technically correct in saying that none of them alone monopolizes its field of business. But in many industries a few big companies, together, do. 'Today monopoly power in this nation', Attorney General Tom C. Clark told Congress on July I I, 1949, 'is to be found in those industries controlled by a few large companies—the Big Threes or the Big Fours—following policies and practices which avoid any real competition among themselves and which at the same time enable them to maintain their dominant positions.'
Cartels regulate the sales of 42.7 per cent of all manufactures, 47.4 per cent of all agricultural products and 86.9 per cent of all minerals, a study of the Twentieth Century Fund showed in 1948: 'in truth, cartels have reached into practically every branch of the modern economy'. The only exceptions were found to be liquid milk, ice cream, sand and gravel; but it was not long before small business complained about progressing concentration in the milk and ice cream trades.
The degree of monopolization, i.e., the control of production and prices by the 'first four companies', according to a report of the Secretary of Commerce to Congress in December 1949, is too per cent in primary aluminium . . . 99.9 per cent in small arms ammunition . . . 98 per cent in aircraft propellers.. 97.6 per cent in steam engines and turbines . . . 95.7 per cent in telephone and telegraph equipment . . . 91.8 per cent in electric lamps ... 91.6 per cent in files . . . 90.7 per cent in locomotives and parts . . . 90.6 per cent in crude coal tar products . . . 90.4 per cent in cigarettes . . . 88.3 per cent in electrometallurgical products . . . 88.2 per cent in petroleum and coal products . . . 88.1 per cent in fiat glass . . . 85.5 per cent in pulp goods . . . 79 per cent in soap . . . 78.4 in synthetic fibres, etc., etc.
In the 'least concentrated' industries the 'biggest four' control the production of 55.7 per cent of automobiles and parts ... 41.3 per cent of slaughtering . . . 44.7 per cent of the steel works . . . 34.3 per cent of periodicals . . . 27.9 per cent of footwear . . . 29.o per cent of flour milling and 20.9 per cent of all newspapers. Even of the nation's bread market the 'biggest four' hold 16.4 per cent, and many of the six thousand smaller baking corporations are near-monopolies in localities where they have driven out the last independent bakeries.
All this, however, shows only part of the ever-growing prevalence of Big Business. For most of these giants are also linked into vertical concentrations throughout the width and breadth and depth of the economy, combining controls over one of its main fields with controls over another and holding in their orbits tens and hundreds of thousands of smaller enterprises which no Congressional investigation can ever hope to name.
The huge domains of many industrial and banking concerns are merely the provinces or junior dependencies of even greater financial empires, whose controls extend not only into every sphere of business but also into the nation's increasingly commercialized agriculture; not only into press, radio and film but even into the hallowed halls of colleges and universities they subsidize and influence.
There are eight main 'vertical' business empires—Morgan, Rockefeller, Kuhn-Loeb, Mellon, E.I. du Pont de Nemours, and the Chicago, Boston, and Cleveland combines of banks and industries.
Between them, they control a good half of the 48 'billionaire' corporations, more than loo of the largest 25o industrial concerns, and uncounted smaller ones. Their combined assets in the middle thirties, at the time of the first and last Congressional investigation of their economic power, amounted to over $6r billion, then one-sixth of the nation's total wealth. They have been spreading and growing ever since, but even the Government does not quite know to what extent.
The Morgan group alone embraces half of this tremendous accumulation of wealth and power. Among many others, Morgan dominates thirty-five to forty of the biggest corporations, i.e., a dozen of the first-ranking industrial concerns like U.S. Steel, General Electric, Baldwin Locomotive Works, and leading coal, copper and paper companies; some great retail concerns like the mail order house Montgomery Ward and Co., the nation's third-ranking distributor of consumer goods, and the leader of the baking industry, the National Biscuit Co.; a dozen public utility, electric power and gas corporations, including that state within the state, the American Telephone and Telegraph Co., and the far-flung American Power and Light Co.; five of the greatest railway systems, including the New York Central, Northern, Southern and Western Pacific; and four financial giants, the First National Bank, Guaranty Trust Co., New York Trust Co, and Bankers Trust Co.-all of them led by the private banking house J. P. Morgan and Co.
The Rockefeller group has its main strength in half a dozen huge oil companies and the enormous ramifications of America's second-ranking financial giant, the Chase National Bank.
The Kuhn-Loeb group rules among other corporations seven major railway systems like the Pennsylvania and Union Pacific networks, the Western Union Telegraph Co., and, aside from the private bank that bears its name, the great Bank of Manhattan Co.
The Mellon group, built on the near-monopoly of the Aluminum Co. of America, controls leading coal, steel, oil, machinery and glass concerns, public utilities and railways, the Westinghouse Electric Co., second in its field, and two major banks, the Mellon National Bank and Union Trust Co.
The Du Pont empire, built around the vast chemical concern E.I. Du Pont de Nemours and Company and the National Bank of Detroit, is now 'the largest single concentration of industrial power in the United States', according to the U.S. Attorney General who brought an anti-trust suit against it in 1949. It controls among others General Motors and U.S. Rubber.
The Chicago Group is headed by four major banks, of which the Continental Illinois National Bank and Trust Co. and the First National Bank of Chicago alone have combined assets of $5 billion. In its great Middlewestern domain it controls three large public utility companies, the agricultural equipment giant International Harvester, the meatpacking trust Armour and Co., and the department-store concern Marshall Field which owns one of the area's few big newspapers, the Chicago Sun-Times.
The Cleveland Group, led by one of the billion dollar banks, the Cleveland Trust Co., comprises among others the Republic Steel, Youngstown Sheet and Tube, Inland Steel, and Goodyear Tire and Rubber companies with assets of $3 billion.
The Boston Group, around the First National Bank of Boston, takes in such large concerns as the United Shoe Machinery Co., with its firm grip on the nation's shoe manufacturers, the American Woollen and U.S. Smelting, Refining and Mining companies, and the United Fruit Corp., the financial sovereign of several Latin American 'banana republics'.
Competition among those eight empires and the unaffiliated business kingdoms and principalities is no more deadly, these days, than between the various departments of any one corporation like U.S. Steel or General Motors. Unwritten covenants restrict what used to be the ruthless rivalries of the frantic trust building era. Ever since the New Deal period, and more still since the last war, Big Business has been pulling together, defending its members and attacking its enemies in unison. No matter how much each group is bent on, increasing its own power and profits, markets and controls, and how close to collision they might come in their unceasing expansion at home and abroad, they are now as considerate of their all else overruling common interests as the most disciplined allies in the midst of war.
They need no supreme command to lay down an over-all strategy; for their basic aims are the same, dictated by the sameness of their nature and their outlook, their dangers and their opportunities. Even such a crucial issue as the desirable extent of governmental armament expenditures at any given time does not jeopardize their unanimity on major economic and political problems; for all the major powers of Big Business are deeply engaged both in the civilian and armament fields.
On day-to-day tactics there may occasionally be disagreement: whether to raise prices today or only tomorrow, to raise them 10 or 5 or only 2 per cent at one stroke; how far to expand or restrict production of basic materials; whether to meet the labour unions half-or quarter-way when concessions are unavoidable, and how to repulse or counter-attack them whenever possible. But such differences have never gone far in recent years.
It is only natural that the leaders of this enormous corporate power should largely have determined after the war how much the nation was to produce, consume, invest and try to export; how many jobs there were to be, what incomes the people were to earn, what prices to pay, what lives to live; what role America was to play abroad, what reactions she was to arouse among her foes and friends, and how the nation's foreign policy had to respond to the realities Big Business created at home and in the outside world.
These are the reasons why Big Business inevitably became more and more unpopular and why some of the nation's political and labour leaders, to maintain their prestige, occasionally felt obliged to echo the people's criticisms. But instead of aiming for a change of the economic order which gives Big Business so much power over the nation, they only attacked the individuals who happened to be at the head of the giant corporations.
To denounce those men as 'Wall Street reactionaries . . . not satisfied with being rich [who] want to increase their power and their privileges, 'regardless of what happens to the other fellow',—as, for example, President Truman did—might have been good political tactics had the intention behind such personal criticisms been to prepare the country for action against corporate power as such. But as a mere means of currying favour with the people such attacks did more harm than good. They diverted attention from the real issue, the need for a basic reform of the economic order. They made many of the people wonder whether the leaders of the corporations, some of whom they know as their own employers, were really such ogres, were really worse than the politicians who, off and on, when things went badly in America, took them to task in ringing phrases.
These business leaders, as a rule, are men of normal personal integrity and considerable ability in their respective fields, who evidently try to do their best. They are rather ordinary Americans in their outlook and moral values, as honestly convinced as anyone of the genuineness of their democratic creed, their patriotism and their love of peace and progress. But, being carefully selected, trained and moulded for their tasks according to the needs of the vast corporate bureaucracies they head, and thoroughly indoctrinated with the self-justifying philosophy of Big Business, they are of course equally convinced that what is best for their corporations must logically be best for the American nation and therefore for the world.
They could not possibly act differently, even if they were able to see the trends and needs of the time in a different light, even if they wanted to refrain from taking crucial decisions on the nation's fate and its role in the world—which in a democracy are supposed to be up to the people and their elected representatives. For those decisions are merely incidental to their conduct of the corporations' business, implicit in the ways they have to determine the production and investment, hiring and firing, buying and selling, lending and borrowing of those giant institutions.
Nor could the Government divest Big Business of this implicit policy-making might, even if it wanted to do so—unless it first obtained a popular mandate to alter both the economic order and the Constitution of the United States.
For as long as free, private enterprise remains the acknowledged basis of the nation's economic system, every business corporation must logically be free on principle to conduct its affairs as it sees fit, no matter how big it may be and how great an influence it is bound to exert on national policies.
Secondly, the Constitution recognizes the legitimacy of corporate power. Big Business had seen to that generations ago, at the very outset of its rise. When Congress, after the Civil War, passed a Constitutional Amendment to safeguard the civil rights of the newly emancipated Negroes, the occasion was cleverly used to guarantee equal rights to all 'persons', individual and corporate alike. 'We have failed to differentiate between the natural person, man, and the artificial person, the corporation', Senator Joseph C. O'Mahoney reminded the American Bar Association on September 23, 1947; 'the consequence is that the modern corporation, in some instances, has become more powerful even than the state.' But no attempt has ever been made to impress the people with the need for changing a basic law that fails to impose greater restraints on the Brobdingnagian corpora.. tions than it does on the Lilliputian citizens they threaten to crush; that puts them on the same footing as to 'freedom of contract', 'protection of property', 'immunity from Government confiscation', and so on.
Big Business tries to create the impression that it is in danger of being 'enslaved' by 'Big Government'. But, while it is true that the economic functions of the state have grown with the increasing complexity of the American economy, Big Business has by no means been subjected to effective government control. On the contrary, the power of business over the nation's political institutions has grown apace, and enables it to wield decisive influence on the manner in which government carries out its limited regulatory functions.
There have of course long been the anti-trust laws, intended to discourage the concentration of economic power and its misuse. But they are vague and weak and, even so, have never been implemented with the necessary provisions for enforcement.
It is typical for the helplessness of the Government under the illusory anti-trust laws that the U.S. Federal Trade Commission had to tell Congress in the summer of 1948 of the grim future that lay ahead for the United States 'unless something was done soon to check the increased trend toward monopoly and even greater concentration of economic power'; and that the Commission vainly asked Congress again in a report of January 17, 1949, 'as it has every year since 1930, to enact legislation that would enable it to deal effectively with the problem of industrial monopolies'. Congressman Emanuel Celler only stated the bare truth when he declared ten months later that the monopoly problem was still as acute and unsolved as it was when the Sherman Anti-Trust Act became one of the laws of the land fifty-nine years ago.
From time to time the Government, aware of the popular appeal of such action, cites one or another monopoly for infringement of the Anti-Trust Act, even though it knows beforehand that the means it possesses to submit corporate power to the law are pathetically insufficient.
The suit against the chemical giant du Pont was the show case of 1949, and what it revealed was as symptomatic for the practices of Big Business as for the impotence of Washington. The Justice Department accused du Pont of having combined with General Motors and U.S. Rubber into a closed, non-competitive system. 'When companies in the du Pont system have to go outside the system for supplies', the St Louis Post Despatch reported some of the charges, 'pressure is put on suppliers to buy, in turn, from the du Pont companies, even though some other companies might make them better offers. By these means, du Pont has eliminated many independent businesses and weakened those that survived. [For example] due Pont has used its bigness to maintain monopolies in tetra-ethyl lead, plexiglass and cellophane [and] to make General Motors its largest customer. . . .'
`Du Pont has used its bigness to keep the price of dental plates high to the consumer', the Senate Sub-committee on War Mobilization already found in 1944. 'A price of $45 a pound, for dental purposes, was maintained for the same material that for commercial purposes sells for 85 cents a pound'—an overcharge of more than 5,000 per cent.
`Through international cartels the influence of du Pont spread out all over the civilized world', it was charged. 'It has been a principal partner in cartels controlling world trade in chemical products, firearms, ammunition, synthetic rubber, plastics and titanium. One of the most dubious associations into which cartelism has led du Pont has been with the I.G. Farbenindustrie, the enormous German chemical combine, which supplied the Nazi war machine and operated mass murder camps for the "master race".' Again, in September 1951, the du Pont concern was accused of having conspired, together with Imperial Chemical Industries, Ltd. of Britain and the Remington Arms Co. Inc., to divide markets and avoid competition in munitions, small arms and chemicals.
But such charges, practically ignored by the popular press, do not endanger the accused concern or Big Business as such. The president of du Pont, Mr Crawford H. Greenewalt, still could command a sympathetic hearing from a Congressional committee when he stated, 'it is the customer and the customer alone who casts the vote that determines how big any company should be'; and his corporation could still overcompensate what little publicity some leading newspapers gave the Government on its case, by sending out a flood of letters 'urging 275,000 customers, employees and company stockholders to give their "wholehearted support in resisting" the action of the Department of Justice', as the New York Times reported on July 12, 1949.
Prosecution of monopoly under the anti-trust law is not only rare, timid and harmless to those concerned because its sanctions are so limited; it is also incredibly protracted. The Government has never been allowed the full legal staff, or the funds for retaining private lawyers, to counter the battalions of the nation's best and most expensive legal counsel which an accused corporation immediately mobilizes against the state. In many cases, the anti-trust authorities have been physically unable to deal with the avalanches of documentation set off by the defence and the barrages of legal subterfuge they put up year after year. On Rich matters Congress has remained as thrifty throughout the post-war period as in 1946, when Senator Mead complained that it 'displayed total unawareness' of the 'ominous trend toward absorption of small industry by the big corporations and financial interests [and] the growing necessity for stronger safeguards, when it voted to reduce from $1,900,000 to $1,700,000 the appropriation for enforcement of the nation's anti-trust laws'.
What the New York Times wrote on May 29, 1949 about a case against investment bankers, whom the Government accused of conspiring to dominate the securities field and eliminate competition, is equally true of all other important anti-trust suits: 'At the present rate of progress . . . grass certainly will be sprouting in the lanes of the financial district before the Justice Department's anti-trust suit against seventeen of the nation's foremost investment banking firms and the Investment Bankers Association even reaches a semblance of actual trial. . .. A new generation will be in the saddle before a final decision.'
As to du Pont's—the firm has in the meantime been appointed by the Government to manufacture the latest weapon, the Hydrogen bomb. 'The choice by the Atomic Energy Commission of E. I. du Pont de Nemours and Co. to design, construct and operate the new and vast facilities for the production of the H-bomb is another instance of the fact that, when the Government needs skills and organizations to do big jobs, especially in the area of security, it must call upon those which often at the same time it is attempting to disperse by anti-trust prosecution', the New York Times commented on October 27, 1950-- adding that many other corporations prominently engaged in armaments were under similar monopoly charges.
Still, every new anti-trust charge and every new wave of popular discontent reminds Big Business of its greatest potential weakness: the smallness of its own political manpower in the American democracy.
One of the important tasks of the great corporations after the war was therefore to try enlisting the support of their many small shareholders and, at the same time, to prove to the public that all the allegations about the undemocratic power of a few hundred business giants were unjustified; that, on the contrary, no other American institutions were in fact so democratically founded and ruled as the much-maligned corporations.
Not a mere powerful few but many millions of ordinary men and women owned and directed the corporations, their argument went.
'How's our railroad doing, young man?' read the caption over a full-page advertisement of the Santa-Fe System Lines, showing a simple, broadly smiling old woman in animated conversation with a broadly smiling young brakeman on a railway car. The little old lady is not a busybody', continued the advertisement, typical of the many that have been appearing in the nation's newspapers and magazines since the war. 'She is merely looking after one of her investments. She has some money in the Santa Fe. . . . Stockholders just like her—housewives, teachers, merchants, salesmen, labourers—can tell us how to run the Santa Fe, and they do. . .. And that's the beauty of America —the voice of the people is the voice that runs things, whether it's operating a transcontinental railroad or putting a man in the White House. Isn't it a wonderful country where so many can own so much? That's "Free Enterprise."
Newspaper headlines stated: 'Stockholders in Giant Corporations Often Outnumber Employees', showing that General Motors, the great du Pont satellite, had 425,657 shareholders while its employees were only 345,940; that Rockefeller's Standard Oil (New Jersey) had 160,025 'owners' against 108,000 workers. Even Morgan's U.S. Steel Corp. has 225,822 shareholders, compared with 279,274 on its payrolls. Seventy-two of America's large corporations thus prided themselves of being the property of 4,082,805 Americans, the 'real masters' of their 2,925,449 employees and their $27 billion of wealth and power. And a New York Times editorial regarded these figures as proof that America had practically achieved social ownership of the means of production.
The facts that matter give a different picture.
Estimates of those who own stocks have often ranged up to 14 million citizens. But the Brookings Institution found, according to the New York Times of July I, 1952, that only one out of every sixteen persons in the adult population—or about 6i million persons in 4 3/4 million families—owned any stocks at all. And only 8 per cent of those 6 1/2 million shareholders, or a little over half a million, owned more than ten stocks, i.e. more than $480 worth each, at the average market values of 1952.
Detailed analyses of some great corporations show that the vast majority of 'owners', together, hold only a small part of all shares. In the typical case of the American Telephone and Telegraph Co., one of the most popular among investors, three-quarters of the nearly 700,000 shareholders own less than one-quarter of the total, while a mere 5 1/2 per cent of shareholders own almost one-half of the stock.
Small owners almost never appear as 'voters' at the shareholders' annual meetings. 'Even the largest institutions attract to their sessions only a few score of stockholders who are not also officers ', wrote the New York Herald Tribune on January 17, 1949. If some of them do appear, criticize some aspect of the corporation's policy and try to follow up their censure with action, small 'owners' find themselves `under the practical disability of having to spend on an average of from $1,000 to $10,000 (possibly several times their investment) to place their complaint by mail before the stockholders', a letter to the Wall Street Journal of August 4, 1948 pointed out. 'In many instances there is large additional expense in securing a list of the stockholders and their addresses [while] the managements, in rebutting any assertions of the complaining stockholders, can and do send their replies at the expense of the corporation [so that it is] impractical for a small group of complaining stockholders to take any efficient action.
Finally, the boards of directors are closed circles of insiders who usually succeed in making the small, ignorant stockholders automatically yield their absentee votes to them by proxy, while doing everything in their power to suppress 'the voice of the people that runs things'. Professor Sumner H. Slichter of Harvard University wrote in Fortune magazine of September 1949: The directorates of most corporations consist almost entirely of officials of other corporations, plus a few so-called "capitalists", that is, men who own large investments but do not directly administer enterprises.'
The most startling fact is that the boards of directors, as a rule representing comparatively small minorities of stockholders, control 'their' corporations largely with other people's capital and other people's votes. 'This concentration of wealth and power has been built upon- other people's money, other people's business, other people's labor', President Roosevelt said on October 14, 1936. 'It has been a menace to the social system as well as to the economic system which we call American democracy.' And it still is.
Among the 120 biggest manufacturing corporations, the magazine Trusts and Estates reported in July 1948, there are only four in which any individual owns as much as ten per cent of the voting stock. In sixty-two of them, no single individual holds even quite one per cent of all shares. But the combination of a few such individual interests is usually sufficient to appoint the all-powerful board of directors.
The du Pont family, for example, controls U.S. Rubber, the leading corporation in its field with $250 million assets, through the ownership of one-sixth of its total stock. According to the Government's anti-trust suit against the family, '17 per cent of the total' have been 'sufficient to give them control, since the remaining shares are held in small amounts by about 14,000 stockholders'. Those, admittedly do not count. And many large corporations are controlled by even smaller minorities.
This case also shows how the purchase of a small minority interest enables a 'parent' corporation to obtain preferential treatment in important commercial dealings with a newly adopted 'daughter' company. 'Du Pont requires', the charge went on, that both U.S. Rubber and General Motors, its satellites, 'purchase substantially all their requirements for certain products from each other, thus freezing out other suppliers'. In this way the parent trust deprives the powerless majority of small shareholders in the conquered corporation of the full dividends due to them, using large parts of the profits to enlarge its own wealth and to finance its further corporate conquests: 'du Pont subsidized its own expansion', the New York Times of July r, 1949 quoted the Government's case, 'by using profits from product sales to General Motors and U.S. Rubber . . . made under closed and noncompetitive market conditions'.
It is no wonder that the masses of small stockholders remained apathetic to the appeals of Big Business for political support.
There is, however, another potential source of political manpower for the corporations: the owners of the 3 1/2 million small business firms who, in the words of Big Business, give the nation 'a three-and-a-half million fold guarantee for economic democracy', and many of whom took this argument too literally and tried to oppose corporate power.
These small businessmen range from proprietors of repair shops with one or two hired hands to owners of factories with a score or some hundred workers who proudly call themselves independent industrialists; from little grocers and owners of filling stations along the roads and saloonkeepers at the street corners to heads of commercial agencies with a few ten or hundred thousand dollars capital, who write the magic title 'president' on the glass panel of their office doors. In their incomes, the majority of small businessmen are not far above the level of skilled factory workers or experienced clerks. They pay dearly for their seeming independence, with longer working hours and greater worries and the ever-present risk of losing all they own and owe.
One million small businesses were born in 1945 and 1946, but some four hundred thousand died. In the following four years of prosperity business births were 1,637,100 and deaths 1,414,30o. Over two million small firms thus went under in this 'seedbed of American free enterprise' during the first six and a half post-war years. Three out of every ten new small enterprises normally live less than one year, another two or so survive no more than two years, a further one or two are lucky to hold on for four years. Only one-quarter continue in existence for six years or more; very few grow to the business equivalent of a man's mature age; and fewer still are handed down to sons and grandsons, as in the case of the Rockefeller, Morgan, and Ford concerns. And the corporate giants have a great deal to do with this enormous mortality that persists even in boom times.
The ultimate threat that always hangs over the majority of small businessmen is that they may sink back into the ranks of workers or employees, the involuntarily and miserably retired, or straight into those of the unemployed. The unending flood of small businessmen's complaints to Congress retells their story every day, together with the age-old demand for state control over corporate power and state aid to small business in its ever-unequal competition with the giants.,
Still, it has proved relatively easy in post-war years to make small business play the game of Big Business.
Their financial frailty gives much power and influence over small businessmen to the banks, which also contribute to their competitive disadvantage. A small merchant or manufacturer who opposes corporate power in his community will be regarded a poor risk by his bank and may either be refused the credit he needs or made to pay a higher interest rate than one who is considered 'loyal'. In any case, a small client has to pay much more for credit than a big one. Compared with an average of 1.9 per cent a year for loans to relatively large concerns, according to a Federal Reserve Board study, medium-sized companies pay 3 per cent or so, while small businesses are charged 5 or 6 and up to 7.4 per cent a year on the same loan amounts.
This does not necessarily make rebels out of small businessmen. On the contrary, if the proper influence is exerted, it makes them anxious to please their banks, to acquire good names politically, too, in the close-knit Chambers of Commerce, where the higher-ups of the business community keep a watchful eye on them, and to sign whatever political petitions they might be asked to support.
As the suppliers and customers of small businessmen, the big industrial corporations have many means of reminding them of their dependence; and when those reminders are categorical enough they usually have the desired results. The men whose business it is to pump gasoline into people's cars or sell Tubber tyres, radios and other mass-produced goods, cannot afford to offend their mighty suppliers who know how to find out about their political views and actions. The same is true of the many small manufacturers who have to rely upon a few big corporations for allotments of metal shapes, machine parts, chemicals and innumerable other materials. They are never left in doubt that if they complain to government or Congress about those corporations' misuse of their power, their supplies will be cut off.
The subcontractors of large manufacturing and armament concerns and the small producers of retail goods who are lucky enough to have one of the giant chain stores as their chief customer also have to 'put up or shut up'—as in some typical cases that came to light in an antitrust suit against the Great Atlantic & Pacific Tea Company. This vast retail concern 'succeeded in obtaining preferential discounts, not by force of its large purchasing power and the buying advantage which goes therewith, but through its abuse of that power by threats to boycott suppliers and place them on its individual black list, and by threats to go into the manufacturing and processing business itself'.
Those who bring suits against great corporations or submit their cases to Congressional committees have become fewer and fewer since the big corporations put the screws on small business after the war.
Going a step further, Big Business actually has won over more and more of its small 'colleagues' by playing up the interests both have in common. After all, when it comes to labour troubles and wage talks with the unions, is not a boss a boss, whether he employs a dozen or a hundred thousand men? On the matter of taxes, is not a businessman a businessman, whether he defends a few thousand or several hundred million dollars of profit against the tax collector? And where 'statist' dangers to the American economic order are concerned, is not a capitalist a capitalist, whether his capital consists of a few old work benches or equals half the wealth in Detroit?
The corporations hired facile writers and speakers to explain these points to small business, painting a grim picture of the sufferings of small enterprises under the 'socialism' that was to be foisted on the United States by Big Labour and Big Government.
The corporations' general staff for this continuing campaign is the National Association of Manufacturers, whose members employ three-quarters of all industrial workers and whose voice is one of the most influential, but of whose very existence, according to public opinion polls, half of the American people are unaware. Field headquarters are the thousands of Chambers of Commerce. And the recruiting offices for militants in the cause of free enterprise are the thousands of special interest associations in every branch and sub-branch of the economy.
Through the unprecedented efforts of these agencies, against the background of the besieged fortress atmosphere and the relative prosperity of the Cold War, corporate power has been finding it less and less difficult to make the small men put up with the dangers of monopoly to their own free enterprise.
Big Business has thus succeeded, to some extent at least, in hiding behind the broad front of the three-and-a-half million private business enterprises, as 'just part of them'. It has taught businessmen to talk its language, use its arguments and, knowingly or not, defend the interests of the very powers which, as by law of nature, must victimize them. The giants, therefore, speak to 'the American business nation' in the name of 'just plain business', telling the people how to save America's 'business civilization' from 'collectivism'.
Yet, 'over and over again in recent years industrial leaders and corporation managements have been astonished to discover by means of opinion polls how differently the man in the shop and the man in the street react to particular economic questions than does the businessman himself', wrote the Christian Science Monitor on September 26, 1947. 'Worse still was the discovery of how low is the opinion of businessmen and their ethics. . . . They would be astonished to hear the unfavourable things said about them.'
The idea of nationalizing important branches of business grew more and more popular in early post-war years. Among those who expressed opinions in a Gallup poll in January 1947, 28 per cent favoured the nationalization of the banks and railways, 3o per cent that of the electric power companies, and 35 per cent wanted the coal mines taken over by the state. 'Previous polls indicate a hard core of 15 per cent of the people would vote for nationalizing any basic industry, and as many as 45 per cent would say "yes" on some industries', wrote the Wall Street Journal on October 9, 1947.
The post-war demands some labour unions made on Big Business found approval among large numbers of the general public. Only 39 per cent of a cross-section of Americans were definitely opposed to the thesis that corporations claiming inability to pay higher wages should bare the secrets of their books to the unions to let them judge for themselves, according to a poll of Fortune magazine in the winter of 1946. Only 36 per cent opposed the idea that the corporations' boards of directors accept union representatives as members.
The most important problem business faces today', Fortune, the magazine of the nation's corporate elite, wrote in May 1949, 'is the fact that business is not out of the doghouse yet. . . . A majority of the people . . . believe that very few businessmen have the good of the nation in mind when they make their important decisions. They think business is too greedy, ... that government should keep a sharp eye on business. . . Ironically, business is spending a great deal more on improving its relations with the people than it has ever spent before on the immense expansion of the art of public relations in the past ten years. . . . Some 4,000 corporations now support whole "public relations" departments and "programmes". About Soo independent firms, some of them knocking down more than half a million a year in consulting fees alone, are supported mainly by business. Public relations courses are offered in dozens of universities and night schools. The papers are full of advertisements that certainly make free enterprise sound convincing to anyone already sold on it. Nobody knows how much it all costs. But if supporting an army of professional good-will makers could do the trick, business ought to be up to its neck in good will. . . .
'Business, in other words, enjoys the most tentative and precarious kind of approval.'
'How long', Fortune wondered, would the plain American continue to 'plump for "private ownership" if he thought, rightly or wrongly, that government could do a better job for him?'
The World The Dollar Built:
The World The Dollar Built
The Captive Audience
Business Of Government
The Dangerous Drift
America Needs Foreign Aid
The Urge To Arm
Cold War At Home
Too Little - But Too Much
Read More Articles About: The World The Dollar Built