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Full text of "Investigation of concentration of economic power; monograph no. 1[-43]"

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?6 3d SelSES"*} SENATE COMMITTEE PRINT 

INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPORARY NATIONAL ECONOMIC 
COMMITTEE 

A STUDY MADE FOR THE TEMPORARY NATIONAL 

ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS, 

THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION 

No. 113 (SEVENTY-FIFTH CONGRESS), . AUTHORIZING 

AND DIRECTING A SELECT COMMITTEE TO MAKE A 

FULL AND COMPLETE STUDY AND INVESTIGATION 

WITH RESPECT TO THE CONCENTRATION OF ECONOMIC 

POWER IN, AND FINANCIAL CONTROL OVER, 

PRODUCTION AND DISTRIBUTION 

OF GOODS AND SERVICES 



MONOGRAPH No. 26 

ECONOMIC POWER AND POLITICAL 

PRESSURES 



Printed for the use of the 
Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1941 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KING, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

VENDELL BERGE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

♦SUMNER T. PIKE, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

♦EWIN L. DAVIS, Chairman 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

*A. FORD HINRICHS, Chief Economist; Bureau of Labor Statistics 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

♦CHARLES L. KADES, Special Assistant to the General Counsel 

Representing the Department of tbe Treasury 



Representing the Department of Commerce 

* * * 
LEON HENDERSON, Economic Coordinator 
DEWEY ANDERSON, Executive Secretary 
THEODORE J. KREPS, Economic Adviser 



♦Alternates. 



Monograph No. 26 

ECONOMIC POWER AND POLITICAL PRESSURES 

DONALD C. BLAISDELL assisted by JANE GREVERUS 



n 



ACKNOWLEDGMENT 

This monograph was written by 

DONALD C. BLAISDELL 

Economic Expert, Temporary National Economic Committee 

assisted by 
Jane Greverus 

Technical Assistant, Temporary National Economic Committee 

The Temporary National Economic Committee is greatly indebted 
to these authors for this contribution to the literature of the subject 
under review. 

TJve status of the materials in this volume is precisely the same as that 
of other carefully prepared testimony when given by individual toit- 
nesses; it is information submitted for Committee deliberation. No 
matter what the official capacity of the witness or author may be, the 
publication of his testimony, report, or monograph by the Committee 
in no way signifies nor implies assent to, or approval of, any of- the 
facts, opinions, or recommendations, nor acceptance thereof in whole 
or in part by the members of the Temporary National Economic Com- 
mittee, individually or collectively. Sole and undivided responsibility 
for every statement in such testimony, reports, or monographs rests 
entirely upon the respective authors. 

(Signed) Joseph C. O'Mahoney, 
Chairman, Temporary National Economic Committee. 

hi 



TABLE OF CONTENTS 



Page 

Letter of transmittal ix 

CHAPTER I 

The dynamics of Government 1 

Control versus Power 1 

The contestants 1 

Methods of controlling power 5 

Characteristics of the struggle 6 

Invisibility 7 

Continuity 7 

Intensity _-__ 8 

The site of the conflict 8 

The need ._ ," 10 

CHAPTER II 

Pressure groups 11 

Contestants in the struggle 11 

Characteristics of the contestants 16 

Staying power 16 

Cohesion , 18 

Invisibility 19 

Resources 19 

Technology a major resource of business 22 

CHAPTER III 

Business outposts in Washington 25 

Chamber of Commerce of the United States 25 

Crystallizing business opinion 26 

The philosophy of business 28 

Economics in the chamber's philosophy 29 

Government-business relations 29 

Industrial relations . 32 

Taxation and expenditures 34 

Money, banking, and insurance 35 

The chamber on other public problems 35 

The American Bar Association 37 

Theme of the bar's philosophy 38 

Disseminating the philosophy 39 

Composition of the bar association 40 

CHAPTER IV 

Public policy and group aims 41 

Public problems - 41 

Domestic problems 42 

Problems of foreign affairs 44 

Public opinion 45 

Political pressure groups 47 

The lobby and its technique 48 

The lobby and the political parties • " 53 

CHAPTER v 

Contacts with government 57 

Congress and the Executive 57 

Congress: The focus of group attention 57 

General legislation 57 

Tax and appropriation bills 58 

Policy-making through blocking treaty ratification 59 

Blocking Presidential nominations 61 

V 



VI CONTENTS 

Contacts .with government — Continued. Page 

The President's role 63 

The President as "Administrator 65 

The President as Party Chief 66 

The President as Chief Executive 68 

Administration 70 

Complexity of administrative approach 71 

Motivation of administrative pressure 72 

The courts 73 

Constitutionality and judicial review 74 

Increasing use of review power 74 

"Duty of the citizen" 75 

Pressure groups and judicial review 76 

CHAPTER VI 

Industrial relations 81 

Channels of business pressure 81 

Organization of the National Association of Manufacturers 82 

Policies of the N. A. M : 83 

Organized labor 86 

The American Federation of Labor 86 

The Congress of Industrial Organizations 88 

Other labor organizations 91 

Labor lobbying 91 

Labor relations the area of conflict 92 

Labor and industrial management come to gripb 94 

National Industrial Recovery Act 96 

Labor disputes bill .* 98 

National Labor Relations Act 99 

N. A. M. activity subsequent to passage of act 103 

N. A. M. supports limiting amendments 105 

Allies of the N. A. M 106 

CHAPTER VII 

Tariffs and taxes 109 

Early fiscal policy 109 

Nation committed to tariff protection 110 

Hawley-Smoot Tariff Act - 112 

Use of import excises to strengthen tariff 114 

Reciprocal trade agreements 115 

Taxes - 117 

Taxation in the 1920's 118 

New Deal tax policies 119 

Taxation for defense 120 

Government expenditures 121 

Defense expenditures 123 

Fiscal policy dominated by business 123 

CHAPTER VIII 

Banking and insurance 125 

Commercial banking 125 

Banking and the Government 125 

Business and the Government 128 

Propaganda methods 129 

Representation at Washington 131 

Investment banking 131 

The role of investment banking 132 

Regulation and — regulation 133 

Propaganda 134 

The life insurance lobby 136 

Assistance from other groups 137 

Business and Government share the banking field 139 



CONTENTS VII 

CHAPTER IX Page 

Utilities and railroads 141 

Public regulation 142 

The Granger Movement 142 

Association of American Railroads 144 

Shaping public policy — — 145 

Banker control of the railroads 146 

A. A. R. cooperation with the Interstate Commerce Commission 148 

Other pressure on the I. C. C 149 

Relations with labor 150 

Public utilities attempt to shape public policy 152 

Utility cooperation with the schools 154 

The utility lobby 156 

Utility pressure on administrative agencies 157 

Utility Holding Company Act 158 

Activities of Edison Electric Institute 160 

The general welfare and utility lobbying 161 

chapter x 

Shipping and air transport , 163 

The Navy League • 163 

Business interests and defense 165 

Public subsidies for private shipping companies — 166 

Public subsidies for commercial air transport 169 

What price patriotism? 170 

History repeats itself 171 

CHAPTER XI 

Agriculture and distribution. ; 175 

Farm political power partially offsets economic handicaps 176 

American Farm Bureau Federation 176 

National Grange 177 

Other farm groups 178 

Business dominance in shaping farm policy 179 

Distribution and legislation 180 

Distribution and antitrust laws 181 

The motion-picture industry 182 

Food and drug legislation 183 

Unequal bargaining power of agriculture and distribution 186 

CHAPTER XII 

The need — to relax business control 187 

Advisory councils 187 

Strengthen planning 190 

Improve Government administration 191 

Bring lobbies into the open ,. 194 

Appendix 197 



LETTER OF TRANSMITTAL 



Hon. Joseph C. O'Mahoney, 

Chairm(m, T emporary National Economic Committee, 

Washington, D. G. 

My Dear Senator : I have the honor of submitting the monograph, 
"Economic Power and Political Pressures," by Donald C. Blaisdell, 
assisted by Jane Greverus. 

As its name implies, it is a study of lobbying. Mr. Blaisdell is a 
former professor of political science who, as a Government adminis- 
trator, has had an unusual opportunity to observe the practical conduct 
of public affairs, and the monograph brings together timely and impor- 
tant information and judgments concerning the activities of repre- 
sentatives of pressure groups. It is, so far as I know, the first well- 
documented statement of the extent and character of lobbying and its 
relation to the concentration of economic power. As such, it raises 
questions which properly concern the Temporary National Economic 
Committee in its deliberations on the problems of concentration and 
competition. Its suggestions for lobby registration, publicity, and 
education of the voting public should be beneficial to the entire 
economy. 

This report is the culmination of years of political science teaching 
and research. Mr. Blaisdell was loaned to the T. N. E. C. by the De- 
partment of Agriculture for the time necessary to condense and write 
up his voluminous materials. In this work he has been ably assisted 
by Jane Greverus, who is responsible for some of the text, and for 
organizational and editorial work on the monograph as a whole. 

I believe the study will prove stimulating and informative to the 
members of the Committee. 

Respectfully submitted. 

Theodore J. Kreps, 

Economic Adviser. 

November 26, 1940. 

IX 



CHAPTER I 
THE DYNAMICS OF GOVERNMENT 

The American people are confronted with the problem of who shall 
control the Government, by what means, and to what ends. 

Since the founding of the Republic, the governmental process has 
been characterized by a struggle for control. With increasing 
stresses and strains as a result of internal maladjustments and foreign 
war, the struggle has taken on new and vital significance. 

CONTROL VERSUS POWER 

Governmental power is qualitatively different from control. 
Power is a political term, synonymous with authority. Control is 
dynamic and constantly seeks new methods of limiting or using 
power. Government may possess power and at the same time wield 
control, as in a totalitarian state; but ordinarily, in a democracy, 
power resides in the government, while control is exercised by the 
various pressure groups, chief of which is business. The extent of 
the Government's control is limited, not only by the Constitution but 
by' our traditional belief that government should not "compete" 
with business but should act merely as an umpire in the struggle 
for control. Only in comparatively recent times, under stress of 
depression and greatly accelerated technological change, has this 
traditional belief yielded ground to the idea of increased govern- 
ment activity. 

The role of business, on the other hand, has never been static. 
From the beginning, business has been intent upon wielding economic 
power and, where necessary, political control for ■ its own purpose. 
The purpose, moreover, is not solely profit, but includes the exercise 
of control per se, as an attribute of ownership. 

Even today, when the purposeful use of government power for 
the general welfarejs more widely accepted than at any time in our 
history, government does not begin to approach the fusion of power 
and will characteristic of business. 

THE CONTESTANTS 

But economic power and political power are general terms. To 
understand them it is necessary to determine who uses them, how, for 
what purposes, and with what results. 

Government itself is both a form of power and a situs of control. 
Government in a democracy, however, does not act independently of 
the electorate ; nor does our Federal Government as now constituted 
proceed in a logical way toward the attainment of carefully thought 
out and consistent goals. 

In the first place, our Government is established on a geographical 
basis of representation. State, county, and district lines provide an 



2 CONCENTRATION OF ECONOMIC POWER 

easy way of securing representation, but the assumption that people 
living in a certain area on the map share, even in a general way, the 
interests of their neighbors is unjustified, if not actually false. Also, 
political representation is generally secured through the party system, 
and as such represents a compromise at the outset. A party platform, 
adopted to appeal to as large a sector of the electorate as possible, can- 
not follow completely the interests of any group. Lip service, at least, 
must be paid to the complex of interests represented in the community. 

The relatively short time served by public officials is also a limiting 
factor on the effectiveness of government control. While 99 Con- 
gressmen in the Seventy-sixth Congress, for instance, have served 12 
years or more in the House, 111 are in their first terms. Of the 96 
Senators in the Seventy-sixth Congress, 20 have served 12 years or 
more, while 44 have served 6 years or less. The terms of office of 
State legislators are probably shorter than for national representa- 
tives, although no comprehensive analysis has been made. 1 

Philosophically, also, government is amorphous. Within broad 
limits there are nearly as many philosophies of government as there 
are men in it, while pressure groups have a tremendous unifying 
principle in the mere fact of their organization about a certain con- 
cept. Congressmen act in a multiple capacity, reflecting at different 
times a functional, sectional, personal, or partisan viewpoint, but with 
a few major exceptions, such as the Social Security Act and certain 
labor legislation, they appear to respond more readily to pressure 
from business than from other groups. There is probably a far 
greater difference in ideology between a high-tariff, industrialist 
Congressman from Massachusetts and a public ownership advocate 
from the Middle or Far West than there is between two members of 
the National Association of Manufacturers, or two members of the 
National Grange. The latter have at least a common economic inter- 
est, while the former are probably poles apart on most of the questions 
which they are called upon to decide. 

While the business community may, on occasion, elect "its man" to 
Congress or to the Presidency, or secure his appointment to a gov- 
ernmental office or to the courts, its indirect influence is of far greater 
importance. Pressure groups generally find it more satisfactory to 
influence the votes of legislators in their behalf than to try to elect 
their own representatives to office. Furthermore, a large number of 
legislators are lawyers, and the bar is on most questions sympathetic 
to the views of the business community. As a result of both convic- 
tion and training, lawyers adhere to a business philosophy to nearly 
as great a degree as businessmen themselves. Farmers, laborers, dis- 
tributors, and consumers, as such, have never appeared in legislative 
bodies in anything like the number of the lawyers. 

At least one business organization has spoken out frankly in favor 
of a system of functional representation. The National Lumber 
Manufacturers' Association believes thoroughly in the theory and 
practice of occupational representation. It believes that a geographi- 

1 The terms for which administrators are appointed are likely to be shorter than those 
of legislators, since many legislators outlast shifts in the national administration. There 
was a large turn-over in Federal office holders in 1920, and another drastic shift in 1932, 
involving a large proportion of the policy making officials in Government ; 16 Congressmen 
and 10 Senators now serving, however, were elected before the end of the Wilson 
administration, carried over the 12 years of Republican leadership, and have lasted through 
8 years of another Democratic administration. 



CONCENTRATION OF ECONOMIC POWER 3 

cal basis for representation in Washington is inadequate, and must 
be supplemented by extra-constitutional representation through an 
industry group. Congress and administrative officials not only listen 
to, but also, it is claimed, are anxious to hear industrial groups. The 
individual is of secondary importance. "The lobbyist of other days 
is about extinct ; the voice of the individual is little heard, and when 
heard has, as a rule, little influence." 2 Officials prefer to have "the 
view of an industry, rather than to listen ad infinitum to the variant 
view of countless individuals." 2 "The representation of a territorial 
area or of a certain part of the population often counts for less in 
point of influence than the industrial representation marshalled in a 
given cause." The development of "industrial representation" is said 
to be inevitable. Moreover, "so important have these contacts become, 
and so indispensable the service rendered by associations' representa- 
tives, that they are sometimes spoken of as the Third House of Con- 
gress." According to this view, the individual citizen stands greater 
chance of obtaining recognition of his views at Washington by asso- 
ciating himself with like-minded persons in business and industry, 
than by trusting to direct representation through Congressman and 
Senator as provided by the Constitution. "It is largely true," the 
lumber manufacturers claim, "that an industry and its members get 
or do not get their dues at Washington, as they are, or are not, well 
represented." 3 The association has been called the "most influential 
and most competently represented association in Washington." 

Economic power is rather widely diffused, although its control is 
concentrated, as pointed out above. In the struggle for dominance, 
it is exerted largely through pressure groups — groups organized for 
the purpose of applying political and economic pressure to secure 
their own ends. It is these pressure groups with which this study 
is largely concerned. By far the largest and most important of these 
groups is to be found in "business," which in this study means the 
business community, as dominated by the 200 largest nonfinancial 
and the 50 largest financial corporations, and the employer and trade 
associations into which it and its satellites are organized. These 250 
corporations represent a concentration of economic power in the fields 
of manufacturing, transportation, electric and gas utilities, and min- 
ing, and, to a lesser extent, merchandising, the service industries, and 
even agriculture. 4 

Another large segment of pressure groups includes the patriotic 
and service organizations, such as the Daughters of the American 
Revolution, the American Legion, the Veterans of Foreign Wars, the 
Navy League, etc. 

A third segment includes the reform groups — the Women's Chris- 
tian Temperance Union, the National Civil Service Reform League, 
the League of Women Voters, etc. 

The farm groups include the National Grange, the American Farm 
Bureau Federation, and the Farmers' Educational and Cooperative 

2 Highlights of a Decade of Achievement of the National Lumber Manufacturers' Associa- 
tion, p. 53. In 1929 five lumber industry leaders, all of whom, had served at some time 
or other as president of the National Lumber Manufacturers' Association, engaged a person 
not connected with the lumber industry to prepare this review. 

3 Ibid., p. 54. 

4 In 1935 the 200 largest nonfinancial corporations controlled over $60,000 000 000 of 
physical assets. On the boards of these 250 corporations in 1935 there were 3 544 director- 
ships, and these positions were held by 2,725 individual directors. National Resources 
Committee, The Structure of the American Economy, Washington, 1939, pt. I pp 105 158 



m CONCENTRATION OF ECONOMIC POWER 

Union, along with minor groups like the Tenants' and Sharecroppers' 
Union. 

There are numerous labor groups, the most powerful being the 
American Federation of Labor, the Congress of Industrial Organ- 
izations, and the various railway brotherhoods. Their function as 
pressure groups is secondary to that of collective bargaining agents, 
but has come increasingly to the fore during the past quarter century. 

Peace groups like the Women's International League for Peace 
and Freedom, the National Council for the Prevention of War, the 
Keep America Out of War Committee, etc., might well be included 
with the patriotic and service groups, except that there is a clear 
demarcation between the activities of the two which makes a separate 
classification desirable. 

This enumeration by no means includes all the pressure groups. 
Some of them spring up for immediate purposes, and when those 
purposes are achieved disappear. Some of them are organized for 
purposes other than the wielding of political and economic power, 
and adopt that function only temporarily. The American Associa- 
tion of University Women is such an organization, which is politi- 
cally active only on sporadic occasions. 

A number of groups organized for the preservation of civil rights, 
the advancement of democracy, or for purely humanitarian motives, 
such as the American Civil Liberties Union, the National Association 
for the Advancement of Colored People, the various committees for 
the aid of refugees, or for Spain or China, the Red Cross, etc.. should 
also be classified separately. They are normally active only for their 
own purposes, and do not lend themselves readily to alliances with 
other groups, except to the extent to which their membership is active 
politically. 

There is another contestant in the struggle for power which cannot 
be ignored, although it is customarily treated by the pressure groups 
more as an instrument for .securing and maintaining their own control 
than as a rival in the contest. This is the general public. The 
public is an amorphous mass, largely directionless, often easily 
swayed, gullible, and easily misled. Nevertheless, it possesses a tre- 
mendous potential strength and an enormous determination when it 
finds a channel for its energies. It would be a mistake to underrate 
mass opinion, however futile it may seem at any particular moment 
to try to goad it into effective action in its own behalf. 

Mass opinion .sets the stage for political action at any particular 
moment in this country, to a large degree. Gullible as it is, it cannot 
in ordinary times be pushed beyond a certain point. It is utterly im- 
possible to return to the political conditions of 1800, or 1910, or even 
1930, partly because economic conditions have changed and partly 
because it is impossible to set back the clock of public opinion. The 
gradual extension of suffrage, unionization, popular control of legis- 
lation, extension of social services — all these things are now in the 
realm of public policy and cannot be removed except by a violent 
revolution and the use of unexampled force. Even then, most of 
them would be retained. 

Pressure groups attempt to mold public opinion to accomplish 
their own aims, "and at any given moment it seems that government is 
the result of a compromise between conflicting pressure groups. His- 
torically, however, the march of evenis in this country has been in the 



CONCENTRATION OF ECONOMIC POWER 5 

direction of public betterment. It has been hindered, obstructed, and 
at times apparently completely stopped by pressure groups and selfish 
interests, but it has been impossible to stop it permanently. 

That does not mean, however, that the struggle can be ignored. 
Events are moving faster and faster, and it is becoming more and 
more dangerous to permit a lag between the events themselves and 
the public perception of their significance. Often a generation 
elapses between an occurrence and the generalization of its import. 
Pressure groups have been able to play upon this lag in achieving 
their own purposes and have often managed to prolong it. 

But as technology piles up it,s disruptive effects, and as its benefits 
are distributed too sparingly to the public as a whole, as the problem 
of distribution of goods becomes more and more serious, so it becomes 
more important that the public should understand its problems and 
use its power to solve them. It is no longer possible, if, indeed, it 
ever was, to trust in the eventual working out of the struggle. 

In order to equalize the contest for the control of power, however, it 
is necessary to determine the objectives, methods, and results of con- 
trol. This study is divided into 12 chapters, the first 5 of which are 
a general discussion of the problems of control and the methods used, 
while the next 6 discuss the individual problems of various fields. 
The last chapter contains recommendations for a plan of action. 

METHODS OF CONTROLLING POWER 

The methods by which control of power is sought are as varied as 
the groups which seek it. The role of the general public in the contest 
may to a large extent be ignored, since the public is generally too 
formless, too inchoate, to apply pressure at given points for a given 
purpose, and is largely the passive instrument which both business 
and government use to strengthen their own arms. 

Our purpose is to discover the techniques by which power is directed 
by conflicting forces toward the attainment of specific goals. The 
chief contestants in this conflict are business and government. Gov- 
ernment, usually in response to external stimuli, seeks to expand its 
functions, to put itself on an equal footing with business. Business 
seeks to hold back the rising tide of government activity, struggling 
to keep itself free from government regulation, so as to pursue its 
own ends unhampered. Both argue that they work in the interest 
of the general welfare. 

While there has been some interest in this country in favor of gov- 
ernment ownership of economic enterprises, it is a philosophy which 
lias never been adopted as a program of action by any large group. 
The expansion of government activity has been along the lines of 
providing social services favorable to many groups which would other- 
wise not be furnished at all, and of regulating economic activity in 
the public interest. 

Business, on the other hand, has fought such regulation and the 
expansion of social services, and even more bitterly has fought the 
idea of government ownership. The fight occurs largely in the po- 
litical arena, but it does not end with the election of Congressmen and 
Senators. Election is but one phase of the process. The selection of 
candidates, the drafting of platforms, the party caucus, all function 
largely in advance of the legislative process. Pressures on Congress 



Q CONCENTRATION OF ECONOMIC POWER 

while legislating and appropriating, manipulation of law enforce- 
ment and administration, and use of the judicial process to achieve 
individual or group ends, take place during or after the legislative 
process. 

Through the press, public opinion, and pressure groups it is pos- 
sible to influence the political process. While all three of these factors 
have played a part in the process since our beginnings as a nation, 
the extent and consciousness of their use has grown inordinately. 
They are employed by all contestants in the struggle for control, 
but reflect the viewpoint of business more accurately than that of 
others. The press today is not the same kind of factor in the 
political process that it was in Thomas Jefferson's day. Although 
the economic basis of politics today is in many respects similar to 
that outlined by Madison in the Federalist, 5 today's economic pressure 
groups have advantages which Madison never dreamed of. The 
revolution in communications, produced by American ingenuity and 
promoted by American business, makes the press, the radio, and other 
opinion-forming instruments far more important in the political 
process than ever before. Both press and radio are, after all, "big 
business," and even when they possess the highest integrity, they are 
the prisoners of their own beliefs. 

The development of the corporation as a means of control of prop- 
erty necessitates ranking it, too, as an important factor in the political 
process. By means of the private corporation, ownership of much 
of American business property has been separated from effective con- 
trol of that property. Ownership is diffused, at least to some extent ; 
control is concentrated. This development is so recent (it has oc- 
curred within the last two decades or so) that its effect on the working 
of our governmental institutions cannot yet be accurately evaluated. 3 
Enough is known, however, to justify the statement that it is warping 
the basic concepts of our Government. Extending beyond State lines 
in great national economic empires, business corporations have grown 
greater than the States which created them. By insisting on the prin- 
ciple of federalism — the division of power between the States and the 
Federal Government — as a basic tenet in our political philosophy, 
corporations have been able in large measure to limit the strength 
of the political power which might control them. 7 

CHARACTERISTICS OF THE STRUGGLE 

Among the noteworthy characteristics of the struggle for power 
between government and business are — 

1. The invisibility of most of the action. 

2. The continuity of the struggle. 

3. Its varying intensity. 

4. Its constantly shifting battleground. 



6 No. 10. 

8 See note, p. 19. 

7 "The rise of the modern corporation has brought a concentration of economic power 
which can compete on equal terms with the modern state — economic power versus political 
power, each strong, in its own field. The state seeks in some aspects to regulate the corpo- 
ration, while the corporation, steadily becoming more powerful, makes every effort to avoid 
such regulation. Where its own interests are concerned, it even attempts to dominate the 
state." A. A. Berle and G. C Means, The Modern Corporation and Private Property, 
Macmillan, New York, 1932, p. 357. 



CONCENTRATION OF ECONOMIC POWER 7 

Invisibility. 

Although any legislation under consideration in Congress is spot- 
lighted in the daily news, although the President's activities and the 
administrative decisions of the various Government agencies are fre- 
quently headlined in press and radio, and although court decisions are a 
matter of widespread public interest, still it is true that a large, and 
extremely important, part of the governmental process is hidden from 
the public. 

It is a commonplace that the work of Congress is done not in the 
Senate and House chambers, where the spectators come to watch, but 
in the committee rooms of the congressional committees. Even this, 
however, is but a faint indication of the extent to which governmental 
activity is carried on behind the scenes. The factors which influence 
legislators are only rarely the opinions of their colleagues, uttered in 
formal debate in Congress. They are the legislator's own political 
convictions, his mail from his district or State, the lobbyists who ap- 
proach him in his office or in the halls of the Capitol, or the witnesses 
who appear before him in committee. None of these activities is car- 
ried on with the publicity devoted to formal congressional action. The 
callers at the White House rarely are even listed in the papers, although 
one or two Washington papers make a habit of printing the day's ap- 
pointments. Still less are callers upon department administrators 
listed. The trade journal of a certain industry group may mention 
that its members went to Washington on a mission of benefit to the 
industry, but the news does not get into the general press. Letters, 
telegrams, telephone calls, personal visits, and the other contacts be- 
tween contestants are rarely of enough immediate dramatic content to 
secure public attention, even if it were not usually made a point to 
conduct such activities without publicity. 

Another strong reason for this invisibility is to be found in the 
geographical basis of legislative and judicial representation. This 
organization of government obscures the economic or functional basis 
for legislative decisions, which are frequently far more compelling than 
a geographical accident. The political process is invisible also because 
citizen groups, the most energetic and purposeful of the working forces 
of government, are completely unprovided for by the written Constitu- 
tion. Only in the living Constitution are they recognized as having 
significance along with the formal Government agencies. They func- 
tion in and through the Government structure, without, howe\er, as a 
rule suffering from the white light of publicity which surrounds it. 

Continuity. 

In addition to being invisible, the political process, the struggle for 
de facto dominance, is continuous. From the first days of the Republic 
to the present, the contest has never ceased. The constant increase and 
centralization of economic power have been accompanied by an in- 
crease (although not a corresponding one) in governmental power. 
There have been periods which seemed relatively peaceful, but for 
the most part the peace was on the surface, and indicated temporary 
gains on the part of business when it controlled the Government 
and was not forced to resort to secondary weapons to accomplish 
its will. 

277780 — 41— No. 26 2 



g CONCENTRATION OF ECONOMIC POWER 

Because business controls the instruments of propaganda, the periods 
when the control struggle favors business seem relatively quiet ; when 
business seems to be losing ground, the struggle becomes more vocifer- 
ous. In the 1920's Harding, Coolidge, and .Hoover were sympathetic 
to the viewpoint of business, and Congress and the courts were gen- 
erally Republican. There was relatively little surface indication of 
conflict, beyond the "red" scares and the activities of the farm bloc. 
The Bryan campaigns, however, Roosevelt's Bull Moose campaign, the 
election of 1920, and the period of the 1930's all mark times when the 
contest was not only bitter on both sides, but extremely vocal. 

The struggle has constantly intensified over the past 50 years. The 
rise of modern technology has been a powerful indirect stimulus to 
increasing governmental oversight of activities once regarded as pri- 
vate. If this trend continues, and it shows no sign of slackening, the 
Government must continue to extend its activities, and to attempt to 
match the concentration of economic power in the hands of those not 
politically responsible to the electorate. 

Intensity. 

The intensity of the struggle for dominance depends on a number of 
factors. While the struggle is continuous over a long period of time, 
there are nevertheless lapses, or breathing spells. The strength and 
bitterness of the conflict are usually determined primarily by the phi- 
losophy of the temporary leaders of government. (Two, four, eight, 
or even twelve years, constitute temporary leadership as compared to 
the continuity of business management and philosophy.) Their inter- 
pretation of events, their political debts, their view of the future — all 
these things and many more determine the intensity of their partici- 
pation. The philosophy of business is not subject to change to nearly 
the same extent. Business wants government to leave it alone, and also 
wants to be able to use governmental authority in its own internecine 
competitions. This is a pervasive, single-minded philosophy, adhered 
to by businessmen generally, and providing a real rallying point for 
their energies. As a result, the combat between the two is most active 
when political leaders are unsympathetic with, or critical of, business. 
President Roosevelt's case leaps to mind, but the same thing was true 
of Wilson, Theodore Roosevelt, and Cleveland. 

The Site of the Conflict. 

At what point the brunt of the battle is borne depends on a number of 
factors, at any particular time. It depends, among other things, on the 
nature and number of current issues, upon the personnel of the govern- 
ment agencies, Congress, or the Supreme Court, or upon the trend of 
dominant public opinion. 

The first battle of the conflict occurs in the choice of legislators. The 
second takes place in the legislature itself. If business loses that, it 
resorts to, the administrative agencies charged with the enforcement of 
the law; if it loses there, or sometimes while it is fighting there, it has 
recourse to the courts ; and if it loses again, the struggle reverts to the 
legislature, taking the form of an attempt to amend or repeal the law. 
The forces of propaganda are, of course, in constant use. Business, 
for instance, first sought to defeat the National Labor Relations Act in 
Congress. Failing that, a number of trade journals, the publications 
of the National Association of Manufacturers and the United States 
Chamber of Commerce recommended that the act be ignored until it 



CONCENTRATION OF ECONOMIC POWER 9 

was tested in the courts. (At that time, it seemed likely that a favor- 
able court decision could be secured.) When the act was finally 
declared constitutional, however, the focus of the attack shifted first to 
the approaching congressional elections, in the hope of amending the 
act, and then to Congress itself. 

Although by no means always favorable, the circumstances determin- 
ing the site of the struggle usually favor business. Business is less 
restricted than government in choosing the place to fight. It can fight 
or not, secure in its conviction that "sixty billion dollars can't be 
wrong." If it feels itself compelled to fight it can accept the chal- 
lenge, at the same time starting a back fire elsewhere. 

In this connection the business orientation of the newspaper press 
is a valuable asset. In the nature of the things, public opinion is 
usually well disposed toward business. This is a natural conse- 
quence of the popular belief in the virtues of the American system, 
as understood by the business community. Business is more or less 
unconsciously assumed to be right. Government is the "prosecutor." 
But, in addition, newspapers have it in their power materially to 
influence public opinion on particular issues. When it comes to 
measuring particular situations of fact against general principles 
and presenting the comparison as news, newspapers are shapers of 
opinion as well as purveyors of fact. Editors are aware of this, of 
course, and many take special precautions to avoid it. With others, 
editorializing is practiced as a matter of course. And even where 
editors and publishers are men of the highest integrity, they are 
owners and managers of big business enterprises, and their papers 
inevitably reflect, at least to some extent, their economic interest. 
When organized business deliberately propagandizes the country, 
using newspaper advertising as one medium, the press is a direct 
means of channeling business views into the public mind. 

Slogans and cliches have a special importance in rendering favorable 
the circumstances in which business chooses to stand against govern- 
ment. "Inalienable rights," "individual initiative and effort," "pri- 
vate ownership and control" are typical of those used by the National 
Association of Manufacturers. They are among the essential features 
of the "American System." They constitute the description of the 
economy which business prefers, but they seem to hark back to the days 
before the emergence of the modern corporation as a dominant institu- 
tion. It stretches the imagination almost to the breaking point, for 
instance, to regard the operations of Standard Oil of New Jersey as 
those of an individual in the usually accepted sense of that word. 

But the legal profession, at the bidding of business, has been equal 
to the task. By getting the courts to accept the contention that the 
corporation possesses a personality separate from those of the indi- 
viduals acting for it and by getting them also to extend the operation 
of the. Fifth and Fourteenth Amendments to these corporate personali- 
ties, lawyers have remade constitutional guarantees in the image of 
business. 8 



8 "Among conservative adepts in Federal jurisprudence the need for more efficient judicial 
protection had been keenly felt for some time ; and when the problem of defining the rights 
of Negroes came before Congress in the form of a constitutional amendment, experts in such 
mysteries took advantage of the occasion to enlarge the sphere of control over the States, 
by including among the safeguards devised for Negroes a broad provision for the rights of 
all 'persons,' natural and artificial, individual and corporate." Charles and Marv Beard, 
The Rise of American Civilization, Macmillan, New York, 19^7, vol. II, p. Ill ff." 



10 CONCENTRATION OF ECONOMIC POWER 

This feat is the best example we have of business control of govern- 
ment. Language used by Thomas Jefferson to state the relationship 
between citizens and government necessary for the development of 
the individual personality, has been used by business to attract public 
support in its effort to avoid regulation. The law, the newspaper 
press, and the advertising profession have all helped business by 
spreading this changed conception of the Jeffersonian idea. 

THE NEED 

To cope with the problem of government by pressure groups, of 
which business is the strongest, requires the development of stronger 
democratic institutions than are now at hand. It is necessary to 
even up, to equalize, the unequal pressures to which government is 
subjected. 

In agriculture, potentially significant steps have been taken since 
1933 to extend democratic principles to the performance of economic 
tasks. Through a number of devices, agricultural producers' opin- 
ions, judgments, and advice are now being brought to bear much 
more effectively than heretofore on planning, production, and mar- 
keting problems. Labor union functions are similarly broadening in 
scope. There is little doubt that business fears that such develop- 
ments may lead to a relaxation of its control. Its hostility to agri- 
cultural producers' referenda and to collective bargaining by organ- 
ized labor are well known. 

But there are doubts as to the permanence of these gains. Will 
their existence be tolerated long enough to demonstrate their useful- 
ness? And even if they live up to their originators' highest hopes, 
can they, in the aggregate, diminish the control which business now 
exercises? So long as technology is the ally of business, can there 
be any effective attack upon the position of business? So long as 
the struggle is so largely invisible, can the public be sufficiently 
aroused to exert its full strength? And, what is the basic question, 
can our Federal system with its division of powers, its system of 
checks and balances, and its geographic basis of organization ever 
cope with the present concentration of economic power ? These ques- 
tions are not foremost in the minds of the people today, yet the future 
political development of the nation turns upon the answer to them. 

From the political point of view, a minimum program to meet the 
problem of control of government should embrace three items. First, 
Congress should enact an effective lobby registration law. Second, 
voters should be given complete information regarding group pres- 
sure on government. If this cannot be provided as a public service 
feature by the radio chains and newspapers, it should be done by 
some adequately financed government office with the facilities of a 
government-owned and operated radio station. The third item 
would require the harnessing of technology to democracy's needs by 
developing a far-reaching program of governmental research. The 
Federal agricultural research program provides ample precedent for 
such a step. No adequate research, for instance, has ever been done 
in the field of low cost housing. The charges of suppression of 
patents by industry have been hotly denied, but they will probably 
continue to crop up until there is established a Federal agency for 



CONCENTRATION OF ECONOMIC POWER \\ 

the development and exploitation of inventions and discoveries. 
The experience of the University of Wisconsin in setting up a patent 
pool is of real interest in this connection. 

This minimum program, as well as the idea of government plan- 
ning and proposals to improve administration are discussed in the 
last chapter. It is perhaps sufficient to say here that many methods 
have been proposed to strengthen the democratic process. The prob- 
lems are immediate, and most of the solutions seem to run outside 
the traditional pattern of political action. But the traditional 
American goal of equal opportunity is far more vital to our welfare 
than maintaining any established patterns of action. 

The only real problem is to settle upon a program which seems 
reasonably calculated to advance us toward the goal. 



CHAPTER II 
PRESSURE GROUPS 

The forces engaged in the struggle for the control of power were 
classified in chapter I as government, pressure groups, and the general 
public, with government and those pressure groups allied with business 
as the major contestants. 

Theoretically, pressure groups compete with each other on equal 
terms, have equal bargaining power, with none enjoying an advantage 
over another. This assumes that the right of petition guaranteed by 
the Constitution is exercised by "free and equal" men. The most it 
assumes, under a broader interpretation, is that citizens, when they 
have grievances against their government, lend weight to their pleas 
by mobilizing their strength and directing it by organization to Con- 
gress. But it is assumed that such organization is temporary, and 
furthermore that the group wields no more economic power than that 
growing out of the aggregate resources of the individuals composing it. 

Actually, the situation has changed radically. Relying on the indi- 
vidual's right of petition, lawyers today lobby for business, for labor, 
for farmers, just as they have done for decades. But beyond this 
surface similarity there is little resemblance to the situation of Wash- 
ington's day. The membership organization, employing the lobbyist, 
directed by paid executives, exerts a degree of strength, cohesion, and 
mobility differing essentially from the fluctuating pressures of an 
earlier day. As for business, the corporations whose right as persons 
to petition the government is exercised by lawyer-lobbyists have be- 
hind them so much, wealth, such concentrated control, and such a 
degree of impersonality as to challenge their right to function, under 
democratic theory, as individuals. In addition, corporations have 
marshaled behind them the bulk of the scientific brains of the country, 
a resource which labor, farmers, and government itself cannot equal. 
Til the contest for government control, applied science is so weighty 
that it tips the scales in favor of business. 

Theoretically, government participates in the struggle not as a 
contestant but as an umpire. If business long ac,o had not borrowed 
public power, government might still be able to function solely in the 
umpire's role. But with the attempt by Congress to balance the tre- 
mendous power which business has gained, government appears not 
only as an umpire but as a contestant as well. To every group ag- 
grieved by government, Washington appears as more than a contest- 
ant: it seems to be an antagonist. And, since business has gained so 
large a share of public power, it is not surprising that business more 
than any other group regards the government as an antagonist. 

CONTESTANTS IN THE STRUGGLE 

It is difficult to enumerate the organizations which, together, are 
the antagonists in the struggle for power. A classification by func- 

13 



14 CONCENTRATION OF ECONOMIC POWER 

tion, on the basis of government, pressure groups, and the general 
public, apparently neglects the divergent interests making up the 
various groups, so that in many cases wider variations in aim, methods, 
and effectiveness are found within a single group than exists between 
any of the three groups. The abyss that separates the United States 
Chamber of Commerce from the Municipal Ownership League, for 
instance, is far wider and deeper than the separation between the 
Republicans -and the conservative Democrats. 

It is probably true that the ranks of the pressure groups shelter some 
who would prefer to live under a government in which their sole 
voice was that of individual citizens; and that government agencies 
and legislative bodies are honeycombed with men and women who feel 
that business is far better able to wield political control than the 
politicians. Still it is impossible to classify the interacting forces 
on a completely adequate basis, and the division here set up has the 
advantage of emphasizing the energetic, directional approach of 
pressure groups as against either government or the general public. 

Government, of course, includes town, county, and State legislative 
bodies and administrative agencies, as well as the local courts. The 
Federal Government's scope of action is so different from the lower 
levels of government that it must be classified separately, although its 
general position in the contest is at least partly the same. One of the 
chief techniques by which pressure groups get and maintain their 
power is by insisting that a certain function legally belongs to the 
States, even though it is clear that the State cannot handle it ade- 
quately. By insisting that it belongs to the States, they manage to 
preclude the possibility of any effective action. 

Among the pressure groups, business can be divided into two cate- 
gories — principals and satellites. In the former are included the 
groups representing business and industry generally, and those repre- 
senting distinctive parts of American business. In the latter are the 
professional associations which revolve around business, largely 
dependent upon it for support. 

Chief among the organized groups representing business generally 
is the Chamber of Commerce of the United States. The outstanding 
employers' group is the National Association of Manufacturers. It 
acts not only on its own account, but has also, through the National 
Industrial Council, been instrumental in coordinating the activities of 
State industrial associations, local industrial relations organizations, 
and manufacturing trade associations. Twelve of the country's top- 
notch corporations keep informed of each other's activities in the 
industrial relations field through a special conference committee. 

In the electric power industry, the Edison Electric Institute, suc- 
cessor to the National Electric Light Association, operates a well- 
known lobby. Legislative activities of the country's life insurance 
industry are under the direction of the Association of Life Insurance 
Presidents. On governmental matters the Association of American 
Railroads speaks for the railway industry. Iron and steel, petroleum, 
lumber, coal, copper are represented by the American Iron and Steel 
Institute, the American Petroleum Institute, the National Lumber 
Manufacturers' Association, the National Coal Association, and the 
Copper Institute, respectively. Of special importance, because of the 
national defense considerations involved in national policy regarding 
merchant shipping and air transport, are the American Merchant 



CONCENTRATION OF ECONOMIC POWER 15 

Marine Institute (formerly the American Steamship Owners Asso- 
ciation) and the Air Transport Association. 

Among industry's satellites, commercial banking presents a united 
front to government through the American Bankers Association, 
while the Investment Bankers Association of America functions in 
the same capacity for investment banking. 1 Although it includes by 
no means all the country's lawyers, the American Bar Association is 
the part of the legal profession most closely allied in thought with 
American business. Through the American Newspaper Publishers 
Association the country's daily newspapers join their strength for 
business and against government. National groups in the account- 
ing, engineering, auditing, and advertising professions share the gen- 
eral philosophy of business and shape their public activities 
accordingly. 

The organizations through which laborers, farmers, distributors, and 
consumers direct their efforts in forming public policy are well known, 
although they vary considerably in effectiveness. The great bulk of 
the labor unions are organized into the American Federation of Labor, 
the Congress of Industrial Organizations, and the railway brother- 
hoods, although the independent unions are not necessarily inactive in 
politics. Among the important farm groupte are the National Grange, 
which has been active in politics for 70 years, and the American Farm 
Bureau Federation and Farmers Educational and Cooperative Union, 
which have emerged as potent factors in lobbying since the World War. 
Farmers' membership cooperatives are active politically, working 
through the American Cooperative Council. Numerous farm com- 
modity producers are organized on a national scale and engage in both 
National and State politics. The American National Livestock Grow- 
ers Association is typical of this group. It is particularly difficult to 
distinguish between such producers' organizations and the pressure 
groups comprising "business." Their members are, in a sense, farm- 
ers, but they have far more in common with the business community 
than with agricultural groups. 

Effective organization of retail distributors on a national basis was 
late in developing, the National Retail Federation dating only from 
1935. Effectiveness of organized consumers is very limited, the only 
Nation-wide group claiming to represent consumers being the National 
Consumers League. However, organizations such as the American 
Association of University Women and the National League of Women 
Voters are becoming increasingly consumer-conscious and also increas- 
ingly active in endeavoring to shape public policy where it affects con- 
sumers. 

This list of contestants contains only a few of the Nation's politi- 
cally important pressure groups. 2 However, it includes most of the 

1 "It is often held that control over the larger nonfinancial corporations centers in the 
larger banks and Insurance companies. This may have been the relationship which developed 
in other countries in which banking concentration has been carried to a very much greater 
extent than in 'the United States. In this country, however, there is much evidence that, 
though the larger banks and insurance companies are an integral part of the corporate 
community and are dominated by much the same group of individuals, the basis of controls 
in the corporate community is too diffuse to justify the statement that control centers in the 
banking institutions. A bank is quite as likely to be dominated by an industrial, railroad, or 
utility group as to dominate such a group. Unquestionably, the banks and insurance com- 
panies play a significant role in the structure of controls, but more as one of the many bases 
for the controls exercised by the dominant groups than as the center of such controls." 
National Resources Committee, Structure of the American Economy, Washington, 1939, p. 
159, fn. 17. 

2 See appendix, pp. 197-201, for a more complete list. 



IQ CONCENTRATION OF ECONOMIC TOWER 

strongest in the struggle for power. In later chapters the working out 
of this process is examined in some detail, and the contacts between 
pressure groups and government are explored. 

CHARACTERISTICS OF THE CONTESTANTS 

In the contest for domination of public policy, four characteristics 
are of primary importance. They are : length of life, cohesion, visi- 
bility, and resources. Length of life, or staying power, is vital because 
the contest is a continuing one, and an organization which continues to 
function over a long period of time gathers experience, techniques, 
and familiarity with the problems which are probably not shared by 
its opponents. 

Cohesion in an organization makes for mutual support, which is in- 
valuable under stress. The more an organization suffers from disunity, 
or internal dissension, the less is it able to direct its strength toward 
any particular goal, and the more easily its aims are defeated. 

The extent to which the activities of a contestant, whether it is gov- 
ernment or a pressure group, are invisible to the general public or to 
other groups often determines the outcome of a particular maneuver 
or a whole phase of the battle. A part of the struggle for power is 
carried on more or less openly, although even then it may be disguised, 
as propaganda frequently is. Congressional hearings provide another 
spotlight. The committee meetings in which policies are decided are 
not open to the public, however, a circumstance which fosters invisi- 
bility in political action. 

In a conflict between economic and political forces it is inevitable 
that resources should play an important part. Propaganda is expen- 
sive, law suits are expensive, lobbies are expensive. The word "re- 
sources" should, of course, include more than money, as there have 
been occasions when money was of no avail against militant groups 
who worked with reforming zeal. The record indicates, however, that 
the side which spends the money usually wins the election. 8 

Staying Pmoer. 

Business has greater staying power than other pressure groups, or 
than government, because its constituent units have a longer lease on 
life. Most private corporations possess perpetual charters. When 
combined with such resources as those controlled by. the 250 ^largest 
corporations, these charters enable business to stay in the political 
game indefinitely. A corporation may, as a result of voluntary or in- 
voluntary bankruptcy or merger, lose its identity and with it its 
charter. But the factors determining a corporation's ability to retain 
its individuality and thus stay in the political game are far more eco- 
nomic and legal than political. Most of the country's important busi- 
ness units have been in business, and in politics, for decades. 
Organizations of these business units are equally old. The National 
Association of Manufacturers was organized in 1895, and the predeces- 
sor of the National Industrial Council, the organization through which 
the lobbying, propaganda, information, and labor relations policies 

3 See H. D. Anderson, Popular Government in California, Stanford University Pres* 
1941. 



CONCENTRATION OF ECONOMIC POWER 17 

of affiliated local, State, employers', and manufacturing trade associ- 
ations are coordinated, in 1907. 

On the surface it would seem that the power of organized labor, 
if not of farmers and consumers, to stay in politics would equal that 
of business, but it is doubtful if this is actually so. 

Labor's stamina depends in the first instance on the authority to 
function, granted in union charters, and, in the second, on the general 
state of business. Labor union income rises with prosperity and falls 
with depression. Without resources, labor cannot use effectively the 
right to function granted them by charter. Also, labor's ability to take 
an active part in the governing process depends largely on the sym- 
pathy of government. 

The relative staying power of labor and business is well illustrated 
by the experience of the National Association of Manufacturers. On 
three different occasions during the 45 years of its existence it has 
responded to alleged threats to the security of the American system of 
free enterprise. The threats were said to come from labor and its 
bid for Government assistance in its struggle for improved working 
conditions. 

In its first "open shop" drive in 1905 and 1906 the association at- 
tempted to break the growing power of organized labor. A similar 
drive was conducted during the mid-twenties. The third attempt was 
begun after the legal recognition of labor's right to organize and bar- 
bain collectively, in 1933 (a recognition strengthened and made more 
permanent in the Labor Relations Act of 1935), and it has not yet 
ceased. 4 

A sympathetic attitude on the part of government toward farm 
groups is a tremendous factor in their effectiveness. These organiza- 
tions almost completely lack the legal basis of longevity conferred 
upon business and labor groups by charter. Farmers' staying power 
is relatively low, although post-war experience with voluntary organi- 
zation and recent legislation have improved it. Whether this will be 
a permanent improvement remains to be seen. 

Government clearly lacks the staying power of business. It i? sud- 
ject to changes among its legislators and responsible officials much 
more frequently than business, and while such changes are inevitable 
in a representative democracy, they seriously compromise its power 
to govern. Even lengthening the term of public service to 4, 6, or 8 
years, instead of the present 2, 4, and 6 years, would not begin to ap- 
proach the decades during which businessmen are in office. 

One instance of the effect of personnel changes and other shifts over 
a relatively short period appears in the history of the enforcement of 
the Federal anti-trust laws. In 1913 Congress placed the enforcement 
of the Clayton Act in the hands of the Federal Trade Commission. 
Twenty years later, according to a study made in 1932, enforcement 
appears to have been effective in the case of ''small 1 ' but not of "big 
business." Because of — 

the shift in political power within the legislative and executive branches of 
the Govt rnment, and the limitations placed on the Commission by the courts — 

4 The story of the two "open shop" drives and of the National Association of Manufac- 
turers' opposition to collective bargaining under Federal law is told in detail in Report of 
the Committee on Education and Labor, pursuant to S. Res. 266, 74th Cong., U. S. Senate, 
76th Cong., 1st sess., Rept. No. 6, pt. 6. 



lg CONCENTRATION OF ECONOMIC POWER 

the Federal Trade Commission has, according to this study — 

been little more than a body for the regulation of the trade practices of small 
business. 6 

Cohesion. 

Cohesion is a characteristic of great advantage to business. There 
is some doubt regarding the cohesiveness of all business, large and 
small, but there is unquestionably a marked degree of "sticking to- 
gether" in the business community which is of primary importance 
in the governing process. How important their attachment to a uni- 
formly accepted philosophy is in this respect it is difficult to say. 
Common observation would indicate that it has considerable weight. 
In any event, the extent of interlocking in the directorates of the coun- 
try's leading business units is so great as to result inevitably in a 
considerable similarity of viewpoint. In 1935, out of 250 corporations 
(the 200 largest non-financial and the 50 largest financial) 151 com- 
panies were interlocked with at least 3 other companies in the group. 
The assets of these 151 companies amounted to nearly three-fourths 
of the combined assets of the 250. 6 While it would be easy to exag- 
gerate the importance of this extensive interlocking in the matter of 
policy formation, it would be a mistake to underrate it, since 59 of 
the 83 directors who held 4 or more directorates were active in at least 
1 of the companies they served. (Active positions include those of 
board chairman, executive or finance committee member, or executive 
officers.) 7 

The cohesion resulting from this overlapping is not only economic 
but political as well. It gives business management a big tactical 
advantage over business owners, over employees and farmers, and over 
government itself. Other pressure groups possess the political co- 
hesiveness and single-mindedness of business, but they have not the 
economic cohesion, in the sense that businessmen all over the coun- 
try are relatively easy to unite in a single movement. Other pres- 
sure groups are smaller, and less well integrated by their organs of 
communication. 

In comparison with business, government appears to be almost com- 
pletely lacking in cohesion. It can hardly be otherwise. The ter- 
ritorial organization of government is diffuse, particularized, if not 
atomized. Not even the executive branch is capable of the degree of 
cohesion possessed by business. It is too large, too diverse in origin 
and t interest, and too lacking in mutual and common concern to be 
more than very loosely held together by President and Cabinet. 
Partisan politics inevitably involves some degree of cohesion, at least 
among the politically-responsible personnel, if the party is to be suc- 
cessful at the polls. But it cannot engender the kind of single-minded 
purposefulness which business possesses, and which would be so valu- 
able an asset in the contest for power. 

As an eminent legislator, later a Cabinet official, once pointed out, 
"The first law of politics is self-preservation." And any legislator 
knows that his reelection is primarily his own problem, which he will 
have to solve by making some compromise with the various groups in 

6 T. C. Blaisdell, Jr., The Federal Trade Commission, Columbia University Press, New 
York 1932, p. 259. 

8 National Resources Committee, The Structure of the American Economy, Washington, 
1939, p. 158. 

' Ibid. 



CONCENTRATION OF ECONOMIC POWER 19 

his district. A legislator with principles often draws a line beyond 
which he will not go in compromise; but as representative of a whole 
district, he cannot in the nature of things achieve the single-minded- 
ness of any one of the pressure groups which tries to influence him. 

Invisibility. 

The invisibility of the struggle was discussed in chapter I. Invisi- 
bility, however, is an advantage which accrues largely to business 
rather than to government. That part of the governmental process 
which goes on behind the scenes is largely the exertion of pressure on 
the legislative, administrative, or judicial branches, and the pressure 
is largely exerted by business. 

In greater or less degree, of course, this invisibility is a character- 
istic of all the private groups which are active in government. It 
grows out of the longstanding fallacy that government is "public" and 
pressure groups "private." As a result, government operates under 
the strong light of publicity, while the other contestants are per- 
mitted to conduct their activities as if they were not of public concern. 

Resources. 

Most important of all the factors in favor of business, however, are 
its resources — not so much because of their size, important as that is, 
as because of the circumstances surrounding their use. The extraor- 
dinary concentration of ownership in the 250 largest corporations, 
and the even greater concentration of control, enormously increase 
their mobility and effectiveness. 8 

The ownership and control of these large assets by the business com- 
munity give point and meaning to the other characteristics of the 
contestants. They contribute to the comparative longevity of corpo- 
rations. They also provide a very real basis for the cohesion dis- 
played by the business community in its efforts to maintain the status 
quo, protect private property, and continue to control business assets, 
unhampered by public regulation. The darkness surrounding the 
political activities of nongovernmental groups in the contest is im- 
portant to business largely because it permits the spending of these 
huge reserves almost entirely without accounting. 

Government expenditures are made out of public revenues, and 
their use is subject to public scrutiny at all times. Hence, business, 
as part of the public, is able to challenge and keep to a minimum Gov- 
ernment expenditures for • propaganda purposes. Government, by 
means of the taxing power, congressional investigation, and use of 
antitrust statutes, and so forth, can to some extent limit business' ex- 
penditures for propaganda purposes. Compared to the glare of pub- 
licity that surrounds Federal expenditures, however, business carries 
on its activities in a dim and comforting gloom. In the last analysis 
it receives its funds from the public, allegedly for services rendered. 
Yet, because propaganda and lobbying expenditures are included in 
the cost of doing business, the public pays for these expenditures, and 
it pays for them not once but twice. As a cost of doing business they 
are deducted before figuring' the net income out of which dividends 
are paid and against which income taxes are levied. This public 
quality inhering in business funds is to a large extent ignored. Rarely 

8 "The lack of significant stockholder control over corporate policies may be regarded as 
the typical condition toward which the large corporate units have been tending." Natural 
Resources Committee, op. cit., p. 157. 



20 CONCENTRATION OF ECONOMIC POWER 

are business expenditures examined from the viewpoint of their effect 
on the general welfare. Rarely are even the total amounts expended 
made known, and almost never is there published an analysis of the 
way in which the total was distributed. Admitting the advisability 
of the existing strictures on the use of Government funds, it seems 
equally important, or more so, that they should also be applied to the 
political expenditures of business. 

On occasion Congress and enterprising journalists have turned the 
spotlight of publicity on the political expenditures of business and 
given the public an opportunity to compare private and public ex- 
penditures for political purposes. 

In 1913, Congress investigated the lobbying activities of the National 
Association of Manufacturers. Extensive hearings were held by a 
select committee of the House and by a subcommittee of the Senate 
Committee on the Judiciary. The tightly-knit organization of the N. 
A. M. and of its legislative pressure group, the National Council of 
Industrial Defense, excited the admiration of the majority of the House 
committee, but the association's many-sided program, and particularly 
its probable effect on the American governmental system, aroused 
apprehension. 

It was disclosed that the association had placed an employee of the 
House of Representatives on its pay roll in order to obtain information 
not available to the public; the association's agents had contributed 
large sums of money to the reelection campaigns of congressional candi- 
dates, and had opposed representatives friendly to labor; the associa- 
tion had carried on a disguised propaganda campaign through news- 
paper syndicates and through the Chautauqua circuits, by employing 
publicists, and by distributing large quantities of propaganda to 
schools, colleges, and civic organizations throughout the country; the 
association's agents had promoted employees' alliances as an aid in 
opposing political candidates friendly to labor. 

In its report to Congress the House committee majority stated that 
the N. A. M. was shown "to have been an organization having purposes 
and aspirations along industrial, commercial, political, educational, 
legislative, and other lines, so vast and far-reaching as to excite at once 
admiration and fear — admiral ion for the genius which conceived them 
and fear for the ultimate effects which the successful accomplishment of 
all of these ambitions might have in a Government such as ours." 10 

The fears expressed in 1913 were echoed 26 years later by the La 
Follette Civil Liberties Committee, a sub-committee of the Senate Com- 
mittee on Education and Labor. One part of its investigation of viola- 
tions of the right of free speech and assembly and of interference with 
the right of labor to organize and bargain collectively dealt with the 
labor policy of the National Association of Manufacturers. The prop- 
aganda employed by the association to advance this policy gave the 
committee "serious concern." It found that between 1933 and 1938 the 
association — 

blanketed the country with a propaganda which in technique has relied upon 
indirection of meaning, and in presentation upon seci'ecy and deception. Radio 
speeches, public meetings, news, cartoons, editorials, advertising, motion pictures. 



8 See the report of the Committee on Education and Labor, No. 6, pt. 6, 76th Cong., 1st 
sess., pp. 209-210. 

10 H. Rept. No. 113, 63d Cong., 2d sess., p. 5. 



CONCENTRATION OF ECONOMIC POWER 21 

and many other artifices of propaganda have not in most instances disclosed to the 
public their origin with the association. * * * 31 

The committee found, furthermore, that — 

the purpose of this prodigious effort is in part to forestall union organization, and 
in part to sway public opinion in favor of a legislative program approved by the 
large corporations which control the association, and to influence the electorate in 
its choice of candidates for office. 14 

The controlling position of large corporations in the association's 
affairs and the connection between their resources and the association's 
propaganda struck the committee with particular force. It was found 
that the association — 

is largely financed by a small group of powerful corporations, representing in 
1937 less than 10 percent of its membership of 3,000 companies. A much smaller 
clique of large corporations, not more than 60 in number, have supplied it with 
active leadership * * * w 

Most of these companies are among the National Resources Com- 
mittee's list of 250 dominant corporations. 14 It is the channelizing of 
corporate funds through the N. A. M. for propaganda and political 
purposes that causes the Committee concern. 

The National Association of Manufacturers' campaign of propaganda — 

it states — 

stems from the almost limitless resources of corporate treasuries. Not indi- 
viduals but corporations constitute the membership of the association and supply 
its funds. It is this fact that makes the political aspects of the association's 
campaign of propaganda a matter of serious concern. In effect the National 
Association of Manufacturers is a vehicle for spending corporate funds to influence 
the opinion of the public in its selection of candidates for office. It may be ques- 
tioned whether such use of the resources of corporate enterprise does not. contra- 
vene the well established public policy forbidding corporations to make contri- 
butions in connection with political elections. 10 

In the opinion of the N. A. M., the expenditure was well made — 

* * * officials of the association have boasted that its propaganda has in- 
fluenced the political opinions of millions of citizens, and affected their choice of 
candidates for Federal offices. 16 

Emasculating amendments to the National Labor Relations Act were 
adopted in June 1940 by the House of Representatives elected in 
November 1938. 

This alliance of corporate resources and propaganda is not an 
isolated instance of the lavish use of business resources for political 
purposes. Omitting such a shocking example as the Teapot Dome 
scandal of the Harding administration, there are numerous cases of 
apparently routine perversion of the political process. The extent 
of the propaganda issued by the electric power industry for private 
ownership and freedom from regulation during the 1920's was so great 
that the Federal Trade Commission said : "No campaign approaching 
it in magnitude has ever been conducted except possibly by govern- 
ments in wartime." 17 The pressure which the utility industry exerted 
on Congress in 1935 in its effort to defeat the Utility Holding Company 
Act is still fresh in the minds of many citizens. 

" J^R 01 '* of the Committee on Education and Labor, op. cit., No. 6, pt. 6, p. 218. 

13 Ibid!,' p. 220. 

« Structure of the American Economy, on. cit., pp. 100-101. 

"Ibid., pp. 221-222. 

"Ibid., p. 221. 

" Sen. Doc. 92, pt. 71-a, 70th Cong., 1st sess., p. 18. See also en. X. 



22 CONCENTRATION OF ECONOMIC POWER 

The life insurance industry also has spent large sums to keep itself 
free from Federal regulation, despite the interstate character of its 
operations. 18 

In none of these areas of public policy would the business com- 
munity have been able to operate as it did without the financial re- 
sources of corporate treasuries. 

Indeed, a well-placed Washington correspondent has expressed the 
view that "property has not hesitated to corrupt government, when 
necessary to preserve its precious advantages and to extend them," 19 
and adds: 

This has been going on for so long that we scarcely notice it. Here in Washington 
we are casehardened ; we take it for granted that the property lobbies will push 
our legislators around whenever the interests of their principals are threatened. 20 

Technology* a major resmirce of business. — While the volume of 
physical assets controlled by business gives it a great advantage over 
other groups and over government, scientific research and technology 
are also of great weight. The control over applied science which 
business holds is the key to the explanation of its dominant position 
in the process of government. Two interacting factors make this 
position possible. Business, enabled by the corporate mechanism to 
raise the large funds necessary for mass production, to concentrate 
control over their use in a few hands, and to build up its research 
laboratories, has worked its way into a dominant position in economic 
life. By its control over technology it is able to perpetuate that 
position. 

Economic pre-eminence means economic independence, and inde- 
pendence means relative freedom from political control. Business en- 
lists technology for economic reasons, primarily to lower unit costs. 21 
This is done deliberately. A less conscious reason is the desire to 
attain a commanding competitive, even a semi-monopolistic or monop- 
olistic, position in the industry. Technology facilitates the realiza- 
tion of that ambition. It not only facilitates it, it is the essential 
prerequisite to successful competition. Research, indeed, is necessary 
to industrial survival. Large-scale industry as it is known today 
would be impossible without scientific research and the technological 
improvements in products and processes flowing from it. 

The consequences of industry's alliance with technology are im- 
portant not only in the economic but also in the political sense. To 
a great extent industry's political formidability can be traced to its 
dominant position in scientific research. For business, this is a by- 
product, albeit an important one. But for the student of politics and 
government it ranks as a primary factor of highest significance. In- 
terested as he is in innovations affecting the ability of government to 
use effectively the power of the State, he must recognize the invention 

18 Hearings before the Temporary National Economic Committee, Part 10. 

,n Kenneth G. Crawford. The Pressure Boys, Messner, New York, 1939, p. ix. The value 
of this book would have been greatly enhanced if the many instances of the success of the 
property lobby had been documented and if an index had been provided. However, it is 
readily understood why Mr. Crawford felt unable to supply the former deficiency. Short of 
the subpena power and the witness stand, it is practically impossible to obtain authentic 
evidence of lobbyists' activities. Even when armed with such powers, congressional com- 
mittees have frequently been rebuffed in their efforts to get the facts by recalcitrant and 
evasive witnesses. 

20 Ibid., pp. ix-x. 

21 "The primary purpose of businessmen in introducing new machinery or new methods is, 
of course, to reduce costs of production. That is flrst * * *." Testimony of Dr. T. J- 
Kreps, Hearings before the Temporary National Economic Committee, pt. 30, p. 16213. 



CONCENTRATION OF ECONOMIC POWER 23 

of the art of invention 22 as a political factor of primary importance. 

As media of propaganda, of information, and of opinion formation, 
the talking picture and the radio are now recognized as new and 
permanent factors in the political equation. As such, they take their 
places alongside the newspaper press, a new factor a hundred years 
ago, but now of traditional importance. Similarly, air transport and 
the automobile are now recognized together with the railroad as means 
of transportation, affecting profoundly, perhaps essentially, both the 
substance and the form of governmental authority. Politcially such 
inventions as the telephone, telegraph, radio, air transport, the auto- 
mobile, etc., have been overemphasized in relation to the art of inven- 
tion. They are merely particular examples of an art which is on its 
way to perfection. And effective domination of this greatest of all 
modern scientific achievements is in the hands of business. 23 The con- 
trols centralized in the business community extend to both pure and 
applied science. It is the domination in both fields which gives busi- 
ness its key position. No other group, not even government, con- 
trols and enjoys this asset to the same extent. It is a resource of the 
first magnitude, endowing business with unique influence in the social 
process, and making its political strength almost unassailable. 24 

The problem thus created is a baffling one. Basically government 
does not compete with industry in research. In fact, much of the 
Federal Government's present research in the physical sciences is of 
direct or indirect value to business. The research which it conducts 
in carrying out its constitutional responsibilities of national defense 
and of determining standards is of this kind. 25 By aiding business 
in this way, government fortifies one of the greatest forces possessed 
by business in the struggle for power. Federal research in national 
defense has undoubtedly been of value to the iron and steel industry, 
and in highway construction and maintenance (not to mention con- 
struction subsidies to the States) to the automobile manufacturing 
industry. Yet in these two industries government efforts to improve 
labor conditions have been persistently rebuffed. In agricultural re- 
search, government assistance is of such long standing, is so com- 
prehensive, and absorbs such a volume of funds as practically to 
dominate the field. Such recent legislation as that of 1938, establish- 
ing laboratories to find new uses for agricultural products, has been 
necessitated at least in part by the spectacular results of earlier work, 
both government and private, in increasing agricultural production. 
Also, recent efforts to bring farm and urban income more nearly into 
balance spring in part from a recognition of the unbalance caused 
in no small degree by inflexible industrial prices made possible by 
centralized control over resources and technology. These fruits of 
governmental research nourish business in greater measure than gov- 

22 "By far the most significant invention made in tbe nineteenth century was * * • 
the invention of the art of invention." Ibid., p. 16212. 

23 "It is this technique of scientific blueprinting by means of involved chemical and mathe- 
matical formulas which has made the industrial research laboratory the creator of new 
processes and new products, the critic of existing techniques ; in short, the industrial and 
commercial intelligence section of a modern business * * *." Ibid., p. 16213. 

2 * An analysis of the consequences of technology and the concentration of economic power 
is made in another monograph in this series, No. 22, Technology in Our Economy 

25 See, in this connection, Report of the Science Committee to the National Resources 
Committee, Research — A National Resource, Washington, 1938. 1. Relation of the Federal 
Government to Research ; sec. 1, Summary of Memoranda on the Research of the Federal 
Government in the Natural Sciences and Technology, pp. 25-46. 

277780— 41— No. 26 3 



24 CONCENTRATION OF ECONOMIC POWER 

eminent; they add to the weapons of business, and do not provide 
government itself with an opposing weapon. Some alleviation of this 
situation is necessary, if the respective contestants in the politicaL 
process are to engage each other on more nearly equal terms. 



CHAPTEK III 
BUSINESS OUTPOSTS IN WASHINGTON 

CHAMBER OF COMMERCE OF THE UNITED STATES 

Two of the pressure groups speaking for business are of sufficient 
importance to justify fuller description. 

The Chamber of Commerce of the United States claims to be the 
outstanding organization for the crystallization of business opinion. 
Its value as such is probably greater than as a lobbying group. While 
its importance as a lobby should not be neglected, it usually operates 
more as a force for discovering and expressing business opinion than 
for putting pressure on Congressmen and Senators, leaving that role, 
for the most part, to its constituent members acting independently 
or through other groups. 

But as a constant factor in political opinion-forming, the Chamber 
of Commerce is probably not surpassed by any other group. Without 
doubt other propaganda campaigns sometimes exceed the chamber's 
program in cost, subtlety and indirection, scope, and ramifications. 
The National Association of Manufacturers put on such a campaign 
between 1933 and 1938, and the National Electric Light Association 
a decade earlier. However, as a pipe line for steady, relentless, and 
timely opinion dissemination, the chamber of commerce is probably 
unequaled. It could be called organized business' Washington press 
agent. 

The reason for the founding of the Chamber of Commerce is 
shrouded in no mystery. It was set up primarily to let the Federal 
Government know what business was thinking. Back in 1911, it 
seems, a member of the United States Senate was being pulled differ- 
ent ways by members of two business groups in his State. The 
chamber of commerce of his city had urged him, by wire, to vote 
against a bill then before the Senate, stating that its passage would 
work great hardship to business in the State. Later in the same day 
he received another telegram from another association of business- 
men pressing him to support the bill, arguing that it would benefit 
greatly his State and the surrounding region. In his dilemma he 
posed the question which the Chamber of Commerce, ever since, has 
been answering, "What," he inquired, "does business think?" 

Help in answering this question came from President William H. 
Taft and from Secretary of Commerce and Labor Nagel. In 1912 
they invited businessmen and representatives of their organizations 
to Washington "to work out a plan by which government could get 
the advice and counsel of the business nation by means of a national 
clearing house of business opinion." In response to this invitation 
some five hundred representatives of commercial organizations, trade 
associations, and individual industrial establishments gathered in the 

25 



26 CONCENTRATION OF ECONOMIC POWER 

Capital and laid the foundation upon which the chamber of commerce 
was erected. 1 

To use its own words, the Chamber of Commerce of the United 
States is "the spokesman at Washington for its membership." From 
its national headquarters across LaFayette Square from the White 
House emanate the opinions constituting the voice of the Nation's 
business. The desire of the Senator to know the thoughts of business 
would now be fully satisfied. Not only Congress but also the Presi- 
dent and his Cabinet, bureau chiefs and heads of the independent 
agencies are thus informed of collective business opinion. Federated 
in the chamber are 1,500 commercial organizations and trade asso- 
ciations, including as members more than 7,000 of the most important 
corporations, firms, and individuals cf the country. Representing 
such a constituency, and having under its direction in Washington a 
competent staff experienced in all phases of business activity, the 
chamber is indeed in a strategic position to dispense its product — 
"service to American business." 

Crystallizing Business Opinion. 

The Chamber of Commerce provides elaborate means for consulting, 
crystallizing, and disseminating the beliefs and desires of its mem- 
bers. Like most other groups who claim to serve the public as well 
as their constituents, the chamber adopts resolutions at its annual 
meetings. In this way points of view are expressed, attitudes are 
probed, and hopes and fears are aired. In addition, the chamber's 
board of directors from time to time frames a question on a specific 
issue, and through a referendum system polls the chamber's member- 
ship on the question. Through a continuous process of fact finding, 
organizing, and digesting, the president and board of directors keep 
its members supplied with material on at least two sides of public 
questions and provide for periodic consultation of the chamber's col- 
lective mind, thus constantly fertilized. At the same time, they 
employ the press, the radio, and the chamber's own organ, The Nation's 
Business, in a never-ending campaign to get the American people and 
their governmental agencies to accept as their own the philosophy 
thus developed. 

The research department of the chamber conducts legislative, legal, 
and economic research for its members, committees, and departments. 
It transmits to members, upon request, accurate and comprehensive 
information concerning bills in Congress, court decisions, rulings, and 
other facts emanating from governmental bureaus, departments, and 
commissions. Committees set up by the 11 service departments 2 are 
constantly studying timely and urgent subjects falling within their 
respective spheres. When the directors order submission of a com- 
mittee report to the membership for a referendum vote, the research 
department must combine with the committee's report the facts neces- 

1 Chamber of Commerce of the United States, Its Organization, Functions, and Services, 
p. 3. This is a publication issued by the chamber in Washington, 1935. The Senate Civil 
Liberties Committee is authority for the statement that the United States Chamber of Com- 
merce was organized by the National Association of Manufacturers. "In order to carry out 
its program, the National Association of Manufacturers, together with other associations, 
organized in 1916 the Chamber of Commerce of the United States and the National Indus- 
trial Conference Board, the latter to provide factual data for the association's "educa- 
tional campaign." Report of the Committee on Education and La"bor, pursuant to S. Res. 
•.?60. 74th Cong., Rept. No. 6, 76th Cong., 1st sess., pt. 6, p. 210. 

2 Agriculture, commercial organization, construction and civic development, domestic 
distribution, finance, foreign commerce, insurance, manufacture, natural resources produc- 
tion, trade associations, and transportation and communication. 



CONCENTRATION OF ECONOMIC POWER 27 

sary for a complete and impartial presentation. Each service depart- 
ment is headed by a manager with experience in his field and lie is 
aided by an advisory committee. These departmental committees 
report to the board of directors their recommendations concerning the 
programs of their respective departments. 

The research department, in addition to assisting the departmental 
committees, furnishes the membership with current information 
through periodic general and legislative bulletins. The former are 
issued weekly and present concise information about the governmental 
activities of special concern to businessmen. The Legislative Bul- 
letin is issued weekly, while Congress is in session. It describes each 
bill of business importance and follows it through all of its legislative 
stages, thus affording authoritative information about its contents 
and status. 

Important as they are, the research and information programs of 
the national chamber are not its first interest. Its — 

primary function is to obtain the matured judgment of business upon national 
questions, and to present and interpret those views to the agencies of government 
and to the public. 8 

The chamber says it is — 

not autocratic. It serves, rather, as the agency through which the opinion of 
business is canvassed and is given point and emphasis. It speaks the business 
language in relation to national policies of essential concern to business. 4 

Membership opinion is canvassed by referenda and resolutions. At 
that point the national chamber's resolutions and referenda depart- 
ment, its press department, and its monthly magazine, The Nation's 
Business, ''present and interpret these views to the agencies of govern- 
ment and to the public." When a policy has once been adopted by the 
membership "it is not allowed to slumber in the archives. When 
proposed legislation or other public action in point calls for it, the 
chamber actively publishes and presents the point of view which its 
members have expressed." 

In promoting policies determined by referenda or by resolutions 
adopted at annual meetings, the resolutions' and referenda depart- 
ment keeps in touch with the progress of legislation and presents to 
Congress the views of the national chamber on principles involved. 
The chamber maintains that it "does not sponsor specific legislative 
measures. It gives counsel as to policies." In performing this role 
of adviser, the resolutions and referenda department arranges for 
the appearance before congressional committees of delegations to pre- 
sent chamber views. Also it appeals to member organizations for 
cooperative support by representation to Congressmen and Senators. 5 
Finally, it advises the membership of the progress of legislation in 
relation to which the national chamber has enunciated a definite 
policy. 

The publicity department's sphere of action is "interpreting and 
promoting the program of organized business as crystallized by the 

8 Ibid., p. 4. 

4 Ibid. 

* This frank admission of lobbying differs somewhat from the statement made by a 
chamber representative before a committee of the House of Representatives. After de- 
scribing the way in which the referendum system works, it was said, referring to the result 
of the vote, that it "is tabulated, and a record showing how each member voted, together 
with the statement and argument of the case as presented, is given to Government officials, 
Senators, Congressmen, and to the public. There it rests. No buttonholing of legielators 
is engaged in ; no pressure brought to bear. Representatives of government can take it 
or leave it ; each is free to assay its worth." (Ibid., p. 8.) 



28 CONCENTRATION OF ECONOMIC POWER 

national chamber." The publicity program which it carries out is 
not unlike that of the press departments of trade associations, com- 
mercial organizations, and other citizen groups. 'It reports activi- 
ties, expounds principles, and gives utility to other chamber activities." 
News of chamber activities and results of departmental and committee 
research are furnished to daily newspapers, the trade press, organi- 
zation publications, the periodical press, and to member organizations 
of the national chamber. It makes available to writers on economic 
subjects special material from the mass of business information with- 
in the chamber. 

The publicity department also prepares a fortnightly Washington 
review. All the chamber's sources of information are drawn upon in 
thus making available to the membership a summary of current de- 
velopment in national business affairs, in legislative and administra- 
tive policy, the more important Government activities affecting trade 
and industry, and the activities of the national chamber in the formu- 
lation of national business policy. 6 

The Nation's Business — 

is the medium through which the chamber, each month, puts before its mem- 
bers and before a large number of business readers not only facts covering 
chamber activities but facts in relation to national and international questions 
vitally affecting commerce and industry. 

The policy of Nation's Business, as described in the chamber's own 
words, is to create a national viewpoint for American business, to 
break down provincialism and narrowness, to stimulate community 
development, to emphasize the value of organization teamwork, to 
promote a better understanding between Government, business, and 
public — to interpret each to the others and to expound the sanity, 
integrity, and stability of American business. 7 

The Philosophy of Business. 

The real significance of the chamber's place among the informal 
units of our Government is not disclosed by saying that it was 
founded to convey the thoughts of businessmen to the Government; 
that it is the outpost in Washington of its membership ; and that it 
exists to serve American business. Valuable as such statements are, 
they will be made more significant by determining the kind of 
thoughts conveyed to the Government. 

The purpose in probing behind these statements is to make clear 
the working of the Chamber of Commerce as one of the forces of gov- 
ernment. Like other citizen groups, it is not mentioned in the Con- 
stitution. Yet to consider our governmental system without includ- 
ing it is to deal with the form of government and not its substance. 

The Constitution enumerates the formal Organs of Government, 
distributes public power among them, and defines in general terms 
the relations existing between these organs and the citizens. But, 
although this description of the Constitution may be adequate from 
the legal angle, it fails to touch the vital forces which make it live. 
In the American system, the Constitution, as Chief Justice Hughes has 
said, is what the judges say it is. The important points, then, are: 
Who asks the questions? And how are they framed? While the for- 
mal procedures of making and interpreting the laws are important, 

6 Ibid., pp. 31, 32. 
T Ibid., p. 32. 



CONCENTRATION OF ECONOMIC POWER 29 

equally important is a knowledge of the groups who are economically 
affected by governmental action, whose awareness of that relationship 
is keen, and whose financial resources are sufficient to enable them to 
frame legislation, file suits, appeal decisions of the courts, and gen- 
erate public opinion. The Chamber of Commerce is a meeting place 
for such a segment of the American people. 

Economics in the chamber's philosophy . — The widest possible scope 
for the development of individual personal initiative and enterprise 
is the central feature of the chamber's economic philosophy. Accord- 
ing to this concept, Government restraint is admissible only to the 
extent necessary to prevent encroachment upon the rights of others. 

The true function of government is to maintain equality of opportunity for all, 
to preserve the sanctity of contracts, and to assume those collective activities 
which society must conduct as a whole. 

Underlying this principle is the chamber's belief regarding the 
function of. business. This function — 

is to provide for the material needs of mankind and to increase the wealth of 
the world and the value and happiness of life. 

This function, however, is not discharged without an incentive. 

In order to perform its function it [business] must offer sufficient opportunity for 
gain to compensate individuals who assume its risks. 

A warning is uttered against identifying this incentive with the 
laudable function just noted. "* * * the motives which lead indi- 
viduals to engage in business are not to be confused with the function 
of business itself." The criteria for judging the value of this function 
to the public are price, quality, and treatment of the various elements 
in the economic process. 

When business enterprise is successfully carried on with constant and efficient 
endeavor to reduce the cost of production and distribution, to improve the quality 
of its products, and to give fair treatment to customers, capital, management, 
and labor, it renders public service of the highest value. 8 

This statement, while suggestive of the philosophy of business as 
interpreted by the Chamber of Commerce, lacks definition. It needs 
considerable amplification and clarification to render it meaningful. 
The chamber's annual statement of policy partially supplies this need 
(in its 1940 revision it amplifies it to the extent of 55 pages) but it is 
not entirely unambiguous. In the field of industrial relations the 
chamber's position is most unequivocal, advocating outright repeal 
of the National Labor Relations Act (p. 10) , the Fair Labor Standards 
Act (p. 13), and the Public Contracts (Walsh-Healey) Act (p. 14). 
On the other hand, its opposition to publicly-subsidized housing is 
obliquely expressed in the section on Government competition (p. 16), 
its approval of cooperative Federal-State employment exchanges is 
A'-ague (p. 26), and the "satisfactory international monetary standard" 
which it advocates (p. 35) is nowhere defined. 

Crovemment-btisvness relations. — Recovery measures bulk large in 
Government-business relations policies advocated by the United States 
Chamber of Commerce. Obstacles to the flow of capital into private 
enterprise should be removed by Congress. ''Congress." it is said. 

8 The chamber's publication, Policies Supported as in the Public Interest, Washington 
1936, passim. Except where' otherwise noted, quotations in the remainder of this necdon 
on the chamber of commerce are taken froin the pamphlet. Policies Advocated by (he 
Chamber of Commerce ot the United States, Washington, 1940. 



30 OONCENTRATION OF ECONOMIC POWER 

"should remove deterrents from the laws regulating the issuance of 
private securities," without diminishing essential safeguards for in- 
vestors. The deterrents are not specified. However, the principal 
one seems to be what the chamber regards as excessive authority 
delegated by Congress to agencies. 

This viewpoint extends to the entire field of Government-business 
relations. Congress, it says, should take away the opportunity for 
administrative agencies to impose theories and restrictions of their 
own. To this end — 

all statutes, State or Federal, dealing with the supervision or regulation of finan- 
cial institutions and similar fields of business should define the powers given to 
the supervisory authority — 

and in particular — 

should be specific about the place where management's responsibility ends and 
the supervisor's begins. 8 

Special opposition is registered to — 

the enactment of further Federal legislation based upon the formula of an ad- 
ministrative agency possessing broad discretionary authority to issue rules and 
regulations, and in addition possessing the powers of investigator, prosecutor, 
and judge. 
Wherever this formula exists in present legislation — 

the chamber asserts — 

there should be reexamination and such a recasting of provisions as to adminis- 
trative authority as will preserve to citizens both the substance and the form of 
their rights. 10 

If Congress were to follow such a course, according to the chamber, 
Government revenues would be raised and tax burdens lessened; the 
number of public employees could be reduced. Moreover, it would 
permit Government reorganization to improve service and decrease 
cost. It would make possible the earlier balancing of the Budget and 
reduction of the national debt. 

So important in Government-business relations is this "intolerable" 
union of legislative, executive, and judicial functions in "many" Fed- 
eral agencies that the chamber of commerce singles it out for special 
reference. An "appropriate test of the exercise of legislative func- 
tions by these agencies" would be provided by the Walter-Logan bill 
(H. R. 6324, 76th Cong.) approved by the House April 18, 1940, . and 
by the Senate on November 26, 1940. 11 

Congress should also refuse to consider "proposals having for their 
object the control of industries by Government agencies." 12 Specifi- 
cally, the chamber " unalterably " opposes the imposition of codes con- 
trolling production in private enterprise by Federal administrative or 
executive authority. 13 On the contrary, "invention and research should 

9 Policies Advocated by the Chamber of Commerce of the U. S., op. cit., p. 5. 
*» Ibid. 

11 Ibid., p. 6. This legislation is discussed further on pp. 191-194. 

12 Ibid., p. 7. 

w Ibid., p. 8. Instead of control of production by Government the chamber has advo- 
cated control by trade associations under Government supervision. In 1936 the chamber 
believed the anti-trust laws should be modified so as to "permit agreements increasing the 
possibilities of keeping production related to consumption." Each industry should then 
be permitted to formulate and put into effect rules of fair competition. When formulated 
by a clearly preponderant part of an industry such rules "should be enforceable against 
all concerns in the industry." In this process the role of the Government would be 
supervisory. It would be limited (1) to indicating to businesses desiring to combine 
whether the proposed combination is illegal; (2) calling attention to agreements which 
are not in the. public Interest in stabilization of business operation and employment, in 



CONCENTRATION' OF ECONOMIC POWER 31 

be encouraged," and "no obstacles should be placed in the way of the 
most intensive utilization of the results of invention and scientific dis- 
covery." The patent system "should be maintained without impair- 
ment, including freedom of patentees to grant licenses restricted as to 
use." 14 

The existing antitrust laws are thought to be adequate, and addi- 
tional civil remedies are opposed. Such rights as these laws contain 
"to permit reasonable arrangements" [unspecified] should be pre- 
served. Trade associations should be supported and encouraged, par- 
ticularly in continuing the development of "methods of cost-finding 
designed to aid each member of the industry in determining its own 
true costs." Also, there should be added opportunities for each 
enterprise — 

to test the elements of its costs, and the methods of determining them, by check- 
ing with the costs of the rest of the industry. There should also be available to 
the members of the industry and to the public information about the operations 
of the industry as to volume of output, stocks, and markets. 16 

The Federal Trade Commission should not be given "authority as to 
acquisition of assets by corporations." 

"Proposals for Federal licensing of State-chartered corporations 
as a condition to their engaging in interstate commerce * * * 
should be opposed." The Temporary National Economic Committee 
would "best promote the public interest by devoting its attention to 
the antitrust laws in aspects in which they may be improved." Its 
allegedly "ex parte presentations so far used" should be replaced by 
"a procedure better adapted to establish the facts upon which any 
recommendations for legislation should be based." 16 

The chamber continues to advocate as fundamental principles legis- 
lation and enforcement of legislation against unfair competition, 
and — 

condemns every expression [not further specified] that falsely represents exist- 
ing conditions of competition as calculated to cause confusion and to obscure 
the true causes [not further specified] of decline in business activity and 
decrease in employment. 

That these causes of business repression [not further specified] should be 
removed, and that fair competition may be promoted, businessmen * * * 
should have means [not further specified] for ascertaining clearly the courses 
which, without being unethical or morally reprehensible, are contrary to a 
definite policy laid down in law, and have means for protecting themselves 
properly from the consequences of departures by others." 

Businessmen themselves should carry "most of the burden" of "po- 
licing of competition," and "new legislation should be clearly limited 
to businesses engaged in, or directly affecting competition in, inter- 
state commerce." The chamber urges the Federal Trade Commis- 
sion — 

to concentrate its attention and energies upon the elimination of trade practices 
which are unfair and which are detrimental to the public interest. 

The trade practice conference procedure is endorsed. 18 

order that they "may be nullified" ; and (3) approving or vetoing the rules of fair com- 
petition drawn up by members of an industry, with power to indicate conditions of 
approval, but without power to modify or impose such rules on the members. In this 
scheme of industrial self-government the trade association plays the dominant role. 

14 Ibid., p. 4. 

16 Ibid., pp. 9-10. 

16 Ibid., p. 7. 

" Ibid., pp. 8-9. 

18 Ibid., p. 8. 



32 CONCENTRATION OF ECONOMIC POWER 

"Sellers in every field are entitled to have the applications of the 
[Robinson-Patman] statute made plain." But "any attempt through 
legislation or otherwise, to prohibit selling at delivered prices should 
be opposed." Retail merchandising, in its legitimate forms, should 
be free from discriminatory laws. Government competition is "de- 
structive and should be ended." "The Government should refrain 
from entering any field of business which can successfully be con- 
ducted by private enterprise." 19 

Instead of a Federal compulsory law to give workers social secur- 
ity, the chamber has advocated voluntary measures. It urges correc- 
tion of certain unspecified burdens upon savings and life insurance. 
The Social Security Act's provisions for old-age insurance and assist- 
ance should be carefully watched, particularly from the cost angle. 
The employer's burden of providing unemployment benefits should 
be lightened. Federal grants in aid tor improving local health facili- 
ties are opposed. 20 

Many of the stands taken on public problems by the Chamber of 
Commerce are not clear. This cannot be said, however, of its position 
regarding the place of the judiciary in our governmental system. The 
judiciary should be kept independent of the other branches of gov- 
ernment. The chamber is opposed to any "influence" by Congress or 
the Executive which would change the size of the Supreme Court, min- 
imize its power, diminish its jurisdiction, or limit its methods of de- 
cision. 21 

Industrial relations. — In the controversial field of industrial rela- 
tions the Chamber of Commerce stands for a system in which em- 
ployers and employees act in response to "the free play of economic 
forces," and Government activity is limited to "the protection of the 
rights arising from employment relations in production and distri- 
bution." Such governmental action, however, is not proper for the 
Federal Government but is "within the province of the State." 22 In 
1936 the chamber argued that regulation of hours of labor by law is 
contrarv not only to business principles but also to wise public 
policy ; in 1940 they asked for the repeal of the wage-hour law "for 
the benefit of employers, employees, and the general public." 

These views on industrial relations reflect certain basic beliefs. 
The Chamber of Commerce holds that the interests of employers and 
of employees are "mutual." Preferably, the Labor Relations Act 
should be wholly withdrawn; if it is not, mutuality of obligations and 
responsibilities should be written into it. In discussing the respon- 
sibility of the worker the chamber in 1936 argued that he should 
"refrain from the arbitrary imposition of any terms and conditions of 
employment" which would "tend to impair or destroy the inherently 
mutual interests of both employers and employees." All employer- 
employee relationships, it was maintained, should promote the recog- 
nition of these mutual interests and "should be so conducted as to 
make this recognition effective." 

Flowing from this belief is the further principle of freedom of 
discussion and of negotiation in determining conditions of employ- 
ment and work. In these matters both laborers and employers should 
have "full freedom." Furthermore, this freedom may be used "either 

M Tbid., pj> 3-9, 14, 

20 Ihid., pp. 25--2G 

- Ihid.. p. 2? 

^ From the 1836 statement of policies. 



CONCENTRATION OF ECONOMIC POWER 33 

through individual negotiation or through representatives of their own 
selection." On examination, this apparently equal power of negotia- 
tion emerges as heavily weighted in the employer's favor, as is also the 
case in analysis of the chamber's attitude toward outside coercion and 
restraint: "Employees in exercising their rights should not be ex- 
posed to coercion from any source. "Through use of majority rule 
the National Labor Relations Act now denies to minority employees 
freedom to select their own representatives for collective bargaining. 
An amendment should make it explicit that an employer is required 
to bargain with any labor organization only as representative of em- 
ployees who are its own members." Likewise, when negotiations are 
being conducted through representatives "it is proper that either side 
be permitted to object to any representatives of the other that are 
chosen or controlled by any outside group or interest in the questions 
at issue." In these terms does the chamber define its position on 
collective bargaining. 23 

By these statements, as well as explicitly, the Chamber of Commerce 
advocates the "open shop." By this phrase is meant "employment 
without regard to membership or nonmembership in any organization 
of lawful purpose." In other words, union membership is not neces- 
sary for employment. By the open shop is also meant what the 
chamber refers to as — 

freedom of individuals, or groups of employees, in their employment relations from 
domination by a majority or any other part of their fellow-workers or workers 
in other establishments. 21 

Thus the. chamber sets its face against the local shop union organized 
on a craft basis, against majority rule in the negotiation of wage con- 
tracts, and against negotiations by union organizers and union officials, 
as well as against the organization of workers into industrial unions 
for purposes of collective bargaining. 

There has been no relaxation of the chamber's attitude toward 
industrial relations since 1936. In fact, experience under the National 
Labor Relations Act has intensified it. It urges outright repeal, but 
short of that it wants the act amended to conform to its general 
statement of beliefs. Specifically, among the amendments recom- 
mended by the Smith investigating committee 25 was a provision for 
a new board with judicial functions only, a recommendation already 
favorably acted upon by the House. 

Additional drastic amendments are advocated by the chamber. 
Every form of coercion and intimidation of employees should be out- 
lawed. To the act should be added definitions and prohibitions of 
unfair labor practices on the part of employees, their representatives, 
and any persons acting for labor organizations. The act's protection 
should be withdrawn from employees while in violation of agreements 
arrived at through collective bargaining. Employers should have 
the express right to petition the Board for an election. The law's 
sanction of the closed shop should be removed. An amendment should 
be passed laying down standards indicating the extent to which an 
employer is to be engaged in interstate commerce before becoming 
subject to the Board's jurisdiction. Moreover, legislation should be 
adopted curbing the right of employees' representatives outside the 

» Policies Advocated by the Chamber of Commerce of the United States, op. cit., pp. 

* Ibid., p. 13. 

38 H. Kept. No. 1902, pts. 1 and 2, 76th Cong., 3d Bess. 



34 CONCENTRATION OF ECONOMIC POWER 

employees themselves to call strikes, outlawing strikes to promote col- 
lective bargaining, establishing responsibility for the acts of labor 
organizations, and forbidding employees' organizations to make politi- 
cal contributions. Any attempt to provide double penalties in con- 
nection with the Labor Relations Act should be opposed, as well as 
attempts to extend the act to recipients of Government contracts and 
those dealing with Government instrumentalities. All of the Labor 
Relations Board's findings and decisions should be subject to judicial 
review. And the right to picketing should be limited to giving 
information. 20 

Taxation and expenditures. 21 — The Chamber of Commerce ap- 
proaches fiscal problems with the assumption that taxes are too high 
and cannot be raised further, and that, therefore, expenditures must be 
cut if annual deficits are to be stopped. All its specific observations 
fit into this general framework. The statutory limit of the Federal 
debt should not be raised. A mere appropriation of money is no justi- 
fication for making expenditures under that appropriation. Congress 
should direct the President to designate in the budget which activi- 
ties he feels should be discontinued; to reduce expenditures of the 
executive branch below appropriations if necessary to prevent a deficit ; 
and to disapprove individual items in appropriation bills. Since the 
demand for Federal funds for the benefit of States and communities 
is an important factor in excessive Federal expenditures, businessmen's 
organizations should refrain from requesting Federal funds for local 
or specialized purposes and should use their influence to dissuade local 
and State authorities from asking or accepting such funds. More- 
over, Congress should reestablish and maintain its control over fiscal 
affairs by providing a body of its own to consider the budget as a 
whole, and propose to Congress a total within which revenues and 
expenditures should be kept. Stating its belief that "financial pre- 
paredness is just as necessary as military preparedness," and that 
"we should carry our defense on a pay-as-we-go-basis," the Chamber 
of Commerce holds that "positive steps" toward placing the fiscal 
affairs of the Federal Government on an orderly basis constitutes 
"one of the most essential preparations for national defense." 

The revenue side of the Federal Budget also needs revamping, in 
the opinion of the Chamber of Commerce. Use of the Federal tax 
power to compel conformity to social or economic readjustment is 
"contrary to sound public policy." The corporate income tax should 
be applied at a flat rate, irrespective of size. Capital-stock and 
excess- profits taxes should be repealed. Reorganization of corporate 
structures undertaken for business purposes should not be subject to 
tax. Income tax returns should not be made public, and estate and 
inheritance taxes, both Federal and State, should be revised, along 

28 In addition, in the chamber's opinion, all persons should be subject to State laws 
against breaches of the public peace ; protection of personal rights should be maintained 
against all unlawful interference ; organizations of employers and of employees, negotiating 
labor agreements, should be registered ; strikes and lock-outs against Government should 
, be placed "beyond the possibility of occurrence" ; and the laws of the States should be 
extended to include provisions directed specifically against concerted action, whether or 
not accompanied by disorder, directed by individuals, groups, or organizations, to bring 
any degree of coercion through economic channels upon the public or upon public authori- 
ties. Settlement of all employment disputes with public utilities should be through 
arbitration. 

27 The material in this section is taken from pp. 17-24 of the 1940 statement of policies. 
For a further account of taxation and business policy see T. N. E. C. Monograph No. 20, 
Taxation, Recovery, and Defense, by Dewey Anderson. 



CONCENTRATION OF ECONOMIC POWER 35 

with the whole internal revenue structure. 28 The chamber supports 
the continuation of the Board of Tax Appeals, an "independent 
agency for the protection of the taxpayer." The "Government should 
give continued attention to relief from burdens imposed by inter- 
national double taxation." 

While relief expenditures are a part of the larger problem of 
Government expenditures, the chamber gives them special treatment. 
It holds that "the Nation's relief problem is the aggregate of a large 
number of State and local situations" and that "Federal participa- 
tion in relief should be confined to rendering supplementary assistance 
to State and local governments when their resources are inadequate 
to finance essential relief." The Work Projects Administration and 
its predecessors have "not reduced unemployment," and work relief 
"should be brought to a close." An "impartial Government agency" 
should replace the W. P. A., and Federal financial aid should be in 
the form of reimbursable advances to States or municipalities. 29 Con- 
trol of emergency expenditures necessary for the relief of the desti- 
tute unemploj'ed should be in the hands of the States of their 
residence. 

Money, banking, insurance.' 60 — In its position on money, banking, 
and insurance, the Chamber of Commerce is sometimes clear, some- 
times vague. On money it is vague. After stating as "vital needs" 
the restoration of a satisfactory international monetary standard and 
strict maintenance of the integrity of the world's currencies, the 
chamber fails to describe such a standard. Repeal of the 1934 Silver 
Purchase Act is advocated, insofar as it relates to the purchase of 
foreign silver. Power to alter the content of the dollar should always 
repose in Congress; it should never be delegated. Power to issue 
"greenbacks," conferred on the Treasury in 1933, should be repealed. 
The chamber stands firm against "any attempts to impose political or 
partisan dictation upon the management and operation of the [Fed- 
eral Reserve] System." In particular should be resisted "all endeav- 
ors to centralize undue powers over reserves' and commercial bank- 
ing." The easy-money policy "which has been imposed upon the 
country for 11 years should undergo * * * gradual but de- 
termined correction." Amendment of the 1935 Banking Act is advo- 
cated "to permit commercial banks to participate in the underwriting 
of those classes of securities they are legally entitled to own." 

All forms of insurance are outside the Federal power and are "a 
proper subect of State regulation." 

The chamber on other public problems. — The Chamber of Commerce 
also takes a stand on many other public problems. Its position on 
transportation and communication, for example, takes up nearly eight 

28 Specific revisions urged are reduction in individual surtaxes, a shorter holding period for 
capital gains, and an extension of the period for carrying over net losses ; corporate rate of 
not over 15 percent, with consolidated returns restored ; depletion, depreciation, and obso- 
lescence provisions that will protect capital against impairment ; assuiance that legitimate 
business needs will be considered in administering the conditional tax on surplus ; elimina- 
tion of double taxation of dividends ; and repeal of excise taxes that are "unduly restrictive, 
disturb competitive relationships, or cause annoyance or inconvenience out of proportion to 
yields.'' 

29 The impartial governmental agency would (1) determine the needs of the respective 
States and (2) see that State organizations spending Government funds meet satisfactory 
adminislrative and personnel standards. Projects financed wholly or in part by Federal 
funds would be let by competitive bids, and determination of the manner in which the 
remaining unemployed would be cared for would rest with the States and communities. 

30 The material in this section is taken from the 1940 statement of policies, pp. 35-37, 53. 



36 CONCENTRATION OF ECONOMIC POWER 

pages in its 1940 statement of policies. There it argues that all forms 
of transportation — rail, highway, water, and air — should be regu- 
lated by the Interstate Commerce Commission. This regulation, how- 
ever, should be confined to assurance of fair rates, adequate service, 
and public safety. 31 

Among other things the chamber believes that water as well as 
highway transportation should be opened to railroads ; that direct con- 
struction and operating subsidies from the Government to private 
owners and operators of merchant shipping are justified because of 
its defense value; and that air mail compensation for interstate air 
transport fixed by the I. C. C. should be continued. Radio is essen- 
tially a problem for Federal rather than State control, but "no regula- 
tion should attempt to force upon the public undesired program 
matter." 32 

Considerable space is also given to defining the Chamber of Com- 
merce position on agriculture and on natural resources. 33 Although 
believing in "as great a volume of output of farm products as is con- 
sistent with foreign and domestic demand," the chamber argues that 
"curtailment * * * should be initiated only by the voluntary 
decision of the farm peoples themselves." If Government financial 
aid is linked to this curtailment it should be limited to the domestically 
consumed portion of the crop. The processing tax in any form, as a 
means of financing such aid, is opposed. 

The wisdom of Government handling or marketing of surplus farm 
products, and of making crop loans except at values substantially 
below the market range, is questioned. Cotton export subsidies and 
barter of loan stocks are strongly opposed. The Farm Credit Admin- 
istration should be returned to its former independent status, and the 
original principle of borrower control of Federal land banks should 
be maintained. 

As regards natural resources, the general position of the Chamber 
of Commerce is one of supporting private ownership and development 
and, where regulation is necessary, accomplishing it through State law 
and interstate compacts backed, if necessary, by Federal law. Thus, 
stream pollution problems should be dealt with through State com- 
pacts, and control of petroleum production through, the existing 
pattern of compact and Federal law. Federal policy toward forestry, 
however, should not include control of commercial practices. On the 
contrary, by prevention of fire and insect damage and fostering of 
equitable tax systems it should support a privately owned and operated 
system, run on the principle of sustained yield. 

Effective regulation of privately owned electric utilities by State 
commissions, supplemented by the Federal Power Commission where 
it has jurisdiction, "will best promote the public interest." Regulation 
by competition, and substitution of public for private ownership are 
contrary to the chamber's conception of the public interest. 

31 Ibid., p. 27. Preservation of private ownership and operation of the railroads and 
unalterable opposition to train-length, full crew, and 6-hour day proposals are among those 
aspects specifically mentioned. A detailed statement on highways is included, as well as one 
on postal service. 

"Mbid., pp. 27-34. 

w Ibid., pp. 43-51. 



CONCENTRATION OF ECONOMIC POWER 37 

The Chamber of Commerce also refers briefly to other, more general 
public problems. National defense is "the most important question in 
the United States today," and the chamber says: 

We must have an Army of adequate size and training provided with the most 
modern arms and equipment, a Navy sufficient to protect the interests of the 
United States, and an air force with superior personnel and equipped with planes 
of the latest types. 31 

While recognizing the war-time dislocation in foreign trade, the 
chamber urges the Government to protect American rights and increase 
the volume of export trade, maintaining opportunities in China and 
increasing them in South America. The principle of equality in treat- 
ment should guide Government efforts in promoting favorable eco- 
nomic relationships among all nations at the end of the war. In the 
meantime, our tariff laws should continue to assure reasonable protec- 
tion for industries subject to destructive competition from abroad. 
The reciprocal trade agreements program wins a qualified endorsement 
from the chamber. 35 

THE AMERICAN BAR ASSOCIATION 

If the Chamber of Commerce is the spokesman at Washington for 
American business, its special pleader before Government and people 
is the American Bar Association. Collectively, the association rarely 
lobbies for or against a particular bill, although in 1937 it made no 
secret of its pressure activities against President Roosevelt's Supreme 
Court reorganization plan. From the point of view of business con- 
trol of Government, the Bar Association is important, aside from the 
obvious value of its membership as individual lawyers to business, 
because it has assumed the role of trustee of American institutions. 
It is in this latter sense that its influence is felt beyond Washington, 
extending over the country and redounding, on the whole, to the ad- 
vantage of business. The Chamber of Commerce makes a special 
point of standing against any proposal which would alter the inde- 
pendence of the judiciary, and, particularly, of the Supreme Court's 
right to review acts of Congress. The Bar Association bases its 
claim to trusteeship on the ground of its special qualifications to 
defend the Constitution and the Supreme Court which interprets it. 
In their attachment to the Court, the Chamber of Commerce and the 
Bar Associaion are as one. 

Former Governor Ritchie, of Maryland, described the role in which 
lawyers of America have cast themselves. In a speech before the 
Maryland Bar Association, June 29, 1935, he exclaimed: "* * * it 
is no mere figure of speech to say that the American bar and the 
American courts should, in a very real sense, regard themselves as 
trustees and guardians of American institutions." 36 The admonition 
is well phrased and well directed. From the beginning of our history 
as a nation, lawyers have set the tone and shaped the structure of 
many of our institutions. A majority of the members of the Con- 

"Mbid., p. 37. 

35 Ibid., pp. 39—42. By its stand against subversive activities, for educational systems 
supported by State funds, for postponement of changes in immigration policy, and for equal 
treatment of American citizens in the Territories with those on the mainland, the Chamber 
.shows its interest in these phases of public policy. 

36 New York Times, June 30, 1935. 



38 CONCENTRATION OF ECONOMIC POWER 

stitutional Convention of 1787 were lawyers. The Constitution was 
largely the work of lawyers. The power of the Supreme Court to 
invalidate acts of Congress was read into the Constitution by a lawyer. 
Hence, the power (or impotence) of Congress to deal with national 
problems is derived ultimately not from the Constitution but from 
the Supreme Court's interpretation of the Constitution. 

Congress has always had more Members from the legal than from 
any other profession. As a consequence, our laws are made by lawyers. 
Not only governmental institutions and public powers but also our 
economic and social institutions have responded to the touch of lawyers. 
Today the corporation, using the powers attributed to it originally by 
lawyers, and later supplemented and expanded by lawyers, over- 
shadows with its financial and economic powers all our other institu- 
tions. It is small wonder, then, that Mr. Ritchie speaks so feelingly 
of lawyers as "trustees and guardians of American institutions." 
Those institutions are in no small measure the lawyers' handiwork. 

Theme of the Bar's Philosophy. 

In a phrase, the American Bar Association's philosophy is respect 
for the Supreme Court's interpretation of the Constitution. Herein 
are embodied three fundamental beliefs : First, that the Constitution 
contains all the principles needed for the maintenance and preserva- 
tion of national unity ; second, that the Supreme Court's power to give 
meaning to these principles must be protected at all costs ; and, finally, 
that respect for the Constitution and for the Supreme Court are 
duties incumbent on all Americans. 

Governor Ritchie's is a typical expression of faith. "We [law- 
yers]", he says, "must show our faith in this great reservoir of human 
experience we call the Constitution and the law, with their accumu- 
lated traditions of stability, of morality, of justice, of government, 
and of human and spiritual well-being in State and family. 37 

Since the principles of the Constitution, however, must be applied 
to specific sets of facts at a given time, it is the agency determining 
what the Constitution means which is important, Hence the central 
place occupied, in Bar' Association philosophy, by the Supreme Court 
and the doctrine of judicial review of congressional acts. The presi- 
dent of the bar association's references to the Court as "the main source 
and protection of our liberties"; "that protector of our individual 
liberties"; "that bulwark of liberty" convey the extent of the asso- 
ciation's devotion to the Supreme Court. 38 

The doctrine of judicial review, originated by John Marshall in 
1803, evokes similar feeling. The anniversary of Marshall's accession 
to the chief justiceship was the occasion in 1934 of "an appeal to the 
American- bar to use its great influence in reviving faith in our form 
of government." But the lawyers lay store by not only a separate 
but an independent judiciary. While "based upon the fundamental 
theory of effectual counterpoise among the legislative, executive, and 
judicial departments, the Constitution yet leaves it within the power 
of Congress and the executive to overcome that balance." This is 
called "the Achilles heel of the Constitution." "All that is necessary 
[to overcome the balance] is a single act of Congress increasing the 
membership of the Court, executive appointment, and senatorial con- 

37 Ibid. 

38 Frederick H. Stinchfield, American Bar Association Journal, June 1937, pp. 425-428. 



CONCENTRATION OF ECONOMIC POWER 39 

firmation." 39 By so doing the balance would be upset and the judi- 
ciary's independence would be destroyed. It was against President 
Roosevelt's plan of February 5, 1937, to increase the Court's member- 
ship that the Bar Association fought so bitterly. 

Respect for the Constitution and for the court on the part of all 
Americans is implicit in two other beliefs of the association. An 
association president has expressed one of them thus : 

It is impossible * * * to think of the American Bar Association as a 
thing apart from this America in which we live. It isn't apart. Undoubtedly 
it carries the stamp of America. I wish it could be the opposite, that America 
could bear the stamp of lawyers, and that that stamp should spell dependability, 
sincerity, unselfishness, and patriotic devotion to country * * * we must for- 
ever be careful that, being in a minority as we are, we do not yield to the force 
of the majority and ourselves carry the stamp of the majority. 40 

The association's belief that proper respect for the Constitution is the 
American's duty is shown again in the expressed purpose of the asso- 
ciation's citizenship committee: "To restore the Constitution to the 
minds and hearts of the American people." 

Disseminating the Philosophy. 

The principal means of spreading these beliefs and attitudes are the 
standing committee on American citizenship and, until 1936, the com- 
mittee on publicity. 

The leadership needed by the country must, according to the 1932 
speech of Guy A. Thompson, the association's president, "come from 
the body of the bar." 41 This conviction explains the association's pro- 
paganda activities, most of which are carried on by the standing com- 
mittee on American citizenship. The duty of this committee is "to 
inspire in the people of the United States a proper appreciation of the 
privileges as well as the duties of American citizens." Among other 
things the committee supervises the annual celebration of Constitution 
Week, distributes pamphlets, conducts essay contests, and surveys the 
extent and nature of teaching of the Constitution. 42 

Circulation of pamphlets is a continuous activity of the committee. 
A vest pocket edition of the Declaration of Independence and of the 
Constitution; a suggested by-law creating a committee on American 
citizenship for bar associations; and Suggestions to Citizenship Com- 
mittees are some of the pamphlets distributed in large quantities. 
The pamphlets, the committee reported in 1933, "have become stand- 
ard authorities," and "have widely advertised this altruistic gesture 
of the association." 43 Furthermore, financial contributions have been 
made to teachers colleges to reprint acceptable material on the teach- 
ing of the Constitution. Teacher training institutions in various 
States have also been the scene of essay contests on designated 
aspects of the Constitution. On one occasion the prize offered was 
$1,000. 

39 Report of the Special Committee on Supreme Court Proposal, American Bar Association 
Journal. June 1937, pp. 401-405. 

40 Stinchfield, op. cit., p. 425. 

11 Reports of the American Bar Association, vol. 57. 1932, p. 266. 

" In 1932, for example, the American Legion cooperated with the bar association com- 
mittee to celebrate Constitution Week. Legion posts arranged for the meetings, while the 
members of the bar made the speeches. Another feature was the distribution during the 
week of some 12,000 pamphlets on the Constitution. Report of American Bar Association, 
1932, p. 392. 

43 Report of the American Bar Association, 1933, p. 388. 

277780— 41— No. 26 4 



40 CONCENTRATION OF ECONOMIC POWER 

The teaching of the Constitution in nearly 600 colleges and uni- 
versities has been examined by the citizenship committee. In analyz- 
ing the replies received, it was not "impressed with the textbooks 
used," and doubted "whether there are conipetent teachers." But the 
committee did not stop here. In addition, it "made recommendations 
where necessary," recommendations questioning the suitability of text 
books and qualifications of teachers. 44 

These activities only suggest the methods employed by the bar 
association and its State and local affiliates to impress its views upon 
the country. In the course of a year many addresses containing these 
views are made by bar members. Speeches are delivered over broad- 
casting chains. Many handouts are given to newspapers. The Jour- 
nal of the American Bar Association assures the membership of 
monthly information from the officers and committees. Members of 
the bar occupy positions of leadership and influence in their com- 
munities, so that their views are sought and listened to with respect, 
When all these activities are summed up, they make easily under- 
standable the popular loyalty to Constitution and court. It is hardly 
open to doubt that the activities are part of an organized program 
to cover the country with the association's views, to keep track of 
public opinion, and to pull it up short when it shows signs of wander- 
ing. The bar association has "a public aspect," to use the words of a 
former president, and, therefore, in his opinion, it becomes the associa- 
tion's "duty to watch carefully the tendency of public opinion, and, 
where the trend is inimical to the welfare of the Nation or to the 
detriment of society, to direct the attention of our people to it," 45 
The successful opposition to the President's Supreme Court reorgani- 
zation plan in 1937 indicates the association's idea of the extent of 
this duty, and how it can be performed. 

Composition of the Bar Association. 

Only about 6 out of every 10 lawyers in the country are represented, 
even indirectly, in the American Bar Association. Less than 2 out 
of 10 belong to the association and take part in its operations. When 
it comes to those who take an active and influential part in the deter- 
mination of association attitudes and policies, the percentage drops 
very low. 46 These facts can profitably be borne in mind in connection 
with the association's educational activity, or in references to the bar 
as "the trustees and guardians of American institutions." There is an 
inverse ratio, in the Bar Association, between the number of citizens 
who really count in its business and the amount of influence on public 
affairs which they wield. This is often true of citizen groups operat- 
ing in the governmental field. 

44 Report of American Bar Association, 1934. pp. 423-438. 

45 Report of the American Bar Association, 1933, p. 224. 

48 Of the 175,000 lawyers in the United States, about 16 percent, or 27,000, are members 
of the American Bar Association. Forty-three percent, or 75,000, are members of State bar 
associations, and about 115,000, or upward of 60 percent, of some bar association, state or 
local. There are 3.500 members of the American Bar Association who are not members of 
any State or local bar association. The national organization has been in existence since 
1878. Control and administration of the association's affairs and determination of its 
policies are lodged in the house of delegates, a body whose membership is composed of State 
delegates. State bar association delegates, delegates from approved affiliated organizations, 
officials of other organizations of bench and bar, and the association's own officers, as pro- 
vided by its constitution. Hence the membership of the house of delegates amounts to 
but a small minority of the total membership. The president and other officers are elected 
by this minority ; the officers constitute the board of governors, which appoints the memDers 
of the sections, the standing committees, and the special committees. They deal with 
various types of law and with continuing and special legal problems, and is by and through 
them that the membership's professional interests are drawn out. Fifty members of the 
house of delegates constitute a quorum. 



CHAPTER IV 
PUBLIC POLICY AND GROUP AIMS 

In an enlightening article published in 1931, Prof. Howard L. 
McBain, of Columbia University, divided the laws of the nation into 
three groups. 1 In the first group he put those which an overwhelming 
majority approve, such as our criminal laws. The second includes 
those in respect of which the public is either ignorant or indifferent, 
while in the third are those which a considerable number of the people 
oppose. In the second and third classifications, and especially in the 
second, he placed the great bulk of our social and economic legislation. 
He said : 

* * * in the complicated economic society in which we are now living, our 
conduct is regulated directly or indirectly by a host of laws that the majority 
have never heard of. Not in the remotest sense do such laws express the will 
of the majority, for the very simple reason that there is no such will to be 
expressed. These laws are made by the few. Regrettably enough they are 
sometimes made in whole or in too large part for the few. But even when they 
are made in the interest of the many, as perhaps most of them are or are 
ostensibly intended to be, the many are seldom consulted directly or indirectly 
and could not be of much help if they were consulted. 

Here we have implied, if not explicitly stated, the thing which it is 
the purpose of this chapter to discuss, the nature of public problems 
and of public opinion and the place of pressure groups in American 
political life. 

PUBLIC PROBLEMS 

For better, for worse, Americans have on the whole accepted the 
idea that their economic welfare and spiritual happiness should be 
actively promoted by the Federal Government. Never totally absent 
from the Nation's political philosophy, it is only within the past half 
century that it has really captured the minds and imaginations of the 
people, however. 

At least three stages in the idea's development may be noted. After 
the Civil War the railroads abused their publicly-approved rights 
and privileges by demanding excessive rates, by discriminating be- 
tween shippers, and by granting secret rebates. As a consequence 
there emerged the doctrine that the public interest should be guarded 
by regulating those enterprises which provide essential public services. 
Later, under the exigencies of war in 1917 and 1918, the scope of the 
doctrine was enormously widened to include not only public services 
but also many of the conditions of. the production and distribution 
of the necessities of life. In the post-war period the/e was some 
contraction, followed by a great expansion after 1930. The depression 
years saw a tremendous broadening of the field of Federal supervision, 

1 H. L. McBain, 'Does a Minority Rule America?" New York Times Mr.gnzine, June 7, 
1931. 

41 



42 CONCENTRATION OF ECONOMIC POWER 

regulation, and control, and the conscious use of Federal power to 
stimulate economic recovery and to effect economic and social reform. 

The extraordinary number of fields which the administration has 
entered to achieve recovery and reform are an evidence of the extent 
to which Americans have come to feel that their government has a 
large and legitimate role to play in furthering their welfare. 

Of course, these three periods of the expansion of Federal power 
are not the only significant stages in its growth. But they are par- 
ticularly important — the first because it marks the beginning of a 
trend, the second and third because they indicate how and to what 
extent the idea has been implemented. 

For half a century the multiplying functions of both Federal and 
State Government have reflected the growing popular approval of 
government as a factor in the conduct of human affairs. But 
since World War I, and especially since 1929, the Federal Government 
has assumed new functions more rapidly than have the States. This 
is in large part because the problems arising since that time have been 
national in scope, and the States -have been incapable of dealing ade- 
quately with them. 

As the area of public activity has expanded, it has come into con- 
tact with the economic order at more and more points. The result 
has been a notable increase in the number of citizen groups affected, 
the strength of their interest, and the pressure which they are willing 
and able to apply. As formulators and advocates of measures they 
surpass the political parties in significance. 2 They are the origi- 
nators of many of the proposals which later become the law of the 
land. Their aims and interests pervade the whole sphere of Federal 
legislation, both domestic and foreign. 

Domestic problems. 

Many domestic problems, especially economic problems, have as- 
sumed a public aspect because organized groups strive to realize their 
objectives through legislation. 

The outstanding issues in the sphere of industrial relations are 
those raised by the groups into which labor and management are 
organized. Both the A. F. of L. and the C. I. O. seek the "American 
standard of living" for their members. In seeking Government help 
to achieve it, they project into the area of public concern such mat- 
ters as the worker's rights to organize, to bargain collectively, and to- 
strike. These matters have, therefore, become public problems of the 
first order. Resort to the "sit-down" strike by the C. I. O. quickly 
made that variation of labor's traditional weapon a public problem. 
The A. F. of L. has long fought for the recognition of the worker 
as "a partner in production" and, hence, as "entitled to an equal 
voice with management in shaping industrial destinies." The politi- 
cal strength of the millions of federation members removes such an: 
objective from the position of a minority aim, and makes it a matter 
of public interest and concern. 

The efforts of organized management to achieve certain aims like- 
wise lift them to the plane of public importance. Maintenance of 
the "American system," especially as regards freedom of enterprise 

* M Ot equal or greater significance (than the parties as formulator and advocate of meas- 
ures) is a long series of professional and trade associations, which are from time to time- 
interested in the programs of political parties and the course of legislation." C. B. Meriiam. 
and H. F. Gosnelf, The American Party System, Macmillan, New York, 1929, p. 218. 



CONCENTRATION OF ECONOMIC POWEF 43 

and the private ownership ana control of production, is an objective 
of the National Association of Manufacturers. The United States 
Chamber of Commerce seeks control of industrial production in 
private enterprise by trade associations under Government supervi- 
sion. The National Catholic Welfare Conference sponsors a plan 
for an economic system of occupational groups under Government 
supervision. A major purpose of the Institute of American Meat 
Packers is to secure cooperation in lawfully furthering and protect- 
ing the interests and general welfare of the industry — a simple state- 
ment of purpose which inevitably involves problems of monopoly. 

Allied problems with a public aspect inhere in the American Petro- 
leum Institute's stand on marketing pacts. Such agreements should 
be permitted, says this interest group, when made voluntarily by any 
industry in order to eliminate unfair competition. Other examples 
can be cited. The National Lumber Manufacturers Association advo- 
cates production control. The National Coal Association approves of 
retail price fixing. The National Association of Wool Manufacturers 
opposes tariff bargaining by the President. Because of the first 
amendment to the Constitution, the American Newspaper Publishers 
Association regards newspaper publishing as a "privileged" business. 
The public importance of these private aims and objectives can be 
traced largely to their advocacy by such groups. 

Additional examples pile up the evidence. Unemployment relief, 
social security, and housing are vexing problems, which, if not origi- 
nally injected into the area of public concern by citizen groups, are 
nevertheless undergoing constant hammering at their hands. Many 
questions connected with the railroads are traceable to the Association 
of American Railroads' desire that all forms of transportation should 
be treated alike as regards regulation, taxation, and subsidies. In the 
same way, the conflict between government and the electric and gas 
utilities has to a considerable extent grown out of the desire of utility 
operators to maintain the private ownership and control of these utili- 
ties, free from effective public regulation. In the controversial issue 
of public control of short- and long-term credit centers tY ; spute be- 
tween government and commercial banking. The Invests ,* Bankers 
Association continues to advocate "self regulation," and the Ameri- 
can Bankers Association desires "non-political" control of credit. 

Other groups besides business and labor accept the policy of active 
Government intervention in economic and social j spheres. Back of 
the National Education Association's program of specific goals is its 
fundamental belief that Government should act as the agent of society 
in providing for its members physical, economic, and mental security, 
equality of opportunity, and freedom. The National League of 
Women Voters holds that there is a large area of proper activity for 
the Federal Government in the field of economic welfare. Equality 
for agriculture is the long-time objective of the American Farm 
Bureau Federation and of the National Grange, involving many de- 
tailed legislative proposals. Popular respect for the Supreme Court 
and its interpretation of the Constitution is due in large measure to 
the American Bar Association. 

Prohibition, the World War veterans' bonus, and prohibition repeal 
are among the best known examples of citizen group aims which be- 
came public problems. The first was the objective of the Anti-Saloon 
League, the Women's Christian Temperance Union, and allied groups; 



44 CONCENTRATION OF ECONOMIC POWER 

the second, one of the main objectives of the American Legion and 
other veterans' groups; while the third was the object of the Associa- 
tion Against the Prohibition Amendment. 

Problems of Foreign Affairs. 

In the fields of foreign policy and of national defense, interest groups 
of various kinds help sharpen the issues before the country. Their 
importance in this connection is not constant. It fluctuates. In time 
of peace, patriotic groups are relatively more important than economic 
interest groups, although the latter are by no means negligible. In 
the merchant marine and air transport industries, business groups are 
important shapers of policy even in peacetime, because of the potential 
value of ships and aircraft in war. 

In time of war or threat of war, patriotic groups become relatively 
less important, and are supplanted by business and industry, upon 
which the Nation depends for its means of defense. The Nation's 
experience in the spring and summer of 1940 illustrates the point. 
The Nazi conquest of a large part of Europe confronted the Nation 
with an emergency. In meeting it the National Association of Manu- 
facturers was more influential than the Women's International League 
for Peace and Freedom, although the latter was by no means a passive 
onlooker. 

However, the overpowering influence of Nazi military successes in 
1940 on our defense and foreign policies should not be allowed to 
obscure the role played by interest groups in these fields in the past 
decade. Then, as now. the outstanding public problems concerned 
neutrality, joint action with other nations against treaty -breaking 
aggressors, the size of the Army and Navy, and the possible uses to 
which they might be put. These problems were obviously public in 
nature, but what factors, singly and in combination, thrust them into 
the area of immediate public concern ? 

Washington's alleged admonition against entangling alliances, the 
Monroe Doctrine, Wilson's dream of a League of Nations, trade and 
investments in Europe, and in Asia, overseas possessions, all come to 
mind, but in themselves they are probably not sufficient to explain the 
form in which the issues were debated. Many Americans recall 
Wilson's fight for the League, but even for them such historic events 
are not of primary importance. Nor do trade and financial statistics 
fix the attitude of the farmer, the garage mechanic, or the shipping 
clerk on the puzzling problems of foreign policy. Similarly, the ob- 
jective geographic facts of Alaska, of Hawaii, and the Panama Canal 
do not bulk very large in the average citizen's mind in connection with 
foreign affairs. Factors other than these operated to raise these facts 
of history, of economics, of strategy and diplomacy to the level of 
public discussion, and thus to confront the voters and their elected 
representatives in Congress with questions of policy requiring at least 
tentative answers. 

Among these factors are the ideas, the methods, and the member- 
ship of such organized citizen groups as the D. A. R., the American 
Legion, the Veterans of Foreign Wars, and the Navy League. Also 
important are those of the Nation J Council for the Prevention of 
War, the American Peace Society, and trie National League of Women 
Voters. There are many others, of course. All of them interpret 
facts and events in the light of the principles and assumptions em- 



CONCENTRATION OF ECONOMIC POWER 45 

braced by their respective philosophies. Thus, they are actively en- 
gaged in shaping- opinion, hence policy, in contrast to the inertia of 
the public as a whole. To the members of these groups historical facts r 
economic data, the elements of geography and of strategy are vital 
matters, stimulating them to write American foreign policy -in their 
own terms. 

Inspired by its goal of fostering the love of American institutions 
and of developing an American consciousness among our people, the 
D. A. R. founds its idea of foreign and defense policy on neutrality 
and preparedness. One hundred percent Americanism impels the 
American Legion to take a similar stand. A policy of aloofness from 
world affairs and of strong defense forces is chosen by the Veterans 
of Foreign Wars as the one best calculated to protect and nourish the 
institutions of American freedom. To the Navy League, insular 
America depends on a strong Navy for national security and national 
prosperity. The "peace through justice" principle of the American 
Peace Society does not keep it from supporting strong national de- 
fense forces. Although the National Council for the Prevention of 
War at one time advocated American participation in a program of 
international organization, more recently a strict neutrality policy 
has been adopted. Of these representative citizen groups interested in 
defense and foreign policy, only the National League of Women 
Voters still advocated in 1938 complete cooperation with other nations 
in solving mutual problems. 

With these groups, as with others, shifts in attitude occur from 
time to time within the broad confines of their general position. Some- 
times the general position itself changes, as in the case of the National 
Council lor the Prevention of War just noted. But rarely do such 
shifts lessen the significance of such groups as active forces in the 
determination of specific aims of foreign policy and national defense. 
Nor do they decrease the frequency with which these groups ask the 
public at large to endorse their respective policies. This constant 
formulation and revision of alternative programs for national security 
compels attention from the public and from Congress. The legisla- 
ture notes and acts upon those questions of policy, both foreign and 
domestic, which are injected into the area of public concern and kept 
there by interested pressure groups. 3 

PUBLIC OPINION 

Just as many public questions are merely enlargements of group 
aims, painted in colors of the national welfare, so public opinion itself 
is shaped perceptibly by citizen groups. 

It is hardly correct, of course, to speak of public opinion as mean- 
ing a general opinion or a general will. There is no such thing. 
Theoretically, it would be possible to get a national cross section of 
opinion on a specific public question at a given moment. If this were 
done, we might then have an expression of general will on that par- 

8 "The task of Government * * * is not to express an imaginary public will, but to- 
effect adjustments among the various, special wills and purposes which at any given time are 
pressing for realization?' J. Dickinson, "Democratic Realities and Democratic Dogma, ' 
American Political Science Review, vol. 24, May 1930, p. 291. Dickinson's concept of the 
various special wills and purposes Is broad, and includes such pressures as that for Federal 
aid to the unemployed, social security, etc. 



46 CONCENTRATION OF ECONOMIC POWER 

ticular subject at that particular time. 4 The Federal Constitution, 
however, makes no provision for the holding of such national refer- 
enda. 5 Presidential elections are the closest approximation in our 
contemporary political life to such polls. 

Moreover, the assumptions underlying the theoretical possibility are 
so many and so broad that its practicability is questionable. It as- 
sumes that everyone is informed on the matter in question, that he has 
an opinion on it, and that he is willing and able to express that 
opinion. It assumes also that the question* is so phrased as to be 
unambiguous to every one of the millions to whom it is put, and that a 
yes or no answer to every public question would be of value in arriving 
at solutions thereof. Even with the present degree of literacy, even 
considering the potentialities of press, radio, newsreel, and moving 
picture, and even with the growing popular interest in public affairs, 
everyday observation indicates that the first assumption is false ; and 
there is a great doubt as to the validity of the others. 6 

Only if it is used to refer to a variety of opinions of numerous self- 
conscious and articulate citizen groups does the concept of public 
opinion as a positive force accord with the facts of the contemporary 
scene. 7 

No matter how clearcut and positive the opinion of an individual 
is on current problems, it is only as a member of a homogeneous group 
that that opinion figures importantly in the formation of new policies. 
An individual opinion ma) be conveyed to Congress, to an executive 
department, to the newspaper press, to the broadcasting chains, and 
expressed from forum or pulpit. But as the opinion of one person 
the chances are pretty small that it will gain much attention. 

There are individuals, of course, who are listened to with respect, 
because they speak or claim to speak for many citizens. They obtain 
a hearing because of the weight of the composite opinion of those 
whom they represent. This does not mean that individual views, con- 
sidered apart fr6m the collective opinion of the interest groups of 
which they are a part, do not vary in weight and importance. There 
are many examples in public life of men and women who stand head 
and shoulders above their fellow citizens and whose views carry greater 
weight than those of their compatriots. 

•* The Gallup Poll, begun in 19351, which is sold to newspapers by the American Institute 
of Public Opinion, is probably the most scientific attempt yet made to tap the opinion 
of the country periodically on current issues. Although of extreme interest and accuracy, 
it is, of course, entirely a private venture and is in no way a part of the country's formal 
governmental machinery. 

6 The Ludlow resolution, H. J. Res. 199, 75th Cong., 1st sees., would have amended the 
Constitution so as to give to the electorate the power to declare war now held by Con- 
gress. Although the Committee on the Judiciary was discharged from further considera- 
tion of the resolution, the House by a vote of 188-209 on January 10, 1938, refused to 
consider it. 

e «* * * what we mean by a common will is no more than that there shall be an 
available peaceful means by which law may be changed when it becomes irksome to 
enough powerful people who can make their will effective. We may say, if we like, that 
meanwhile everybody has consented to what exists, but this is a fiction. They have not ; 
they are merely too inert or too weak to do anything about it." L. Hand, "Is There a 
Common Will?" 23 Michigan Law Review, p. 50. 

7 "To students of real politik, the fact that there is no 'general will' or general public 
opinion over and above the many diverse and particular opinions of interest groups 
which formulate it, has long been recognized." S. McK. Rosen, Political Process, Har- 
pers, New York, 1935, p. 48. There is a tendency, both among casual observers and 
serious students, to ignore the effect of the inertia of the general public and the part 
which it plays in the shaping of public policy. Because it is generally negative, it is 
easily overlooked, but its power is by no means small. Any politician knows, or will 
learn to his cost, that he must neither move too far ahead of the electorate nor drop 
behind ; nor can he venture too far into by-paths. If he does, even his connection with 
a determined special-interest group will not save him. 



CONCENTRATION OF ECONOMIC POWER 47 

But this admission does not invalidate the theory of public opinion 
presented here. The views of outstanding unofficial citizens can 
become known by means of any one of a variety of ways, yet have 
little or no effect on the direction of governmental policy. Our inter- 
est is in the kind of public opinion which does fix or affect that direc- 
tion. Unless the opinions of outstanding individuals are directed to 
a particular matter back of which active citizen groups are already 
ranged, such opinions are likely to be of little net importance. And 
even if so directed, their importance is likely to be secondary. 

POLITICAL PRESSURE GROUPS 

The constituent groups into which politically active Americans are 
divided have as their practical objective the favorable consideration 
of their respective aims by the legislative, executive, and judicial 
branches of the Government. We have seen how pressure groups, by 
soliciting general approval for their aims, raise them to the status of 
public problems. Also, we have considered the role of these groups 
in the manufacture of public opinion. It is now appropriate to 
scrutinize more closely the place of pressure groups in American j oliti- 
cal life. 

Their goal is Government sanction of their continually emerging de- 
mands. Those demands are insistent no matter what the form of 
organization of the group. Trade associations and organizations of 
professional people press their demands unhindered onHhe formal 
agencies of the Government. Similarly, groupings of industrialists 
and federations of labor and veterans' units insist on consideration 
of their desires. Peace and patriotic-minded societies likewise im- 
press their programs on the formally-selected officials of the Govern- 
ment. Added together, these citizen groups of varied shape consti- 
tute a sizable portion of the American people. And, what is more 
important, they include practically all the people who recognize the 
value of official consideration of private interests and are so situated 
as to command that consideration. 

Of the variety of citizen groups which have emerged in recent 
decades as active unofficial agencies in the governmental field, the 
trade association is perhaps the most typical. According to Herring, 
trade associations — 

have become an integral part of representative government. In shaping policies 
of government, in bringing to legislative councils the weight of their expert 
knowledge in their special fields, in synthesizing and directing the opinion of 
their membership, in arousing public support through skillful publicity, they 
constitute an element which the formally selected officers of government must 
reckon with in matters relating to legislation and administration. 8 

To the casual observer, such an appraisal may seem exaggerated. 
But this is hardly the case. In general, trade association activity cor- 
responds to that of most of the groups whose legislative agents are 
active in Washington. The range of their interests is very wide. A 
statement illustrating the movements of typical lobbyists indicates 
the extent to which the formally selected governmental officers must 
"reckon with" citizen groups. 

During the second week of May 1932, for example, numerous legis- 
lative agents were active in Congress. The "dapper, aggressive" agent 

8 E. P. Herring, Group Representation Before Congress, Brookings Institution, Wash- 
ington, 1929, p. 109. 



48 CONCENTRATION OF ECONOMIC POWER 

of the American Legion and the "dark, stocky" representative of the 
Veterans of Foreign Wars, "pushed the war widows' pension bill 
through the House." The latter however, "failed to get the bonus 
out of committee." The lobbyists for the National Federation of 
Federal Employees "managed to beat a real pay cut in the House 
omnibus economy bill." The "special pleader" of the American Auto- 
mobile Association "failed to block a Senate increase in the automobile 
tax." The lobbyist of the Independent Petroleum Association "got 
his tariff in the tax bill," while a lawyer (who normally lobbied for 
the brewers) "as a side-line * * * fought off a tax on cosmetics." 9 

These are a few of the movements of the "active and successful 
lobbies which pay their legislative agents $10,000 or so per year to 
secure congressional favors?' Among others are those of the farmers, 
the railroads, individual corporations, and business generally, peace 
organizations, and women's and labor groups. In fact, so numerous 
and so ubiquitous were the representatives of these and other citizen 
groups at that time that President Hoover referred to them as a "locust 
swarm." In speaking of "balancing the Budget" as the problem then 
before the country, he called it "an issue between the people and the 
locust swarm of lobbyists who haunt the Halls of Congress seeking 
selfish privileges * * * misleading Members [of Congress] as to 
the real views of the people by showers of propaganda." 10 

While the distinction between the people, on the one hand, and the 
aggregate of the groups whose agents seek congressional favors, on 
the other, is understandable when drawn by a harassed President, 
it is difficult to say, nevertheless, how far it should be pushed. An- 
other President who has been pressed by powerful and aggressive 
minorities u has referred to the sum of all interest groups as "what 
we mean by American democracy," 

In a letter to the director of the Institute of Human Relations dated 
August 20, 1937, President Roosevelt said that "we are ruled by public 
opinion," and, referring to the press, motion pictures, and radio as 
"three powerful agencies in the creation of public opinion," laid it 
down as our "duty to see that these agencies * * * are main- 
tained as public agencies for the creation of wholesome relationships 
among the various cultural, religious, racial, and economic interest 
groups which make up the American people. The sum of these com- 
plex and composite interests constitutes what we mean by American 
democracy." 12 

THE LOBBY AND ITS TECHNIQUE 

From this broad statement on pressure groups, let us proceed to a 
closer examination of lobby technique in general. 13 

» Time, May 16, 1932, pp. 15-16. 

10 Ibid. 

u In vetoing the World War veterans* bonus bill, May 22, 1935, President Roosevelt 
asserted that the credit of the United States "cannot ultimately be safe if we engage 
in a policy of yielding to each and all of the groups that are able to enforce upon the 
Congress claims for special consideration. To do so is to abandon the principle of goy- 
■ernment by and for the American people and to put in its place government by and for 
political coercion by minorities * * *." 

13 New York Times, August 29. 1937. 

13 Writers on congressional lobbies are accustomed to distinguish between the "old" 
and the "new" lobby. The former used corrupt methods, e. g., bribery, giving of free 

E asses, or payment of election expenses. While the possibility that similar methods may 
e adopted by the "new" lobby is never absent, still it normally uses propaganda and 
publicity among the public generally and among constituent members and aims to focus 
this pressure on Congress. Among the reasons which have been advanced for the change 
/rom the "old" to the "new" lobby are: (1) Reform of the House Rules (1911) ; (2) adop- 



CONCENTRATION OF ECONOMIC POWER 49 

In their search for governmental favors, national associations of 
citizens all conform to a pattern which is more or less standardized. 
They maintain lobbies at Washington, of varying size and resources. 
The lobby of the United States Chamber of Commerce, for example, 
is a department of the national headquarters and is maintained on an 
impressive scale.. In contrast is the single lobbyist of the Women's 
International League for Peace and Freedom. 

Some lobbies are permanent, others intermittent or temporary. Im- 
portant citizen groups organized nationally maintain permanent lob- 
bies. Others maintain intermittent lobbies which have been effective 
in legislative matters, such as the Fair Trade League, with its objec- 
tive of retail price fixing. The American Bar Association's special 
representative in Washington during the fight on President Roose- 
velt's Supreme Court reorganization proposal is an example of a tem- 
porary lobby. 14 At a minimum, each lobby usually includes a legis- 
lative agent and a staff of research workers. 

It is the lobbyist's job to put on the statute books the bills which 
embody the aims of his association, or of which it approves, and to 
keep off the statute books those bills of which it disapproves. Conse- 
quently, it is the desire of the typical national association to build a 
bloc of votes in Congress and then to back it at the right junctures 
with pressure from the country. The pressure is exerted on neutral 
or unsympathetic Congressmen by the association's Nation-wide mem- 
bership, as an adjunct of a favorable, or at least not hostile, public 
mood built up by the association's active propaganda. 15 

The services which a bloc of votes in Congress can render a national 
association are numerous and valuable. Obviously the most valuable 
is frankly to represent the citizen group in Congress. Possibly the 
best known example of such occupational representation by geographi- 
cally-elected representatives is the farm bloc, which was founded by 
the Farm Bureau Federation in 1921 and held the balance of power in 
the Sixty-sixth and Sixty-seventh Congresses. For a group to be able 
thus to rely on some definite support is always worth a great deal. 

In addition to being ready tQ vote for the group's bills, there are many 
Avays in which a bloc may render service to the group. Sympathetic 
legislators can watch and influence committee appointments, and can 
urge committee members to report out bills. Members of the bloc can 
speak for the group on the floor of the House or Senate. They can 
introduce bills. Moreover, any member of the bloc can use his 
franking privilege to send association propaganda through the mails 
free of postal charge. This propaganda takes the form either of a 
Member's speech on the piece of legislation in question, or of a pre- 
pared statement inserted in the Record through "leave to print." 
These are all normal and time-honored methods by which sympathetic 
blocs in Congress can advance the aims of citizen groups. 

With several hundred nationally organized citizen groups with 
agents in Washington, it is obvious that only a relatively small number 

tion of the practice of open committee hearings; (3) adoption of the seventeenth 
amendment (direct election of Senators), 1913; (4) a keener and more intelligent 
scrutiny of public affairs; and (5') Senate and House investigations of the lobby in 1913 
to defeat the Underwood tarifT bill. Herring, Group Representation before Congress, op. 
cit., pp. 41-46. 

" New York Times, July 1, 1937. 

15 "It is thus that the present-day lobby gets results in legislation ; a skillful staff of 
alert watchers and experts at Washington ; a disciplined, organized membership all over 
the country ready to give specific statements of opinion and back up these declarations 
by pressure on their Congressmen." Herring, op. cit., p. 93. 



50 CONCENTRATION OF ECONOMIC POWER 

can gain control of congressional blocs. For representation before 
Congress, most of the groups must rely primarily on their legislative 
agents. Even those supported by congressional blocs lean heavily on 
their lobbyists. In fact, the lobbyist is the key factor in pressure poli- 
tics. On him rests the responsibility not only of translating his asso- 
ciation's legislative program into law as fast as possible, but also of 
thwarting legislation running counter to that program. 

This means that the alert lobbyist must interest himself in a wide 
variety of subjects on which Congress acts. The objectives of. some 
groups are few and specific, and their lobbyists accordingly need pay 
but little attention to other legislative proposals. Other groups, how- 
ever, aim at general objectives, which, to be reached and held, require 
legislative action in a dozen fields. Outstanding among such groups 
are those including the Nation's laborers, businessmen, manufactur- 
ers ; its transport and public utility systems ; its bankers, farmers, and 
professional people. The lobbyists who guard the interests of these 
groups in Washington must scrutinize carefully a bewildering array 
of bills. Tax measures and appropriations need close examination. 
Bills providing for Government reorganization must also be studied. 

For almost all these groups the prospects of reaching their objec- 
tives are dimmed or brightened by existing and proposed laws dealing 
with natural resources, transportation facilities, manufacturing, proc- 
essing, grades and standards, and distribution ; with marketing and 
trading, foreign commerce, banking and credit^ and postal operations, 
quarantine and sanitary measures, and trade practices; with Govern- 
ment purchasing, roads, local tax systems, and education. Almost 
every one of these subjects, therefore, falls within the scope of the 
lobbyist's concern. Both his own personal success and that of his 
association's program depend on his ability to win battles on this 
many-sided legislative front. 

For example, congressional activities in all these fields engaged the 
attention in 1935 of the Washington representative of the American 
Farm Bureau Federation. In contrast to the secrecy maintained by 
lobbyists of an earlier day, Farm Bureau officials, like those of other 
contemporary pressure groups, print and make them available to the 
public, stories of some of their lobbying activities. 

A most illuminating feature of such reports is the large number of 
items in connection with which the lobbyist employed pressure in his 
efforts to carry out his instructions. 16 Among the legislative projects 
mentioned in the Farm Bureau report are all which were supported 
by the Bureau and which were enacted into law. Among them were 
amendments to the 1933 Agricultural Adjustment Act, regular appro- 
priations for the Department of Agriculture, separate appropriations 
for resident teaching, research, and extension work at land grant 
colleges, amendments to basic farm credit laws, investigation of food 
handlers by the Federal Trade Commission, of pulp wood imports 
by the Tariff Commission, of wool marketing by a Senate committee, 
an irrigation payment moratorium act, and a tobacco grading act. 

is "The extent of the present-day operations at the Capital and the systematic methods 
employed, however, would distinguish the national associations from the petitioners and 
lobbyists of a former day even if the power they wield and the respect they command 
did not." Herring, op. cit., p. 241. It is not intended to maintain here, of course, that 
all present-day lobbying is done in the open, even of the Farm Bureau Federation, nor 
that the published reports tell the whole story of pressure activities. The report of the 
administrative officers of the seventeenth year of the American Farm Bureau Federation 
(Chicago, 1935) is the source of the material in this paragraph. 



CONCENTRATION OF ECONOMIC POWER 51 

The Banking and Revenue Acts of 1935 were supported in part by 
the Farm Bureau and were enacted into law. On four other projects 
supported by the Bureau — a commodity exchange bill, a lobby regis- 
tration bill, a filled-milk bill, and a standard containers bill — progress 
was made. 

Ten projects opposed by the Farm Bureau were not enacted, among 
them bills both to expand and to prohibit the imports of cordage and 
twine from the Philippine Islands during the transition period leading 
up to complete independence, to revise the Federal Food and Drug 
Acts, to rename the Department of the Interior the Department of 
Conservation and Works, and to place water carriers under the Inter- 
state Commerce Commission. The Motor Carrier Act of 1935 placing 
motor carriers under I. C. C. regulation was opposed by the Farm 
Bureau but was, nevertheless, enacted. It is the only bill thus listed. 

On 13 projects supported by the Farm Bureau no progress was made. 
Among them were a bill levying excise taxes on eggs and egg prod- 
ucts, blackstrap molasses, tropical starches, and chemical and wood 
pulp, and repealing the excise tax on furs ; a bill to provide more funds 
for vocational education activities in agriculture and the trades; one 
amending the Packers and Stockyards Act to redefine the term stock- 
yard, and to give the Secretary of Agriculture certain powers in 
regard to registration and operation of stockyards and methods of 
purchase by packers; and a truth-in-fabric bill. 

Among the nonlegislative, i. e., administrative projects, on which 
the Farm Bureau Washington representative worked during 1935 
were reciprocal trade agreements, a livestock sanitary convention with 
Argentina, rural electrification, ocean freight rates, farm-to-market 
roads, voluntary trade practice agreements under the supervision of 
the Federal Trade Commission, funds for payment for services of 
farm debt adjustment committees, and government purchase of domes- 
tically produced in preference to foreign-made products. Attention 
was also directed to rumors that several bureaus which were perform- 
ing iheir "proper functions" in the Department of Agriculture were 
to be transferred out of that Department. 

This is a long list, but it could probably be duplicated in both 
length and variety by nearly every national association represented in 
Washington. Each association's goal is defined in general terms, 
which must be implemented bt many laws and administrative rulings. 
The Farm Bureau Federation s slogan of "equality for American agri- 
culture" is appealing and very useful in bargaining with a party con- 
vention's resolutions committee, educating the non-farm population to 
agriculture's problems, inspiring Farm Bureau members to action, and 
sustaining their morale. But it means little to congressional com- 
mittees unless it is embodied in specific legislative proposals. 

The slogan is broken down into its constituent elements by the Fed- 
eration in its annual meetings, usually with the assistance of the 
lobbyist. Then, working with the board of directors and Federation 
officers, he attempts to enact those elements into law. In this way 
group aims are changed into national policy. 

So it is with every citizen group which is organized and operated 
for purposes of pressure politics. Labor's objective of the American 
standard of living, the "American system" of the Association of Manu- 
facturers, the "individual initiative" and "free enterprise" of the 
chamber of commerce, the "free press" of the newspaper publishers, 



52 CONCENTRATION OF ECONOMIC POWER 

and the "America of the future" of the educators are all examples of 
general aims with great propaganda value which reach Congress in 
the form of specific bills and amendments intended to accomplish the 
purposes of these organizations. The lobbyist or his witnesses explains 
to Members of Congress why the attainment of the aim depends upon 
the enactment of many specific bills and why the general welfare will 
be promoted by the bills in which he is interested. Part of the lob- 
byist's job is to make Congress feel that the "public" is back of the 
bills which his association wants passed. "The men who seek special 
favors of Congress * * * do not bribe, or give free passes, or pay 
election expenses ; they attempt to make the legislators think that the 
thing they want is the thing that the public wants." 17 In this process 
of identifying group interest with public interest the lobbyist occupies 
the key position. 

Congress is importuned for special favors not only by lobbyists who 
work openly in Washington, but also by pressure exerted from behind 
the scenes. The pressure reaches a Congressman through telegrams, 
resolutions, letters, and delegations of constituents, all urging him to 
vote thus-and-so on a particular bill. The constituents who exert this 
sort of pressure are not limited to members of the association whose 
lobbyist directs the campaign. They include also those of many other 
groups — political clubs, chambers of commerce, young voters' leagues, 
independent citizens' alliances, etc. Thus a lobbyist mobilizes behind 
a measure support from a dozen or more different quarters in a con- 
gressional district. 

Once the decision is made by the officials of the association inter- 
ested in the bill to "turn the heat on Congress," a number of district 
organizers tour the country, contacting local organization secretaries,, 
ambitious young lawyers, and professional men, and local celebrities 
for the purpose of starting the avalanche of letters and telegrams 
speeding toward the Capitol. Meanwhile, in Washington, the lob- 
byist is acting as coordinator of the field armies. 

As he conceives his job, he is not a personal contact man at all except with an 
inner group of statesmen who were on his side from the beginning and have 
been picked to act as his congressional strategists. With these he is constantly 
in touch. But most of the time he sits in his office rolling up prodigious tele- 
phone bills as he keeps in touch [through the district organizers] with "progress" 
in two-thirds of the States and scores of congressional districts." 

During a campaign of this kind he is hardly visible in Washington, 
indeed, he may be absent from the Capital City, if his presence is 
needed with the armies to keep them striking simultaneously. The 
whole strategy of his movements is to stay out of the limelight and 
to let the voters speak to their Congressmen for him. 19 

On occasion Congressmen are appealed to through this method to- 
vote against a bill because it is "communistic" or "socialistic." In 
such cases the lobbyist's aim is to have the pressure come to Members 

1T C. S. Thomas, "My Adventures With the Sugar Lobby," World's Work, January 
1916, pp. 244-245, quoted in Herring, op. cit., p. 60. 

18 Aikman, D., ''Lobbyist — 1936 Model," The New York Times Magazine, March 15, 1936. 

19 Note the words of another Washington newspaperman : "In a general wa,y, pressures 
are applied by (1) leading Congressmen to believe that they can be reelected only if they 
support or oppose a given bill or, (2) convincing their constituents that the Congressmen 
should or should not be reelected. The first is the older, more simpler method. * * * 
The second is the newer, now more favored, technique. * * * Often the lobbyist employs 
a combination of the two methods. * * *" Crawford, The Pressure Boys, Rlessner, New 
York, 1939, p. x. 



CONCENTRATION OF ECONOMIC POWER 53 

of Congress from one or more patriotic organizations. The follow- 
ing description is revealing : 

One of the wealthiest and most powerful organizations in the country has a 
very clever high class representative here [in Washington] who is never seen 
at the Capitol, who never lobbies. He knows full well that Representatives 
listen to the people back home with much more attention than they would to 
the known representative of any organization. Therefore, no matter how power- 
ful the propaganda for or against any measure in which his organization as 
a whole or any part thereof is interested, it sometimes reaches the voter in 
such changed form that the tracks could never be traced to his door. Some 
of this, after it has passed through several hands, has been known to go out 
through patriotic organizations whose heads have called upon their members- 
to wire their legislators to oppose or support [sic] certain bills, because they are 
communistic or socialistic. 20 

Devious as well as direct methods are thus employed by lobbyists 
to influence Congress. To oppose legislation because it is commu- 
nistic or socialistic and, therefore, un-American, is to take a stand on 
generalities which is, nevertheless, unassailable, when love of America 
stands highest in the scale of popular loyalties. 

THE LOBBY AND THE POLITICAL PARTIES 

The system of representation worked out by pressure groups in this 
country to supplement the system of geographical representation is 
co-ordinate with the party system. The presence of groups in Wash- 
ington — 

means that the geographic representation as outlined in the fundamental law 
of the land has been supplemented by a new and spontaneous and at the same 
time systematic form of representation based upon various interests of various 
groups of like-minded people. It means that there has developed in this Gov- 
ernment an extra-legal machinery of as integral and of as influential a nature 
as the system of party government that has long been an essential part of 
government, though not originally incorporated in the Constitution. 21 

The party system developed in response to two definite needs: First, 
of a method whereby candidates for manning and operating the gov- 
ernmental machinery might be selected and presented to the elector- 
ate; and, second, of a method for choosing between candidates thus 
selected. Both custom and the Constitution have operated to fix the 
single-member constituency as the basic unit of representation. This 
was the system in operation in England in the eighteenth century with 
which the colonists were familiar. 

Moreover, the Constitution designated population as the basis of 
apportioning the seats in Congress among the several States. Tradi- 
tion and law were reinforced by the difficulty of communication. Oc- 
cupational and professional interests were not lacking even during the 
drafting of the Constitution, yet as a foundation on which to erect 
the structure of political representation geography seemed the more 
reasonable. 22 In any event, as the Nation expanded both in area and 

*> Proceedings of the Forty-third Continental Congress of the Society of the Daughters of 
the American Revolution (1934). 

21 Herring, Group Representation Before Congress, op. cit., p. 18. 

22 "A survey of the economic interests of the members of the Philadelphia convention 
(1787) shows that a majority of the members were lawyers by profession; most of them 
came from towns on or near the coast, i. e., from the regions in which personalty was 
largely concentrated ; not one member represented in his immediate personal economic 
interests the small farming or mechanic classes ; and the overwhelming majority of mem- 
bers, at least five-sixths, were immediately, directly, and personally interested in the out- 
come of their labors at Philadelphia, and were to a greater or less extent economic bene- 
ficiaries from the adoption of the Constitution." C A. Beard, An Economic Interpretation 
of the Constitution of the United States, New York, 1913. pp. 149-151. 



54 CONCENTRATION OF ECONOMIC POWER 

in population, surveyor's lines were unquestioningly accepted as the 
method of allocating among the population representation in the 
legislature. 

As long as travel and communication were difficult, representation 
in Congress on the basis of geography was on the whole fairly satis- 
factory. Unquestionably, even today, men living side by side in the 
same vicinity have many common interests. Up to a certain point, the 
needs growing out of these interests can be met by a legislature elected 
on; the basis of geographical representation. Beyond that point such 
representation is inadequate. 

The machine age has sharpened those interests which are independ- 
ent of territorial association and has created many new interests. Easy 
and rapid communication has made men more aware of these new 
interests and has thus facilitated the formation of groups of like- 
minded individuals. Today, residence in a particular locality is but 
one of many grounds on which Americans feel a community of interest 
with others of their fellow citizens. One's vocation, his calling, pro- 
fession, or occupation, is possibly the most important of these grounds. 
It can be seen at work in the organization of citizens into trade associa- 
tions, labor unions, industrial leagues, professional associations. 
Another important basis is service in defense of the Nation. Patriot- 
ism, reform, national defense, and peace are others. 

These special-interest groups are not limited by the boundaries of 
congressional districts. Puzzled by problems beyond their abilities 
to solve and, turning to the Government for help, they have discovered 
that the system of representation in Congress makes no provision 
for them. 23 Two-party government discourages their entrance into 
politics, thus forcing them into extra-legal channels to achieve their 
aims in the sphere of legislative activity. The means which they 
have evolved to do this is the lobby, 24 which thus becomes an instrument 
not only of opinion forming, but of providing functional, nongeo- 
graphic interests with representation at Washington. 

The decline of the political party as a leader in opinion has been 
accompanied by the rise of these organized groups of voters. 25 Obvi- 
ously, the effect of this shift in the relative importance of the party in 
the political process is important. It has resulted in the virtual dom- 
ination of politics by the citizen group movement. Both during and 
after elections the groups hold the key to the explanation of much 
party behavior. As leaders in the formation of opinion, the parties 
at election time seek their support more assiduously than that of ag- 
gregates of individuals. In election campaigns this means that the 

*» "The Government has set up certain administrative and judicial tribunals to deal •with 
these new interrelations of men that have resulted from easier communication, but the 
fact that men have interests in common other than those bred by living in the same 
vicinity has been ignored in the structure of the representative branch of the Government. 
In the formal system of representation, we are still using the mode of the eighteenth 
century. Wiijh the decline of the political party as the leader in policy and opinion, it was 
not only compulsory but inevitable that some other medium or expression for the many 
diverse points of view and commercial and ideational interests should evolve. The national 
associations are the result." Herring., op. cit. p. 268. 

<u "The 'groups in this country are reasonably successful in accomplishing their ends 
through the lobby. They all fear launching into partisan politics as a minority party. Since 
the Government of this country is based upon the two-party form and leaves no official way 
for blocs or multiple parties to participate directly In government, the national associations 
are forced to resort to extra-legal means in order to make their influence felt. The parties 
have practically no distinctive principles ; the groups are founded on principle. The former 
administer the Government, the latter formulate opinion and urge the parties to put it 
into effect. The organized groups, to do this, must largely depend upon their lobby." Ibid., 
pp. 252-253. 
* Ibid., p. 46. 



CONCENTRATION OF ECONOMIC POWER 55 

real significance of the platform on which party nominees run for 
election can be found only in the stated or implied desires of the 
groups supporting the candidates. "The voice which political parties 
hear now is the voice of groups rather than that of political leaders 
who profess to speak for the people." 26 

The range of that voice extends to Washington as well. Partisans 
in Congress and administration also listen to group opinion. Mem- 
bers of Congress are elected by parties but in their votes they tend to 
respond as a rule more to the voice of groups than to that of the party. 

Laws are enacted in * * * Congress by members of political parties, and 
are enforced mainly by members of parties ; but partisans are influenced not so 
much in their votes by the party organization as by * * * innumerable 
quasi-public organizations * * * it is not the voice of the party as such 
but the voice of public opinion as expressed by some active agency to which 
they listen most of the time. 27 

Control of legislation and offices has thus shifted in large measure 
from the parties to the lobbies and allied organizations. 28 

The real danger of this situation lies not in functional or group 
representation before Congress, but in the possibility that Congress 
will be swayed by a pressure out of proportion to the actual number 
of people in the group, or without regard to the effect of the legislation 
on the general public. 29 To a certain extent the parties themselves are 
a check on this dangerous tendency. 

At the very point where it might militate against the public interest, the 
national association is checked by another force, the political party, which 
theoretically and often in practice works for the national good rather than the 
welfare of a small special minority. 30 

While this may be too optimistic an appraisal of the situation, it is 
still true that, without the support of the leaders of the majority party 
in Congress, citizen groups usually are not able to enforce their de- 
mands. 

Both parties and groups are active in the shaping of policy. 
Through nominations of personable candidates, bargains with citizen 
groups and political factions, and success in elections, the parties play 
the dominant role in the determination of broad policy. At the 
same time, the substance of policy both in the beginning and as re- 
vised through the years is due more to pressure groups. After all — 

most issues are not decided by the parties, but by public opinion. * * * 
Here the activity of the nonparty groups is of prime significance. 81 

The competition among groups for official approval of their aims is 
perhaps the outstanding characteristic of the governmental process 

28 E. B. Logan, "Lobbying," Supplement to Annals of the American Academy of Political 
and Social Science, July 1929, p. 80. 

"C. E. Merriam and H. F. Gosnell, The American Party System, Macmillan, New York, 
19^Jt), PP. 220 — 221. 

28 Logan, loc. (St., p. 82. 

20 "Apparently the tendency of associations and leagues of citizens formed for the 
accomplishment of their own particular purposes ignores the theory 4hat the general good 
spould be the consideration of the citizen before that of any one group." Herring op 
cit.. p. 4. 

80 Herring, op. cit., p. 252. 

■» Merriam and Gosnell, op. cit., p. 239. "Most legislation * * * represents the 
insistence of a compact and formidable minority." Learned Hand, 28 Michigan Law 
Review, 50. 

277780 — 41— No. 26 5 



56 CONCENTRATION OP ECONOMIC POWER 

in America of the twentieth century. 32 To decide who shall win in 
this competition and what form the victory shall take is the govern- 
ment's continuing assignment. 

82 "Government, whatever its form, Is bound to be in the long run far more a reflection 
of the balance of interests in the community than an agency capable of making tne com- 
munity reflect the independent will and purposes of the governors." Dickinson, loc. cit., 
p. 304. 



CHAPTER V 
CONTACTS WITH GOVERNMENT 

CONGRESS AND THE EXECUTIVE 

In preceding chapters we have seen how pressure groups are com- 
posed, what are their aims, and how they proceed to achieve them. 
But in order to uncover fully the process of control we must examine 
the various points of contact between citizen groups and govern- 
ment. "The raw material [of government] can be found only in 
the actually-performed legislating-administering-adjudicating activ- 
ities of the Nation and in the streams and currents of activity that 
gather among the people and rush into those spheres." * 

CONGRESS: THE FOCUS OF GROUP ATTENTION 

In seeking governmental sanction for their aims citizen groups 
focus their attention principally upon Congress. The reason for 
this is obvious. Congress is the law-making, money-raising, and 
money-appropriating body. In performing these functions it can 
transform group aims into public policy. With the aid of Con- 
gress groups can effect this change through any of four different 
kinds of action : legislation, Senate action on treaties and Presi- 
dential nominations, and formal proposals to amend the Constitution. 

General Legislation. 

Much of the general legislation on our statute books is the result, 
wholly or in part, of group pressures. 

The laws passed by Congress are never admitted to be legislation 
in the interest of special groups. In fact, such bills are taboo as 
"class legislation." Even the private bills passed for the relief of 
individuals are introduced on the theory that the individual has 
suffered an injustice which the ordinary law makes no provision for 
remedying. 

Bills to prohibit the entry of foreign livestock or meats, while 
they obviously benefit domestic meat packers, are defended as an 
attempt to prevent the spread of hoof and mouth disease. Farm 
legislation, which is admittedly for the immediate benefit to farmers, 
is argued in terms of the general welfare. Even the soldiers' bonus, 
which Presidents Coolidge, Hoover, and Roosevelt vetoed as special 
interest legislation, was finally passed over the veto as a debt which 
was due the World War veterans. While it was a result of increas- 
ing pressure upon Congress, the increased pressure probably resulted 

1 Bentley, A. F., The Process of Government, Chicago, 1908, p. 180. The raw material 
of government, Prof. Bentley claims, cannot be found in lawbooks, nor in the "law" behind 
the lawbooks, nor in the proceedings of constitutional conventions, nor in the arguments 
and discussions surrounding them, nor in essays, addresses, appeals, and diatribes on 
tyranny and democracy, nor in "the character of the people," in their specific "feelings" 
or "thoughts," in their "hearts" or "minds." Ibid., pp. 179-180. 

57 



5g CONCENTRATION OF ECONOMIC POWER 

from the stringencies of the depression, and many Congressmen un- 
doubtedly defended it in their own minds as an attempt to cope with 
the Nation's problems of unemployment and destitution. 

Tax and Appropriation Bills. 

The revenue and appropriation measures passed by Congress afford 
a particularly good opportunity to fix or change Government policy. 
Every year Congress passes at least two revenue bills, one for the 
country as a whole, and one for the District of Columbia; also, it 
passes a series of appropriations for carrying on Government func- 
tions. Finally, at intervals of a number of years, the tariff comes 
up for consideration. 

Like other congressional legislation, such bills may reflect the gen- 
eral welfare (or the aggregate pressure of a large number of groups) 
or they may result from the pressures of a compact, formidable 
minority. In any case, they are defended as being in the interest 
of the general welfare. 

The graduated scale of the income-tax law is still being opposed 
as unjust. The income tax publicity clause, the excess-profits tax, 
and the undistributed-surplus tax all were finally repealed as a result 
of business pressure which convinced the public that these measures 
were inimical to business. Tax matters are technical, the statistics 
are complicated and easily juggled; hence the electorate is easily 
confused and pressure groups are particularly successful. The large 
increase in consumers' taxes during the depression, in spite of the 
administration's avowed wish to expand consumer purchasing power, 
is in large part due to this fact. 3 

But these are not the only ways in which tax bills may be used for 
group purposes. In 1934, for instance, the Farm Bureau Federation, 
having been unsuccessful in inserting duties on certain imported fats 
and oils in the previous tariff act, succeeded in securing their inclu- 
sion as excise levies in the revenue act of that year. 4 

Taxation is also used openly for policy purposes. The processing 
tax of the A. A. A. declared unconstitutional in 1936 was levied as 
part of an effort to raise farm prices. 

The tax levied under the Guffey Coal Act is levied to secure coopera- 
tion with the purposes of the act. The pay roll taxes of the Social 
Security Act implement the provisions for the payment of old age pen- 
sions and unemployment compensation. 

An indirect method of using tax statutes for group purposes is to 
attach a rider to an urgent revenue bill. The Miller-Tydings Fair 
Trade Act was attached to a District of Columbia revenue bill, and, 
simply because the tax measure was vitally needed, the Fair Trade 
Act passed without the opposition which it would probably have 
aroused otherwise. 

An instance of counter-attack by pressure groups which goes back a 
number of years, but is curiously contemporary in its approach, is the 
reaction of the Institute of American Meat Packers which was under 
fire in 1916. A House resolution calling for investigation of the meat 
packing industry in that yea/ was sidetracked by the Institute's efforts. 
Three years later, by having a resolution introduced in the Senate to 

8 See Dewey Anderson Taxation, Recovery, and Defense, Temporary National Economic 
Committee Monograph 20 
« See ch. VII. 



CONCENTRATION OF ECONOMIC POWER 59 

investigate the so-called Socialist members of the Federal Trade Com- 
mission, the Institute diverted attention from a Commission report 
showing monopolistic practices among the big meat packers. 5 
• Appropriation bills are likewise subjects of prime interest to organ- 
ized groups. They provide a constantly recurring battleground for 
the forces opposing and favoring the various departments and agen- 
cies. One way of emasculating an agency whose operations are dis- 
tasteful or inimical to certain groups is to cut its appropriation to a 
point where it cannot carry on its program. Certain departments or 
divisions of an agency may be cut out, or a whole agency may be 
starved out by drastic slashes. The repeated attempts to cut the ap- 
propriations for work relief, as well as for the National Youth Ad- 
ministration, the Securities and Exchange Commission, the National 
Labor Relations Board, the Justice Department's Antitrust Division, 
and so forth, are examples of this policy-making approach in appro- 
priations. 

Conversely, of course, certain groups fight for continued or larger 
appropriations for the agencies they favor. For example, in 1925 the 
Land Grant College Association got through Congress a law authoriz- 
ing increased Federal grants to States for agricultural research, espe- 
cially economic and social. Quite naturally it watches closely to see 
that Congress appropriates each year the funds authorized by this 
act. The Departments of Labor and Agriculture, the Veterans' Ad- 
ministration, the Office of Education, the N. Y. A., W. P. A., C. C. C, 
and so forth, all provide examples of this kind of pressure. 

The tariff provides an excellent and frequently recurring opportu- 
nity for pressure on Congress in the interest of minority groups. This 
problem is taken up in detail in chapter VII, and will not be discussed 
here except to point out that it provides an outstanding opportunity for 
fiscal legislation in behalf of group interests. 

Policy-Making Through Blocking Treaty Ratification. 

From time to time the Senate is under pressure to withhold its assent 
to the ratification of a treaty running contrary to the desires of cer- 
tain groups. Obviously, such opportunities for compact citizen minor- 
ities to put their imprint on policy are few in comparison with those 
in the field of domestic legislation; nevertheless, they do arise from 
time to time, and provide another method for group determination of 
policy. 

For example, in 1925 the United States signed at Geneva a treaty 
outlawing the use of poison gas as a weapon of warfare. Twenty- 
eight other countries took similar steps, in accordance with the move- 
ment sponsored by the League of Nations to limit and reduce arma- 
ments. In due course the President forwarded the treaty to the Senate 
asking for advice and consent to its ratification. 

In a speech opposing ratification, Senator Ransdell, of Louisiana, 
introduced into the Record a letter from the American Chemical 
Society to Secretary of State Kellogg, asking him to oppose ratifica- 
tion. Mr. Parsons, secretary of the society, also asked Mr. Kellogg 
to request individual Senators to oppose ratification of the protocol, 
arguing that ratification would perpetuate the blunder made in Wash- 

5 "The summary volume of the report is a scathing indictment of the 'big packers' as a 
combination in restraint of trade." T. C. Blaisdell, the Federal Trade Commission. 
Columbia University Press, New York, 1932, pp. 186-187. 



(30 CONCENTRATION OF ECONOMIC POWER 

ington in 1922, 6 would lead to unnecessary suffering in future wars, 
would discourage preparedness against an enemy which might un- 
expectedly use gas, and would leave the country defenseless. Further- 
more, his argument ran, adherence to the treaty would force us to 
use destructive methods instead of harmless gases in case of war 
against an unprepared nation, would not be made effective, and would 
put the chemical industry in each country under the control and 
supervision of a national board. 7 

This position of the American Chemical Society, first made known 
in August 1926, was fortified by a statement issued on October 10 
by John Thomas Taylor, legislative representative of the American 
Legion, saying that the Legion, too, was against ratification of the 
Geneva Protocol. The same stand was taken by the Association of 
Military Surgeons on October 24 and by the National Association 
for Chemical Defense on November 14. 

In the face of this opposition not even the support of President 
Coolidge, Secretary Kellogg, and General Pershing, to say nothing of 
the National Women's Conference on the Cause and Cure of War, 
was sufficient to gain Senate approval. The Senate voted on Decem- 
ber 13 to recommit the treaty to the Foreign Relations Committee. 8 

Even more illuminating is the way various farm groups have tied 
the Argentine Sanitary Convention up in committee. From 1903 to 
1930 the Secretary of Agriculture was authorized to prevent the 
introduction of communicable diseases of livestock through the medium 
of fresh meats or other animal products. Under this authority, in 
1927, he issued an order prohibiting the importation of fresh meats 
from any region where rinderpest or foot-and-mouth disease existed. 
Section 306(a) of the Tariff Act of 1930 prohibited the importation 
of fresh meat, among other livestock products, from any country if 
or when either of these diseases exists within its border, leaving no 
discretionary authority in the Department of Agriculture. The pur- 
pose of the Argentine Sanitary Convention, signed in 1935, was to 
modify that prohibition to the extent of permitting the importation of 
fresh meats from regions in Argentina that may be determined to be 
free from foot-and-mouth disease. 

For years the opposition of farm and ranch interests has been 
successful in preventing ratification by the Senate. Among the dozens 
of farm business groups which have urged the Senate to withhold its 
advice and consent are the American Farm Bureau Federation, the 
National Grange, the American National Livestock Association, the 
National Livestock Marketing Association, the United States Livestock 
Sanitary Association, the National Association of Swine Records, the 
American Shorthorn Breeders' Association, and the National Wool 
Growers' Association. Opposition came also from the Texas and 
Southwestern Cattle Raisers' Association and th? Western Slope Stock 
Growers' Association. Wool, horse, and cattlemen's associations in 13 
Western and Southern States forwarded resolutions opposing ratifica- 
tion to Congress. In the 3 years following the signature of the con- 
vention the Congressional Record reveals but one national organiza- 

a Apparently Mr. Parsons refers to the Washington Naval Limitation Treaty of 1922 
between the United States, Great Britain, Japan, France, and Italy. 

7 Congressional Record, 69th Cong., 2d sess., December 13, 1926, pp. 363-367. 

8 The New York Times, June 18, 1925, August 5, October 11, 25, November 15, 27, 
December 8, 10, 11, 14, 1926. 



CONCENTRATION OF ECONOMIC POWER Q\ 

tion, the National Foreign Trade Council, which had asked the Senate 
to consent to the convention's ratification. 9 Consent is still withheld. 

Blocking Presidential Nominations. 

Just as Senate refusal to consent to ratification of a treaty can some- 
times maintain a favorable position already won, so its refusal to 
confirm Presidential nominations to administrative posts may be used 
for certain group purposes. During every congressional session the 
President sends to the Senate for confirmation the nominations of 
many persons to public office. Such confirmation is usually given 
without a great deal of debate, but occasionally a person is nominated 
whose known views appear invidious to some group, and then pressure 
will be put on the Senate to withhold confirmation. 

The success of organized labor in blocking President Hoover's nomi- 
nation of Judge John H. Parker to the Supreme Court illustrates this 
procedure. The first indication of a serious protest against the eleva- 
tion of Judge Parker occurred on March 26,, 1930, when A. F. of L. 
representatives asked members of the Senate Judiciary Committee to 
investigate his participation in court decisions upholding "yellow dog" 
contracts. Three days later the A. F. of L. filed a written objection 
with the committee and asked for the privilege of appearing in oppo- 
sition to the confirmation of Judge Parker's appointment. Members 
of the Senate were called upon to refuse confirmation. 

On April 5, A. F. of L. President Green appeared before the com- 
mittee, voicing the protest of organized labor against the appointment. 
President Green said he was speaking for 5,500,000 organized workers, 
and supplemented his testimony by a formal letter of protest addressed 
to Senators Borah, Norris, and Overman. Notices were sent to the 
35,000 unions affiliated, with the A. F. of L. urging them to request 
their respective Senators to vote against confirmation. 

Under pressure the Judiciary Committee declined to report the 
nomination favorably and requested Judge Parker to appear and 
answer the charges of his critics. In the final vote in the Senate, 
labor's wishes* were followed ; the vote against confirmation was 
41 to 39. 10 

The Parker case is not unique. Twice President Coolidge nomi- 
nated Charles Warren to the Attorney Generalship, once in January 
and again in March 1925. On both occasions the Senate refused to 
confirm him. Among those opposing confirmation was the People's 
Legislative Service, whose director, Basil Manly, made a torn al pro- 
test to the Senate Judiciary Committee. The protest was based on 
the fact that Mr. Warren, as president of the Michigan Sugar Co., 
had disregarded an injunction of the Federal Trade Commission re- 
straining his company from violation of the Sherman Antitrust Act. 11 

President Roosevelt's second term has been marked by an extraordi- 
nary number of fights against confirmation of his nominees. One of 
the bitterest of these involved the nomination of Senator Black to the 
Supreme Court. During the debate the Senators' private galle :y held 
numerous lobbyists representing interests on whose toes Senator Black 
had stepped in his investigations. "It was their fight that a lumber 

9 Resolutions opposing ratification, adopted by the State legislatures of Colorado, North 
Dakota, Nebraska, Oregon, Montana, New Mexico, Nevada, and Arizona, were also sent to 

w New' York Times, March 26, 29, April 1, 6, 12, 14, 1930, ^nd interview on July 21, 
1937, with William Roberts, A. P. of L. representative. 
u New York Times, February 12, 1925. 



(J2 CONCENTRATION OF ECONOMIC POWER 

of Senators in the pit below were making." 12 But they lost their 
fight when the Senate voted 63 to 16 to confirm. 

An even greater storm of protest was aroused by the President's 
nomination of Thomas K. Amlie to the Interstate Commerce Com- 
mission in 1939. Amlie had been a leading member of the liberal 
bloc in the House for 6 years, and had consistently supported New 
Deal policies. He had been particularly prominent in the fight for 
increased appropriations for work relief. 

As soon as a date was set for the consideration of his nomination 
by a subcommittee of the Senate Committee on Interstate Commerce, 
the committee was showered with requests to be heard, both in oppo- 
sition and support of the nomination. The first witness, Luther D. 
Walter, trustee in receivership of the Chicago & North Western Kail- 
way, appeared "as his own witness, representing no one but himself." 
He was armed with a detailed account of Amlie's writings for the 
past 8 years, some of which the nominee himself confessed his in- 
ability to secure. Two leaders of the anti-Roosevelt Democratic 
faction in Wisconsin testified against Amlie. Efforts were made to 
prove, first, that he was a Roosevelt supporter, and hence, as a Demo- 
crat, not entitled to fill a place on the minority side of the Commission ; 
second, that he was a Socialist ; and, third, that he was a Communist. 

The evidence was conclusive that Amlie was a leader of the Pro- 
gressive Party ; that he had been a member of the Republican Party 
until the Progressives split off in 1934 ; and that some of his bitterest 
denunciations had come from the Communists. It was established 
that he had supported several plans intended to increase and redis- 
tribute national income, raising the living standards of consumers 
at the bottom of the scale, and that he had advocated Government 
ownership of the railroads. 

Alfred Bingham, son of the late Senator Bingham of Connecticut, 
testified in his behalf, as did John Bauer of the Municipal Ownership 
League, Mayor La Guardia of New York, A. F. Whitney of the 
Brotherhood of Railway Trainmen, and a number of Amlie's col- 
leagues in the House of Representatives. 

The hearings were finally closed, after a sizable volume of testi- 
mony was taken, and the committee went into executive session. The 
press was opposed to the nomination almost 100 percent, and printed 
innumerable editorials in support of their position. The last 135 
pages of 'the 390-page volume of hearings was filled with statements 
for and against confirmation, a large number of them elicited by the 
furore in the press. 

The Association of American Railroads was bitterly opposed to the 
nomination, as were transportation groups generally. Several State 
public service commissions supported Amlie. The lines were drawn 
with extraordinary clarity between the business groups interested in 
the railroads, and the liberal faction which Amlie supported during 
his years in Congress. 

The subcommittee delayed for months in reporting its findings, 
until finally Amlie, convinced that Senate action would not be forth- 
coming in that session, asked the President to withdraw his nomi- 
nation. 13 



32 Raymond Clapper. Washington Daily News, August 18, 1937. 

13 The Constitution provides a fifth way through which groups may achieve their objec- 
tives, namely, formal change in the organic law itself. The Prohibition and Equal Suffrage 
Amendments a*^ examples. Both were made part of the Constitutiou through the efforts 



CONCENTRATION OF ECONOMIC POWER 63 

THE PRESIDENT'S ROLE 

In the political process the Chief Executive plays a role of synthesis 
and of application. The President must, as an adjunct to his duties, 
construct and further as best he can his concept of the general welfare. 
This is to some extent inherent in his political and social thinking, 
and to some extent it may be formulated as a result of his daily respon- 
sibilities. But he is not free to express this concept unreservedly in 
his decisions. He must work within a constitutional system of divided 
powers and of checks and balances which greatly inhibit his freedom 
of action. 

Moreover, the President is subject to continuous pressure from Con- 
gress, from minorities of varying weight, and from individuals. 
Government in a representative political democracy like the United 
States is government by compromise. Probably only in degree has 
the Chief Executive's role, at least in recent years, been different from 
that described by President Roosevelt in 1938. In replying to criti- 
cism of certain of his policies, he is reported to have said : "For vari- 
ous reasons of responsibility and compromise in this office, I cannot 
dictate my own course of action. To move forward I must accommo- 
date myself to more opinions than one." 14 

Consideration of pressure politics as the interaction of numerous 
group desires and ambitions may lead to over-simplification of the 
political process, unless it is remembered that one of the strongest fac- 
tors in politics is the psychological lag of the voting public. A certain 
number of the people in the Nation are leaders in the struggle to use 
political power for various ends. They are a minority of the voters, 
but because they are energetic and vociferous, they play the role of 
opinion-formers, and are often successful in accomplishing their pur- 
poses. They may be the representatives of minority, special-interest 
groups, or they may be sincerely concerned to promote the greatest 
good for the greatest number in an immediate, socially conscious 
sense. 

But in their efforts to use political power for any new purpose, tney 
are continually confronted by the barrier of inertia among the voters 
as a whole. The ordinary man finds it difficult to evaluate the facts 
of his everyday environment as they affect him at that moment. His 
reaction to his environment is conditioned largely by past experience, 
some of which may still be valid, and some of which has been irrele- 
vant for a generation or more. He is reluctant to change old ways of 
doing things, and even more reluctant to change old habits of thought. 
Hence, it is often a matter of years between the original inception of an 

of politically powerful groups. Without the pressure and lobbying efforts of the Anti- 
Saloon League, the eighteenth amendment would never have been adopted by Congress, 
nor ratified by the States. Almost equally well-known is the success of the National 
American Women's Suffrage Association (predecessor of the National League of Women 
Voters) in having universal equal suffrage incorporated int.o the Constitution. Another 
group, the Association Against the Prohibition Amendment, played a part in getting the 
eighteenth amendment repealed. Its lobbying efforts were secondary in importance, how- 
ever, in comparison with those of the Anti-Saloon League and its associated temperance 
groups. The Nation's experience with prohibition illustrates two facts of importance to 
observers of pressure politics, business, and Government. The first is the dependence 
of pressure group success upon satisfactory enforcement of the law embodying its objective. 
The temperance aim of the Anti-Saloon League failed of realization because of the impos- 
sibility of enforcing the Volstead Act. The second is the importance of stamina in tha 
game of pressure politics. Although the enghteenth amendment was adopted by Congress 
over the protest of the United States Brewers Association, the brewing industry was able, 
nevertheless, due to stamina conferred by charters and resources, to outlive the 14-year 
prohibition era. 

u SpriDgfield Republican, May 7, 1938. 



64 CONCENTRATION OF ECONOMIC POWER 

idea in politics and the date when the electorate is finally induced to 
accept it. 

During that time, politicians must be alert to sense the dangers of 
proceeding faster than the inertia of the electorate permits, and 
equally alert to seize the exact moment for successful action. Unfor 
tunately, it is considerably easier to recognize this inertia than it is to 
seize upon the moment when action is possible ; this is one reason why 
politicians find it more satisfactory to allow themselves to be prodded 
in one direction or another by pressure groups, than to mark out their 
own programs to achieve their campaign promises. 

Thus whether the President furthers or obstructs the interest of any 
particular group at airy particular time, depends not alone upon his 
wish, nor the amount of the pressure, but u L >on the general political 
situation as well. 

The general political situation is a limiting factor on both con-; 
gressional and Executive action. Governmental action of all kinds 
occurs. on the level of politics, and in the arena of politics. Even the 
most routine governmental procedures are carried on in the knowledge 
that they affect and are affected by the political situation. 

As Chief Executive of the Nation and leader of his party, the 
President can further certain group interests and thwart others. By 
approving or vetoing acts of Congress the President can give, ex- 
pression to the ideas of certain groups. By sponsoring new legisla- 
tion he can play an even more active part in achieving the aims of 
such groups. 

He can dispatch a Presidential message, as a very formal approach, 
or .he may communicate directly with various Members of the House 
and Senate. The famous letter written by President Roosevelt to 
"Dear Alben" Barkley on the occasion of the death of the Democratic 
floor leader, Senator Robinson, is credited with tipping the scales in 
favor of Barkley as his successor rather than Pat Harrison. Moreover, 
when tax and appropriation measures come to the White House other 
chances are presented to the President to show his agreement or dis- 
agreement with minority objectives. 

The President can appoint Cabinet members, departmental officers 
and bureau chiefs, judges and district attorneys who can be expected 
at the very least to be guided by the broad outlines of a certain politi- 
cal and social philosophy. As Commander-in-Chief of the armed 
forces he can use them both at home and abroad in situations short of 
war to further the interests of certain groups as against others. More 
frequently, he need only drop a sympathetic word at a press conference 
or public address in order to associate himself with a certain program. 

There are many examples of a President's response to group pres- 
sure. For instance, Andrew Furuseth, dynamic, able president of the 
Seamen's Union, was largely influential in drafting and getting 
through Congress the La Follette Seamen's Act of 1915. Shortly be- 
fore President Wilson was expected to consider the bill, Furuseth 
and Samuel Gompers, president of the American Federation of Labor 
from 1886 until his death in 1924, called on the President. Gompers 
says that, "As Mr. Furuseth spoke Mr. Wilson was leaning forward, 
ea^er to get the storjr. A few days later Mr. Wilson signed the Sea- 
men's Act." 15 



15 Samuel Gompers. Seventy Years of Life and Labor, Dutton, New York, vol. 1, p. 546. 
For other instances of his contacts with Presidents, see also pp. 517-530. 



CONCENTRATION OF ECONOMIC POWER 55 

During prohibition the Anti-Saloon League was strong enough to 
cause President Coolidge to nominate its candidate for prohibition 
enforcement officer rather than the candidate backed by Treasury 
Secretary Mellon, and also to appoint a Federal district judge in New 
Jersey over the protest of the United States Senator from that State. 16 

In 1934 the President revoked that part of his 1933 economy Execu- 
tive order reducing appropriations for agricultural extension, experi- 
ment stations, land grant colleges, and vocational education in agri- 
culture, industry, and home economics. This action was in line with 
the desires of the Farm Bureau Federation. Also, for a time at least, 
the advocates of collective security felt that Roosevelt's "quarantine 
the aggressors" speech in 1937 indicated the adoption of their program. 

The President as Administrator. 

In discussing the influence of groups on the President's role, a dis- 
tinction is made between that part relating to continuous policy re- 
vision and that which deals with routine administration. To divide 
the President's part in this way is, to some extent, artificial and arbi- 
trary, but it serves to emphasize the dual role he plays, as policy- 
maker and administrator. It is often hard to discover, of course, 
where revision of policy ends and where routine administration be- 
gins, since administration is the application of innumerable revisions 
of policy. 

In routine administration, contact between President and groups 
grows out of his position as Chief Executive, rather than as party 
leader. The President functions as party leader in the formation of 
policies, measuring group aims against the political situation before 
deciding to further or obstruct them. Where policy revision is not 
directly involved, however — that is, in the execution of laws already 
on the books — the President comes into contact with the groups in his 
capacity of head of the state and of the executive branch of the 
Government. 

No duty as Chief Executive affords the President such opportunity 
of reviewing administration as the preparation of the annual Budget. 
Consequently, no duty exposes him so completely to the pressure of 
interested groups. Groups who have gained their ends in the estab- 
lishment of a Government agency recognize the Budget as the first line 
of battle to keep that agency functioning. Similarly, organizations 
anxious to throttle a certain Government activity see a chance to gain 
their ends in the Budget recommendations. The agency itself is 
usually desirous of increases in its funds, and brings any pressure it 
can to bear upon the President to secure his sanction. He, in turn, 
must decide, as to each agency, whether it is necessary, whether it is 
over or under staffed, and whether it is politically feasible to recom- 
mend a decrease or increase. The Budget, as it is finally submitted 
to Congress, indicates the tacit approval or acceptance by the Presi- 
dent of the thousands of individual items representing decades of 
achievement by successful pressure groups, along with the inevitable 
accumulation of public services made necessary by the growth of the 
Nation. 

In Federal budgetary procedure group actions are noteworthy as a 
phase of a routine matter rather than as separate and isolated acts in 
themselves. Important though it is, the preparation of the Budget is 

»« A. S. Henning, Chicago Tribune, July 12. 1027. 



(56 CONCENTRATION OF ECONOMIC POWER 

merely the first in a series of steps taken annually to provide funds 
for carrying on the Government. After receiving the Budget from 
the President, Congress examines carefully the estimates of both re- 
ceipts and expenditures for the forthcoming fiscal year, and on the 
basis of this examination prepares, debates, and passes the necessary 
tax and appropriation bills. Here, then, are additional stages in the 
process at which specific objectives of the several citizen groups may 
be advanced. They are the final liases of the supply process. Hardly 
are Congress and the President Imished with the process for one fiscal 
year than the spending agencies, under the direction of the President 
and the supervision of the Budget Bureau, set the process in motion 
for a new fiscal year. 

In all phases the influence of citizen groups may be seen. In the 
executive phase, when bureau chiefs, business managers, and depart- 
mental budget officers carry forward the work of preparing the es- 
timates, groups may be either active or passive. If active, it is through 
their Washington representatives. If they are passive, it may be be- 
cause the officials responsible for the performance of the services in 
question are sympathetic to the group's point of view. In greater or 
less degree every executive agency lobbies for expanded functions and 
increased funds. When the departmental estimates are assembled by 
the Budget Bureau and are presented to the President for his examina- 
tion and analysis, the influence of the citizen groups may again be 
actively exerted. At this stage, access to the President is of great 
value, and his appointment calendar carries names of citizen association 
officials anxious to point out the need or the desirability of providing 
better services. Such presentations, of course, can be made at any 
time of year. After the estimates are submitted to Congress the 
groups continue to exert influence both actively and, for the most part, 
openly. 

The President as Party Chief. 

But access to the White House is of major importance in policy mak- 
ing only when the President's party has a simultaneous majority in 
both Houses of Congress. Both for party and for groups supporting 
the party politically, the capture of Presidency and congressional 
majorities opens the widest opportunity for revising policy without 
hindrance. 17 

Groups which claim consideration on account of their support of 
the party may have offered their aid in a number of ways. Such 
groups as the Workers' Alliance and the American Youth Congress 
are unable to make large financial contributions, hence they spend a 
great deal of time in contacting voters personally, donate their services 
m campaign headquarters, etc. Theirs is the contribution frequently 
called "door-bell ringing." Labor unions often make both personal 
and financial contributions. The C. I. O. is said to have contributed 
more than $300,000 to the Democratic Party in 1936, and in addition 
the union members were personally active in local campaigns. Busi- 
ness groups, on the other hand, usually confine their assistance to finan- 
cial aid and propaganda through their organizations and publications. 
All these groups, on the basis of their share in electing the Executive, 
feel free to approach him in furtherance of their desires, and they are 
usually received cordially, even when the President is unsympathetic 

17 A. N. Holcombe, The Political Parties of Today, Harpers', New York, 1924, p. 87. 



CONCENTRATION OF ECONOMIC POWER 67 

to their present demands. But these vote-getting (or even vote-de- 
flecting) activities are hardly typical of the grounds on which pressure 
groups appeal to the White House for support. 

The truth is that continuous grubbing in the Nation's political 
garden is not the type of activity for which the great majority of 
citizen associations are established. The political parties were insti- 
tuted and are maintained for that purpose. Nomination of candi- 
dates and the maintenance of an organization for mobilizing voters 
to support these nominees at the polls are not the functions of citizen 
groups such as the American Iron and Steel Institute, the American 
Bankers Association, the National Grange, or the Newspaper Publish- 
ers' Association. Among such organizations are some which unques- 
tionably prefer Republican to Democratic Presidents and vice versa, 
as well as some which have no preference. Undoubtedly the Ameri- 
can Tariff League would like to see the White House continuously 
occupied by a Republican. On the basis of its choice in the past 
decade, the American Farm Bureau Federation, on the other hand, 
seems to prefer Democratic occupants of the Executive Mansion. 
The National League of Women Voters, however, expresses no pref- 
erence, just so long as the Chief Executive believes in the merit sys- 
tem and supports it in practice. The United States Conference of 
Mayors is another organization which does not look at political labels. 
So long as unemployment persists on a wide scale, its interest is in 
seeing in the White House a President, no matter what his party, 
who will support its plea for ample Federal appropriations for un- 
employment relief. But whatever their leanings, partisan or non- 
partisan, these organizations come to the White House with their 
requests for Presidential support, basing those requests not so mur-h 
on the number of votes which they swung to the President in tht- 
last election as on other grounds. Among these factors are, first, 
congeniality of views between the groups andthe President, and second, 
common notions of the general welfare. 

Since the turn of the century the Nation has had eight Presidents. 18 
Six of them have been Republicans ; two, Democrats. Although the 
country ]s citizen groups cannot be sharply divided into Republican 
and Democratic, still the views of certain groups are undoubtedly 
more acceptable to Republican occupants of the White House than 
are the views of others. The reverse also is true. During the Re- 
publican regime from 1920 to 1932 the views entertained by the 
Chamber of Commerce of the United States, the National Association 
of Manufacturers, and the American Bankers Association were re- 
ceived more hospitably at the White House than were those of the 
American Farm Bureau Federation. Since 1932 the views of the 
former groups have been less in harmony with those of President. 
Roosevelt than those of the Farm Bureau Federation. Although the 
views of A. F. of L. leaders during the 1920's were not rebuffed by 
Presidents Harding, Coolidge, and Hoover, the reception accorded 
them by the New Deal has been far more sympathetic. The concept 
of government.business relations held by the National Electric Light 
Association accorded with that of President Roosevelt's predecessors 

» William McKinley. Theodore Roosevelt, William H. Taft, Woodrow Wilson, Warren G 
Harding, Calvin Coolidge. Herbert Hoover, Franklin D. Roosevelt. During these 40 vears the 
Republicans had been in power 24 years, the Democrats 16. 



gg CONCENTRATION OF ECONOMIC POWER 

while the Edison Electric Institute, the association's successor, is in 
notorious disagreement with Roosevelt. Other examples show still 
more plainly how congenial views smooth the path . to revision of 
national policy. Since 1932 the opinions of the American Tariff 
League have not been as welcome at the White House as they were 
during the preceding Republican regime. The position of the Asso- 
ciation Against the Prohibition Amendment coincided with that of 
President Roosevelt in the days immediately before repeal in 1934, 
while that of the Anti-Saloon League did not. During President 
Hoover's term the situation was reversed. In these examples there 
are undoubtedly particular phases of policy on which group and 
Chief Executive were not in as close agreement as on broad policy 
tself. In general, however, they show that certain groups have less 
difficulty than others in obtaining at the Executive Mansion a sympa- 
thetic audience for their views, while at other times the roles are 
reversed. 

Sometimes groups appear, play an important role for a time, then 
disappear. But always there are groups appealing for the President's 
support on the ground that the fulfillment of their aims is necessary 
to the general welfare. Indeed, these grounds are broad enough to 
accommodate all groups, and it is not surprising, therefore, to find 
them all striving to play through the President an active part in the 
process of policy revision. 

The President as Chief Executive. 

The number, of groups- which can seek Presidential aid in their ob- 
jectives on account of their support of him on election day is limited, 
as is the number of groups which can expect an open ear on account of 
possessing similar views. No such limitation exists, however, when 
the appeal for support comes in the name of the general welfare. Any 
organization, local or national, partisan or non-partisan, may in the 
name of the general welfare ask the President's assistance in legislat- 
ing its objectives. 

Organized labor found Hoover willing to listen to its program when 
it was couched in terms of the general welfare. Farm groups and the 
Engineer President found that their ideas of the general welfare met 
in the matter of tariff revision. Even though he has disagreed with 
them, President Roosevelt has invited businessmen, industrialists, 
publishers, and utility magnates to the White House to hear their 
views as to how best to promote the general welfare. 

Thus it is possible for groups holding widely differing concepts of 
the general welfare each to seek the blessing of the Chief Executive 
for its program, and it may be sought and given without hypocrisy. 
It is likewise possible for a President to join with Congress in sanc- 
tioning, in the name of the general welfare, aims and objectives of 
groups which on logical grounds are difficult to reconcile. No single 
group has a monopoly of wisdom, or even of knowledge. Hence, in the 
highly complex fields in which Congress and President make and con- 
tinually revise policy there is no yardstick with which to measure 
the various concepts of the general welfare. 

In choosing between the numerous specific proposals brought for- 
ward for approval, Congress does not apply a nationally-accepted, 
rationally-constructed standard. Instead, the process of re-making 
policy is a process of yielding to the pressure generated bv the strong- 



CONCENTRATION OF ECONOMIC POWER 69 

est groups. Some of the ideas back of these pressures originate in 
Congress; others originate in pressure groups and are introduced by 
friendly Congressmen; while still others arrive in Congress by way 
of the White House. 

However, all the ideas which get through Congress are presented to 
the President for his approval. Nor is his approval or disapproval 
based on an absolute standard free from clashing opinions and cross 
currents of desires and hopes. Whether or not such acts of Congress 
contribute to a balanced concept of the general welfare, or harmonize 
with the President's own concept, he cannot wait for legislative per- 
fection to reach him before giving it his approval. The Government 
must go on, and the future of the state and of the people must be 
looked to constantly. Thus, every congressional act carrying the 
President's approval signifies his agreement that the general aims 
embodied therein contribute to the general welfare. Only by use of 
the veto power can he signify otherwise. 

In the complex of interests, institutions, and personalities which 
w r e call government there is a habit of thinking of the President as 
continually representing the views of a particular part of the popula- 
tion. Despite the popular tendency so to interpret Presidential con- 
duct, it is hardly so simply explained as that. 

President Roosevelt has frequently been described as the ally of 
organized agriculture and labor to the exclusion of other minority 
sections. But it hardly accords with the facts. Without doubt Mr. 
Roosevelt has adopted the legislative proposals of certain farm and of 
certain labor groups. Also he has rejected the legislative proposals 
of certain business and industrial groups. At the same time, he has 
not uniformly rejected the ideas of organized business. In some cases 
they have been adopted by him as the basis of legislation. An ex- 
ample is the 1933 Industrial Recovery Act, the code feature of which 
was first conceived by the Chamber of Commerce of the United States. 

Presidents Harding, Coolidge, and Hoover are often accused of 
having acted for "Wall Street," and for "those in control of the 
Nation's productive wealth." But "Wall Street" and "industrial 
management" are not precise phrases describing definite groups of 
American citizens, closely organized, unanimous in their basic philos- 
ophy, and hewing to their programs regardless of time and circum- 
stance. Although they correspond to an extent to the membership and 
philosophy of the Investment Bankers' Association and of the National 
Association of Manufacturers, not even these citizen groups embody 
everything implied therein. Like so many phrases employed in con- 
temporary political discussion, "Wall Street" and "management of 
•capital," "organized labor" and "organized agriculture" are symbols 
used to explain events, events oftentimes unpleasant to those using 
the symbols.. Thus, when it is said that the President recommended 
this piece of legislation, signed that bill, made a particular speech, or 
performed some other definite act, under pressure from a particular 
group readily identifiable among those active in public affairs, it 
betrays a combination of rationalization and over-simplification which 
often ignores significant elements in the case. What is usually meant 
is that at a particular time and in a particular set of circumstances, of 
which the desire of an identifiable set of citizens was one, the Chief 
.Executive took a certain step. 



70 CONCENTRATION OF ECONOMIC POWER 

Nevertheless, it would be unrealistic to deny that a major factor in 
much Presidential behavior is to be found in the existence and public 
activity of organized groups of citizens. In yielding from time to 
time to their demands Chief Executives are behaving as might be 
expected. Somehow to incorporate these group demands into their 
own ideas of the general welfare is essential. It may be taken for 
granted that Presidents are all concerned with furthering the general 
welfare regardless of variations in their political philosophies. Just 
what this concept means to each occupant of the Executive Mansion 
depends, of course, upon his personal genius. But in no case is there 
doubt that the expressed desires of the people, or better, perh,aps, of 
some of the people, are factors giving substance to the concept. In 
theory and in practice, a democratic republic is responsive to the 
needs and desires of its citizens, and in the very nature of things an 
elected Executive must" adapt his notion of the general welfare to 
those conceived and battled for by the groups into which the people 
organize themselves. To this general rule the Chief Executive of the 
United States is no exception. The difficult role of the American 
President is to apply in the interests of all the people a concept of the 
general welfare compounded from the specific desires of some of the 
pteople. 

ADMINISTRATION 

The influence of organized groups on the Federal Government is not 
aimed entirely at Congress and the President. It is felt throughout 
the administrative structure as well. While Congress, as the starting 
point for new policies, is inevitably the primary focus of group 
attention, at the same time policies already decided upon are being 
executed in innumerable Government offices throughout the country. 
The interest which secured enactment of a law must not flag once 
Presidential approval is given, if the gains won in legislation are not 
to be lost in administration. Conversely, laws passed over group 
opposition may encounter continued opposition during enforcement. 

Three aspects of Federal administration are important in con- 
nection with pressure politics: (1) The large number of activities 
performed; (2) the great variety of these activities; and (3) the net 
advantage accruing to business from the daily pushing and hauling 
of administrative officials. 

A mere listing of the executive departments — State, Treasury, War, 
Justice, Post Office, Navy, Interior, Agriculture, Commerce, Labor — 
indicates many of the main areas of administrative activity. The 
number of activities of the departments performing traditional func- 
tions — State, Treasury, War, Justice, Navy, and Post Office — is im- 
pressive, and in the other departments is even more so. Sample 
functions selected at random include, for example, the Interior De- 
partment's construction and operation of irrigation projects and 
promotion of commerce in mineral products. . The Department of 
Agriculture aims to enhance the farmer's economic and social condi- 
tion through many kinds of research, education, and financial subsidy. 
Through meat inspection and other consumer aids it benefits the 
public as a whole. "Among the Commerce Department's functions 
are the development of standards used in science, engineering, indus- 
try, and trade ;. investigation of foreign trade restrictions ; and main- 
tenance of navigation aids for both ocean and air commerce. Among 



CONCENTRATION OF ECONOMIC POWER 71 

other things, the Department of Labor mediates labor disputes, and 
collects and disseminates labor statistics. 

The area of Federal administrative activity extends its boundaries 
even further in the case of the independent agencies. Ten agencies 
regulate private enterprise in the fields of railway labor, rates, and 
services, electric power, interstate communications, and of trading 
in securities, besides administering the anti-monopoly laws and those 
governing labor relations. 19 Six more are active in extending credit 
to individuals and organizations ranging from home owners, farmers, 
and steamship operators to cities, towns, and other public bodies. 20 
War veterans, the unemployed, bank depositors, the aged, the blind, 
and dependent and crippled children are other groups which come into 
direct or indirect contact with Federal agencies. Also, the protective 
tariff system affects thousands of domestic producers. 

This enumeration merely hints at the extent of Federal administra- 
tive activity, yet it indicates scores of points where administrators 
and citizens come into contact with each other. The nature of the 
contact varies, from the mere dissemination of undisputed data to 
such complex functions as the development of legally enforceable 
administrative orders involving differing opinions of law. In be- 
tween, there is a gradation running from informal personal meetings 
between official and citizen, through semi formal conferences with few 
restrictions on the kinds of facts and opinions which are acceptable, 
to highly formalized hearings suggestive of the courtroom, in which 
the rules of evidence govern the admissibility of material. 

Complexity of Administrative Approach. 

In general, the simpler contacts can be made by anyone, regardless 
of education and experience, by mail or in person. The more com- 
plex forms, on the other hand, can be exploited successfully only by 
those trained in the law and familiar with government procedure. 
This fact is known to every alert observer of government, and has 
even been recognized by the Supreme Court. "In dealing with the 
Government and its departments" the Court has stated, "there is fre- 
quently and necessarily required a degree of knowledge and skill, and 
an acquaintance with forms and principles, not possessed by the un- 
lettered citizen." 21 The conclusion is inescapable that talent of this 
kind will be far more readily available to those citizens and groups 
with sizable financial resources at their disposal than to. those without 
such resources. Furthermore, of all active interest groups, business 
controls the largest and most liquid resources, and hence may be 
expected to enjoy a considerable advantage even over other citizen 
groups, in utilizing administrative contacts and procedures. It is 
well known that men of substance find it easier to resort to the courts 
for protection of their rights and advancement of their interests than 
do men of small property. This is also true when it is a question of 
contacting the administrative arm of Government. And if the regu- 

w Interstate Commerce Commission, Railroad Retirement Board, National Mediation 
Board, Federal Power Commission, Federal Communications Commission, Securities and 
Exchange Commission Federal Trade Commission, National Labor Relations Board, 
Social Security Board, Maritime Labor Board. 

20 Reconstruction Finance Corporation, Electric Home and Farm Authority, Disaster 
Loan Corporation, Federal Housing Administration, Home Owners' Loan Corporation, 
U. S. Maritime Commission. 

21 Quoted in E. E. Schattschneider, Politics, Pressures, and the Tariff, Prentice-Hall, 
Inc., New York, 1935, p. 213. 

277780— 41— No. 26 6 



72 CONCENTRATION OF ECONOMIC POWER 

lation of interests growing out of the unequal distribution of property 
formed the principal task of legislation in Madison's time, his obser- 
vation applies with even more force today. 22 

The multitude of Federal services makes it difficult for the average 
citizen to comprehend the total administrative process. He is only 
vaguely aware, if at all, of the number and variety of the points of 
contact between groups and government. He tends to think of group- 
government contacts in terms of his own experience. If he is a mem- 
ber of a pressure group, he may become aware of a certain conflict in 
the pressures applied to an executive department. But at best his 
view of the Federal administration is narrow. 

The owning and controlling groups, such as bankers, industrial 
managers, and the professional classes, on the other hand, are con- 
siderably more sophisticated in governmental techniques and are 
more aware of the many potentially useful points at which contact 
may be made. They may, and frequently do, exert their influence at 
a large number of points in the administrative process. 

Motivation of Administrative Pressure. 

The pressure exerted at the numerous contact points takes various 
forms and is put forth for different purposes. Some groups are 
drawn into the sphere of administrative activity as a result of a 
normal interest in the incidence of such activity. In revenue collec- 
tion, for example, this interest has enabled revenue officials to get 
technical data needed in administering the income and profits tax 
laws, and has also resulted in the expression of opinion by various 
groups on questions of tax administration. The Lumber Manufac- 
turers Association, for instance, has been interested in the determina- 
tion of the basis of taxable gain in the natural resource industries. 
Officers of the National Retail Dry Goods Association have assisted in 
working out the basis for determining the valuation of inventories for 
income tax purposes. Application of excise taxes to games and parts 
of games necessitated consultations with the Toy Manufacturer's 
Association. The tax on bank checks has brought the American 
Bankers Association into the tax administration picture. The 
avowed regulatory purpose of the margarine tax has naturally re- 
sulted in contacts between the Commissioner of Internal Revenue and 
the margarine manufacturers. 23 

A second type of pressure grows out of a group's natural desire for 
adequate financing of an agency whose functioning it finds helpful. 
The Women's and Children's Bureaus in the Department of Labor 
are outstanding examples of this type of interest. 24 

22 In the Federalist (No. 10), Madison said : 

"The regulation of these various and interfering interests (arising out of the unequal 
■distribution of property) forms the principal task of modern legislation, and involves 
the spirit of party and faction in the necessary and ordinary operations of the Govern- 
ment." 

23 E. P. Herring, Public Administration and the Public Interest, McGraw-Hill, New 
York. 1936, pp. 48, 50, 52. 

24 The bureau was established largely through the urgings of representatives of the 
National Women's Trade Union League, the League of Women Voters, the Y. W. C. A., 
and the National Consumers' League, working in cooperation with the A. F. of L. and 
the National Federation of Federal Employees. Its effectiveness depends, to a considera- 
ble extent at least, upon these same groups. The bureau is primarily a fact-finding 
agency, working in the fields of labor standards in industrial practice and labor legisla- 
tion and administration as they affect women. For bringing about reforms the bureau 
relies on private organizations like the League of Women Voters. The bureau has 
likened itself to "a powerful dynamo sending currents of facts made available by the 
Women's Bureau over a national network of wires, and starting activities necessary to 
effect the desired improvements." Ibid., p. 285. With the Children's Bureau a similar 



CONCENTRATION OF ECONOMIC POWER 73 

Equally determined, and equally effective, is group activity aimed 
at obstructing administration. In varying degrees, Federal admin- 
istration of the laws governing the generation and transmission of 
electric power, the labeling of foods, and marine inspection, among 
others, has been obstructed by groups in these industries. 25 

In certain areas of administration, a considerable degree of cooper- 
ation has been effected between regulators and regulated. The rela- 
tions of 'the Interstate Commerce Commission with the Association 
of American Railroads provide an outstanding example. "The most 
significant thing about the special interests surrounding the Interstate 
Commerce Commission is the support they give this regulatory 
body." 26 In the codes under the National Recovery Administration 
(1933-35) this idea of cooperation formed the basis of a partnership 
between Government and business in which industry, in effect, made 
and carried out its own regulatory laws under Government super- 
vision. 27 

Citizen groups often act as a check upon the executive branch of 
the Government, 2 " and may provide an incentive to better administra- 
tive methods. 29 From the group point of view these are byproducts 
of pressure, yet to the public at large they are of major value, and 
probably tend to offset some of the more questionable effects of this 
pressure. 

THE COURTS 

For the American people, and especially for its constituent groups, 
the courts are the keystone of our governmental system. Such groups 
may appear to be less active in the judicial than in the legislative and 
administrative fields. The appearance, however, belies the fact. In 
the courts they are but little less active and their actions are no less 
significant than toward Congress and the administration. In the 
judicial field these activities go under the more dignified title of litiga- 
tion, of seeking an interpretation of the Constitution, or of defending 
individual rights. But they amount to pressure, just the same. By 
law and by custom the courts can uphold or invalidate results reached 
through lobbying in Congress and through pressure on administrative 
officials. 

Litigation in the courts is encouraged by the fact that our Federal 
Government is one. of limited powers. Congress does not have un- 
limited authority to provide legislative remedies for current eco- 

situation prevails. The New York settlement worker, Lillian D. Wald, originated the 
idea for the setting up of such a Government agency. But it was the National Child 
Labor Committee, acting at the suggestion of the National Consumers' League, which 
led the fight for its establishment. Although the bureau administers certain parts of 
the Social Security Act, its main function is the gathering and organizing of factual 
material bearing on child life and welfare among all classes. For pushing reforms it 
relies on the private associations whose activities brought it into being. 

25 See below; pp. 152-160, 185-170, 183-185. 

28 Herring, Public Administration and the Public Interest, op. eit., p. 201. Also see below, 
pp. 148 ff. 

"See below, p. 181. 

28 "Pressure croups * * * must be looked upon as furnishing a political check upon 
a powerful Executive with discretion to put into effect or to suspend laws in particular cases, 
to turn fie purpose of Congress in directions not contemplated by that brdy. or to create 
privileges ard rights as well as to take them away. It is the larger aspect of the question 
of Executive checks that is to be emphasized, i. e., the compelling force of organized opinion 
to make a cureless or arbitrary officer respond to, and to bring a sympathetic officer into 
harmony with, the groups affected. " J. P. Comer, Legislative Functions of National Admin- 
istrative Authorities. Columbia University Press, New York, 1927, 199-200. 

59 "Thr> insistence of powerful social groups upon the practical realization of their legis- 
lative program is a constant sDur to better administrative methods." L. D. White, Public 
Administration. McGraw-Hill, New York, 1926, p. 45. 



74 CONCENTRATION OF ECONOMIC POWER 

nomic and social problems. In performing its functions it must stay 
within the boundaries of its powers as enumerated in the Constitution 
and as interpreted by the Courts. In a Nation-wide industrial 
economy, this situation creates an uncertainty over the validity of 
acts of Congress which inevitably invites litigation. 

Constitutionality and Judicial Review. 

This characteristic of our constitutional system emphasizes the im- 
portance of the judiciary in determining finally what public policy 
does and does not consist of. For example, Congress has the power 
to regulate "commerce among the several States." What does this 
mean as a matter of policy ? The answer does not lie in the total of the 
laws passed by Congress in connection with what it regards as inter- 
state commerce. It rests in the court opinions on the validity of cer- 
tain of these laws. Nor has the answer always been clear and un- 
ambiguous. At times the Court "has recognized an intimate — even an 
indivisible — relationship between the production of certain commodi- 
ties and their sale in a national market." 30 On other occasions, how- 
ever, it has insisted that "the production and manufacture of a com- 
modity, and its sale and transportation, are 'two distinct and separate 
activities.' " 31 The- point to be emphasized is not the inconsistency, 
important though it is. What is especially noteworthy is the primacy 
of the Supreme Court in defining commerce and fixing the boundaries 
beyond which the commerce power may not be exercised. The power 
of the Court to give substance to policy extends, in varying degrees, to 
the other fields in which Congress is authorized to legislate. 

But the really vital factor in judicial review is the readiness of citi- 
zens to employ the procedure. Suits do not file themselves, any more 
than laws are self-enforcing. Congress legislates and the^ executive 
administers. But unless someone is willing to challenge the authority 
of the administrative officer to do what he is doing, judicial review never 
gets under way. The initiative of citizens in appealing to the courts 
controls, no matter whether the citizen brings suit against a Federal 
officer, or whether he has a suit filed against him, as defendant, by the 
Government. 

In the former case, if a citizen will not act, the law is presumed to be 
a valid exercise of congressional power. No court will on its own 
motion pass upon the law's constitutionality. Even when the citizen 
is defendant, his attitude is likely to be controlling. Of course, he may 
not contest the suit, or, if he loses it, he may not appeal to a higher 
court. In such a case the Government's judgment as to the legality of 
the citizen's actions controls. But in the far more likely case of a de- 
fense or an appeal from the judgment of the lower court it is the de- 
fendant's readiness to dispute the law's validity which sets in motion 
the machinery of judicial review. The Supreme Court is able to wield 
its veto power only to the degree that cases are brought to it for de- 
cision. 

Increasing use of review power. — The importance of the courts in 
reviewing public policy has never been greater than it is today, partly 
because of the promptness with which groups of private citizens re- 
sort to the courts for decisions as to the validity of acts of Congress. 

30 W. H. Hamilton and D. Adair, The Power to Govern, New York, 1937, p. 15 and cases 
there cited. 

31 Ibid., p. 17, quoting Mr. Justice Sutherland in Carter v. Carter Coal Co. (298 U. S. 238 
(1936). at p. 303). 



CONCENTRATION OF ECONOMIC POWER 75 

This is not to criticize a situation. It is merely to state a fact. There 
have always been citizens willing and ready to seek judicial review of 
acts of Congress; nor has the success attending these efforts been 
without deep significance in our national development. But in recent 
years the challenges to the authority of Congress have become more 
frequent and more far reaching in their effects. McBain, among 
others, has pointed out this fact. He states that in the 150 years up to 
1933 but 10 laws of prime importance had been struck down by the Su- 
preme Court, while between 1934 and 1936 5 such laws were invali- 
dated. This is his trenchant statement : 

Perhaps .the only acts in our entire history antedating the New Deal that marked 
high spots of judicial annihilation were the Missouri Compromise over slavery, the 
Legal Tender Act (promptly overruled), the Civil Rights Act of the reconstruc- 
tion era, the Income Tax Act of 1894, the act of 1898 prohibiting interstate car- 
riers from discriminating against labor unions, the first and second child labor 
acts, the Minimum Wage Act for the District of Columbia, the Federal Corrupt 
Practices Act as applied to senatorial primaries, and an act requiring senatorial 
confirmation of Presidential removals from office. In all, only 10 laws of first 
rate significance 1 

But in 2 short years the court has already struck clown eight acts of the New 
Deal Congress, five of which (the hot-oil provision, the Railway Retirement 
Act, the N. R. A., the Farm Mortgage Act, and the A. A. A.) were of very great 
importance. Even the gold-clause resolution was only partly salvaged from 
destruction. And the end is by no means yet. Other important acts are await- 
ing almost certain slaughter at the hands of the court 32 

Subsequent events proved the correctness of Professor McBain's 
prophecy. Four months later the Court had invalidated other acts of 
primary significance, including the Bituminous Coal Conservation 
Act of 1935. 

The decision of the Court is more than a judgment in an important case. It in- 
volves more than the power of Congress to prescribe a way or order for bitumi- 
nous coal ; the plight of textiles, of boots and shoes, and of lumber is equally 
notorious; and the factors which bring disorder intothe affairs of many another 
industry are Nation-wide in their scope. A growing opinion has it that compe- 
tition is inadequate to its economic task; that the matter lies beyond the compe- 
tence of the several States ; and that the real choice is between Federal regula- 
tion and industrial disorder * * * The formal bother is over the frontiers 
of commerce ; the real issue is the power of the government to govern. 33 

After the President's proposal to reorganize the Supreme Court in 
1937, the Court's intransigent attitude toward New Deal legislation 
relaxed somewhat, and the Social Security and Labor Relations Acts 
were upheld. 

"Duty of the citizen". — Obviously, if. Congress had not adopted new 
national policies in these hitherto unexplored fields the Court would 
have had no opportunity to review them. But it is equally obvious 
that such opportunity would not have been presented to the Court if 
groups of citizens had not taken the initiative in challenging the power 
of Congress to frame such policies. This is the point deserving em- 
phasis. In the operation of the courts, as in the operation of Congress 
and the executive branch, the really significant and perhaps determin- 
ing role is played by citizen groups. They may act through trade 
groups, such as the Edison Electric Institute, the National Coal As- 
sociation, the Association of American Railroads, through manufac- 

32 H. L. McBain, "The Issue : Court or Congress," The New York Times Magazine, January 
19, 1936, p. 22. 

33 Hamilton and Adair, op. eit., p. 17. 



76 CONCENTRATION OF ECONOMIC POW T .ii 

turers and processors associations, or through farm organizations. 34 
Or, again, citizens organized as a corporation may be the form in which 
a group is active at the bar. These are, in general, the same forms 
in which American citizens formally group themselves for actively 
pressing their interests before Congress and the executive branch. 
Just as political pressure against Congress is generated in corpora- 
tion board rooms, trade association headquarters, and other citizen 
group executive committee rooms, so these are the places where the 
fateful decisions about litigation are reached. Upon these decisions 
hangs the fate of public policies. "A fate of a public policy hangs on 
the validity of an act; an act awaits the judgment in a case; a case 
turns upon the boundaries of a word. This is the way of the law." 35 

Pressure^ groups and judicial review. — Most legislation, it will be 
recalled, is the result of the insistence of organized minorities. And 
most important legislation is adopted over strong minority opposition. 
The full significance attaching to these facts can be grasped only by 
appraising the actions of these opposing minorities after the legisla- 
tion is enacted 

It is difficult, almost impossible, to offer satisfactory documentation 
for the statement that pressure groups do not stop with Congress, the 
President, or the administrative agencies in the achievement of their 
aims. It is even more difficult to find the real rather than the nom- 
inal initiators of litigation in the Supreme Court record than to find 
and identify the original impulses behind statutes. Even if we agree 
that they who pose the questions to the Supreme Court are the real 
molders of national policy, we will find it difficult to identify them. 
There is not the same amount of data available from which to draw 
conclusions in this field as in the fields of legislation and administra- 
tion. Even there the data are not complete, but they do justify the. 
conclusion that pressure groups are the most important single factor 
in the legislative process, and are becoming of increasing importance 
in the administrative process. It is. not possible to reach such a 
conclusion from the data as to the importance of citizen groups in the 
judicial process. ■ 

Yet pertinent material is available, meager though it is. Over half 
a century ago, a group of farmers, organized into the National 
Grange, initiated the movement to regulate those forms of private 
corporate enterprise affected with a public interest. The movement 
has not yet subsided. On the contrary, it has grown stronger. Before 
its initial impulse was spent, the courts had answered the question 
which the Grange played such a part in framing, as to whether the 
fates and services of public utilities were subject to Government regu- 
lation, and Congress had passed the Interstate Commerce Act of 
1887. 36 This answer, although it established the principle of public 
regulation, has .been undergoing revision down to the present day. 

84 "Confidence cannot be restored or maintained when Government officials and legis- 
lators, in spite of their oaths of office, endeavor to avoid by technicalities the true in- 
tent of constitutional guaranties .or deliberately legislate with respect to matters not 
delegated to them. This places on the individual citizen the heavy burden of asserting 
his rights through judicial procedure, not as to the relation of his acts to such legisla- 
tion, but as to the right of government to deal at all with such matters." National Asso- 
ciation of Manufacturers, The Platform of American Industry, p. 4. 

M Hamilton and Adair, op cit.. p. 9. 

so The Gkranger cases are discussed below, pp. 142-143. 



CONCENTRATION OF ECONOMIC POWER 77 

The railroads still endeavor to keep public regulation to a minimum, 
and are frequently successful, as in their suits in 1934 and 1935 against 
Federal retirement and pension legislation. 37 

Today the principle of public regulation is being applied to the 
electric and gas utilities, as well as other industries, but only over 
their bitter and relentless opposition. Their business association, the 
Edison Electric Institute, has resorted to the courts to obstruct and 
defeat Federal regulation. The Institute inspired the suits against 
the Tennessee Valley Authority Act, the Public Works Title of the 
National Industrial Recovery Act, and the Public Utility Holding 
Company Act, although in none of the suits did it appear as a party. 88 

In other fields of private enterprise, not yet so clearly recognized as 
being affected with a public interest, the conduct of groups in initiat- 
ing action or compelling the government to take action is often de- 
termining. Most actions of this sort grow out of alleged violations 
of the Federal antitrust laws. In the Appalachian Coals case, for 
example, in which the Government in 1933 tried to put a stop to a 
cooperative marketing scheme, the group responsible for setting up 
the scheme was the National Coal Association, although it was not 
a party to the suit. 39 In many other industries, competitive on the one 
hand, and monopolistic and semi-monopolistic on the other, trade 
associations have been active and have frequently figured in suits 
under the antitrust laws. This is the case with the American Hard- 
wood Manufacturers Association in 1921, 40 with, a group of companies 
headed by the American Linseed Oil Co. in 1923, 41 with the Maple 
Flooring Manufacturers and Cement Manufacturers Protective Associ- 
ation in 1925, with the Sugar Institute in 1936. 42 

The argument that groups are the really significant factors in the 
judicial process is supported further by their appearance in cases as 
friends of the court. In the Appalachian Coals case, two of the three 
individuals filing briefs as amici curiae were Washington represen- 
tatives of the Cotton Textile Institute and of the National Lumber 
Manufacturers Association. In the Sugar Institute case not only 
these two trade groups but, also, the Window Glass Manufacturers 
Association and the Consumers Goods Industries Committee were 
represented as friends of the court. 

Vincent P. Whitsitt, manager and general counsel of the Association 
of Life Insurance Presidents, said that the association had paid 
$60,000 to W. M. Bullitt and John W. Davis to act as "special counsel" 
in the test case over the Frazier-Lemke Act. 43 The act was held uncon- 
stitutional. Also, the same organization paid amounts totaling $17,500 
in 1934 to Clarence J. Shearn, Bruce S. Bullitt, and Root, Clark, 
Buckner & Ballantine, to act in a "proposed suit" to test the constitu- 
tionality of a proposed New York City law to tax insurance com- 
panies "when, as, and if the act became effective." 44 

& Railroad Retirement Board v. Alton (295 U. S. 240 (1935)), and Supreme Court of 
the District of Columbia, June 26, 1936. 

88 These cases are discussed below, in ch. IX. 

88 Appalachian Coals, Inc., et al. v. U. 8. (288 U. S. 344 (1933)). 

40 American Column and Lumber Co. et al. v. V. 8. (257 U. S. 377 (1921)). 

41 V. 8. v. American Linseed Oil Co. et al. (262 U. S. 371 (1923) ). 

43 Maple Flooring Manufacturers Association v. U. 8. (268 U. S. S63 (1925)) ; Cement 
Manufacturers Protective Association v. U. 8. (268 U. S. 5f8S (1925)) ; Sugar Institute, 
Inc., et al. v. U. 8. (297 U. S. 553 (19361). 

48 Hearings Before the Temporary National Economic Committee, Part 10, p. 4352 ff. 

** Ibid., p. 4354. 



78 CONCENTRATION OF ECONOMIC POWER 

When the Supreme Court decided in 1936 that Congress did not have 
the power to deal with economic problems as it had attempted to do in 
the 1933 A. A. A., it ruled on a matter in which -many citizen groups 
had filed briefs as friends of the court.* 5 Briefs supporting the valid- 
ity of the act were filed by representatives of the League for Economic 
Equality, American Farm Bureau Federation, National Beet Growers' 
Association, the Mountain States Beet Growers' Marketing Associa- 
tion, Farmers' National Grain Corporation, and the Texas Agricultural 
Association. Briefs challenging the validity of the act were filed by 
Hygrade Food Products Corporation, American Nut Co., Berks Pack- 
ing Co., et al., General Mills et al., the National Association of Cotton 
Manufacturers, and the Farmers' Independence Council of America. 
The latter organization was set up and financed by the American Lib- 
erty League, an anti-New Deal propaganda agency established in 1934. 

In 1938 the National Association of Wool Manufacturers threatened 
to contest the constitutionality of the Reciprocal Trade Agreements 1 
Act, passed in 1934 and twice extended, in 1937 and 1940. 46 The threat 
was issued while negotiations were in progress with the United King- 
dom and may have been intended as an attempt to maintain the import 
duties on British woolens. Cuts were made in many items in the wool 
manufacturers' schedule, however, and the threatened attack on the 
act's constitutionality did not materialize, probably because the associa- 
tion found it impossible, in the light of Supreme Court decisions, to 
prove injury as the result of the lowered duties. 47 

Some legislation adopted by Congress as a result of group pressure 
is immune from judicial review. War pension legislation is an 
example. 

All of the veterans' bonus legislation arising out of the World War 
was passed over strenuous opposition. President Harding vetoed the 
original adjusted compensation bill. The bill providing for the 20- 
year endowment insurance policy plan was adopted in 1924 over Presi- 
dent Coolidge's veto. Hoover vetoed an amendment providing for 
Treasury loans against the face value of insurance certificates. The 
1935 act providing for immediate payment of the face value of the 
certificates became law over the veto of President Roosevelt. These 
measures were also strenuously opposed by the Chamber of Commerce 
of the United States, the National Association of Manufacturers, the 
American Bankers Association, and the National Economy League, 
along with many other citizen associations, great and small, which in 
these matters have sided with the post-war presidents. 

With apparently but one exception all this opposition stopped short 
of seeking judicial review of the legislation. The exception was a 
group of New York lawyers and veterans who tried to get the Su- 
preme Court of the District of Columbia to rule upon the 1924 act. 
The court refused on the ground that an individual or a small group 
of citizens could not call into question or impede the spending of 
public funds. The group then tried to have the United States Su- 

« U. S. v. Butler et al, Receivers of Hoosac Mills Corp. (297 U. S. 1 (1936)). 

48 See the letter dated May 3, 1938, to members of -the association and others inter- 
ested in the proposed reclfrocal trade agreement with the United Kingdom, Congres- 
sional Record, 75th Cong., 3d sess., p. 1886. 

"'The National Association of Wool Manufacturers is one of the oldest trade associa- 
tions in the country and one of the most continuously active in governmental affairs. 
For decades it has lobbied in Congress, particularly on tariff matters, and for an equal 
period it has looked after wool manufacturers' problems which have come up with Fed- 
eral administrative agencies. 



CONCENTRATION OF ECONOMIC POWEK 79 

preme Court compel the lower court to pass upon the constitutionality 
of the legislation. The petition was refused without written opinion. 48 , 

In the light of post-Civil War cases, in which the Court had helcT 
that the whole question of giving or withholding war pensions was 
within congressional power, these post-World War cases appear to 
define "a clear line of judicial policy permitting Congress to do what- 
soever it pleases concerning veterans legislation without fear of ju- 
dicial restraint." 49 In such a situation it is perhaps not surprising 
that there are not more cases in which the pension power of Congress 
has been questioned. The fact, however, is not without interest, in 
view of the constant readiness of trade associations and other citizen 
groups to challenge the powers of Congress. 

As a factor in litigation, citizen groups are of significance more be- 
cause of the importance of the cases they are connected with than of 
their number. During our entire history the Supreme Court has in- 
validated less than a hundred laws. Yet it would hardly be argued that 
the number was an accurate measure of their significance in the Na- 
tion's development. As already mentioned, McBain found that only 
10 laws of first-rate importance had been overturned by the Court in 
all the years prior to the New Deal. Five of the eight laws which the 
Court struck down in the next 2 years were "of very great importance." 
The Association of American Railroads instigated the Court action in 
the railroad retirement legislation of 1934, and in the A. A. A. case 
the National Association of Cotton Manufacturers lent support to the 
plaintiff, if it did not actually initiate the action. Thus,- there is solid 
ground for believing that in the framing of many of the first-rate 
questions which ultimately come to the Supreme Court for decision, 
citizen groups play an important, if not a vital, part. 

« 270 U. S. 631. 

40 N. J. Padelford. "The Veterans' Bonus and the Constitution," American Political 
Science Review, vol. XXVII. No. 6 (December 1933), p. 927. 



CHAPTER VI 
INDUSTRIAL RELATIONS 

Public policy in the field of industrial relations has been formulated 
by Congress over the bitter opposition of organized industry, an opposi- 
tion which is still continuing in a determined effort to change that 
policy. The economic power of business and the "educational" per- 
suasiveness of its newspaper, advertising, and legal allies enabled it 
between 1933 and 1937 to frustrate the initial efforts of the Federal 
Government to regulate labor relations. The Supreme Court valida- 
tion of the Labor Relations Act in 1937 marked a set-back to industry, 
but its forces are by no means discouraged. On the contrary, they 
show signs of increasing confidence in their ability sooner or later to 
outmaneuver labor and government, and again bring public policy 
more closely into line with business desires. 

CHANNELS OF BUSINESS PRESSURE 

Business exerts its influence on industrial relations policy through 
the National Association of Manufacturers, its members and affiliates, 
and other sympathetic organizations. That influence is exercised on 
behalf of the "open shop" and in opposition to the "closed shop." A 
necessary corollary is opposition to organized labor and particularly to 
its political activity. 

Through Nation-wide organizations, such as the National Metal 
Trades Association, and local employers' federations, such as the Asso- 
ciated Industries of Cleveland, the National Association of Manufac- 
turers applies its policy on the industrial front. 1 Through the National 
Industrial Council, instituted and dominated by the National Associa- 
tion of Manufacturers, employer activity is mobilized and directed on 
the political front. The Special Conference Committee of New York, 
composed of representatives of 12 of the country's largest manufac- 
turing and utility corporations, works behind the scenes to exchange 
information and to coordinate, so far as possible, their respective labor 
policies, and to join forces with the N. A. M. and the Chamber of Com- 
merce of the United States in their lobbying at Washington. 2 

Although not always in complete accord, the N. A. M. and the Cham- 
ber of Commerce are as one in their opposition to the National Labor 
Relations Act and in their support of proposed legislation to limit 
the law enforcement powers of administrative agencies, and to in- 
crease correspondingly the power of the courts. 3 The American Bar 
Association has, by framing and pushing legislative proposals de- 
signed to achieve this purpose, indicated its fundamental community 
of interest with business. 4 The American Newspaper Publishers' 

1 S. Rept. No. 6, pts. 4 and 5, 76th Cong., 1st sess. 

2 Ibid., pt. 6, pp. 57-74. 

3 See above, pp. 25-36. 

4 For a statement of the Chamber of Commerce support of this legislation and a dis- 
cussion of the legislation itself, see above, pp. 37-40, and below, pp. 191-194. 

81 



82 CONCENTRATION OF ECONOMIC POWER 

Association shares a similar community of interest. This community 
of interest is reflected in the opinions which these and other profes- 
sional and business organizations publish, and which are essentially 
projections of the philosophy of industrial management as conceived 
by business and industry. 5 The origin and development of the Na- 
tional Association of Manufacturers, the substance of its philosophy 
and the methods used in applying it, are, therefore, of central im- 
portance in 'a discussion of the forces shaping the Nation's industrial 
relations policy. 6 

ORGANIZATION OF THE N. A. M. 

The National Association of Manufacturers is an organization of 
over 3,000 corporations engaged in manufacturing and utility serv- 
ices. Its members are located in every section of the United States, 
and are reputed to employ some 2,100,000 workers. This would be 
more than 25 percent of the total employees in manufacturing industry. 
Many of the .country's 200 largest manufacturing enterprises belong to 
the N. A. M. 7 

In addition to being an association of manufacturers and utilities, 
the N. A. M. is a coordinating agency for some 250 national, State, and 
local employers' associations in every part of the country. This co- 
ordination is achieved through the National Industrial Council, a 
federation of these various employers' associations organized under 
the aegis of the N. A. M. Through the National Industrial Council 
the N. A. M. is reputed to influence from 30,000 to 35,000 manufac- 
turers, employing between 4,500,000 and 5,000,000 persons. This is 
a substantial proportion of all persons employed in manufacturing. 
It is with some plausibility, therefore, that the association assumes the 
status of "the voice of American industry." 8 

The N. A. M. was organized in 1895 at the instigation of some manu- 
facturers in Ohio. Its original statement of objectives dealt princi- 
pally with the promotion of trade, particularly international com- 
merce and the merchant marine. Not until 1903 did the N. A. M. 
take a definite stand on labor relations and labor legislation. In the 

6 See the statement regarding the American Bankers' Association and the Investment 
Bankers' Association of America below, pp. 125-139. 

6 Note the following significant statements by the Industrial Committee of the Na- 
tional Resources Committee in The Structure of the American Economy (Washington, 
1939) : 

"* * * there are certain economic-interest groupings operating through formal 
organizations which have a significant impact on the policies adopted by specific produc- 
ing units. The most important of the economic interests formally organized are those 
of business, labor, farmer, and consumer" (p. 163). "Probably the 5 most important 
business associations are the national associations in the fields of finance, railroads, 
utilities, manufacturing, and all business." (p. 164). These are the American Bankers' 
Association, the Association of American Railroads, the Edison Electric Institute, the 
National Association of Manufacturers, and the Chamber of Commerce of the United 
States. "With the possible exception of the United States Chamber of Commerce, these 
national associations appear to be more or less closely tied into the corporate community. 
Six of the 31 officers and directors of the American Bankers' Association are officers 
or directors of 6 of the country's 30 largest banks. The railroad and utility associations 
are almost entirely composed of the corporations listed among the 200 largest, and their 
directorates are for the most part made up of representatives of these large enterprises. 
The chairman of the board "and 6 others of the 18 oflicers of the National Association 
of Manufacturers are responsible executives of the 106 largest industrial corporations, 
* * * and others of the largest corporations are represented on the association's 
important policy committees. Even in the case of the United States Chamber of Com- 
merce, there is an important interlocking with the large corporations, 16 directors and 
oflicers out of 57 being associated with the management of 28 of the 250 larger cor- 
porations" (p. 164). 

7 There is no complete list of National Association of Manufacturers members available 
in public print. A list of large contributors is available in S. Rept. No. 6, pt. 6 ,76th Cong., 
1st sess., pp. 247-25'5. 

8 See National Association of Manufacturers, Platform of American Industry, 1935, p. 13. 



CONCENTRATION OF ECONOMIC POWER §3 

intervening years, labor unions had developed great strength in mem- 
bership and organization. The total membership of trade unions is 
said to have increased from 447,000 in 1897 to 2,072,700 in 1904. 9 This 
was considered a great threat to what was then termed "industrial 
freedom." At the New Orleans convention of the N. A. M. in April 
1903, a labor platform was adopted, essentially a declaration for the 
open shop. According to the N. A. M. itself, this convention "marked 
the first declaration by a representative body for the open shop as a 
cardinal policy of American manufacturing." 10 

Although a clause added in 1904 considered the right of employees 
to contract for their services in a collective capacity, in practice the 
association's officers were hostile toward labor unions, on the theory 
that the ultimate objective of any labor union was the imposition of 
the closed shop, to which the association was irrevocably opposed. 

Policies of the N. A. M. 

In 1903, under the leadership of its president, David M. Parry, the 
N. A. M. took the initiative in a national coordination of employers' 
labor policies and founded the Citizens' Industrial Association of 
America, which during the next few years became a powerful agency 
of propaganda against labor unions and labor legislation. The Citi- 
zens' Industrial Association was strong in its own right and was fur- 
ther strengthened by the affiliation of strong anti-labor and open 
shop employers' associations in particular fields, such as the National 
Metal Trades Association. In 1907, however, the N. A. M. undertook 
to expand its membership and multiply its influence still further. As 
a result of this campaign, a permanent organization was formed in 
January 1908 which came to be known as the National Council of 
Industrial Defense. 



8 Leo Wolman, The Growth of American Trade Unions, 1880—1923, National Bureau of 
Economic Research, 1924, pp. 33-34. 

10 S. Rept. No. 6, pt. 6, 76th Cong., 1st sess., p. 6. The association's labor principles then 
adopted were as follows : 

"The National Association of Manufacturers of the United States of America does hereby 
declare that the following principles shall govern the association in its work in connection 
with the problems of labor : 

1. Fair dealing is the fundamental and basic principle on which relations between em- 
ployees and employers should rest. 

2. The National Association of Manufacturers is not opposed to organizations of labor as 
such, but it is unalterably opposed to boycotts, blacklists, and other illegal acts of inter- 
ference with the personal liberty of employer or employee. 

3. No person should be refused employment or in any way discriminated against on 
account of membership or non-membership in any labor organization, and there should be 
no discriminating against or interference with any employee who is not a member of a 
labor organization by members of such organizations. 

4. With due regard to contracts, it is the right of the employee to leave his employment 
whenever he sees fit, and it is the right of the employer to discharge any employee when he 
sees fit. 

5. Employers must be free to employ their work people at wages mutually satisfactory, 
without irterferenee or dictation on the part of individuals or organizations not directly 
parties to uuch contracts. 

6. Employers must be unmolested and unhampered in the management of their business, 
in determining the amount and quality of their product, and in the use of any methods or 
systems of pay which are just and equitable. 

7. In the interest of employees and employers of the country, no limitation should be 
placed upon the opportunities of any person to learn any trade to which he or she may 
he adapted. 

8. The National Association of Manufacturers disapproves absolutely of strikes and lock- 
outs, and favors an equitable adjustment of all differences between employers and em- 
ployees by any amicable method that will preserve the rights of both parties. 

9. The National Association of Manufacturers pledges itself to oppose any and all 
legislation not in accord with the foregoing declaration." 

In 1904 the following provision was added to the labor principles : 

"Employees rave the right to contract for their services in a collective capacity,' but any 
contract that contains a stipulation that employment should be denied to men not parties 
to the contract is an invasion of the constitutional rights of the American workman, is 
against public policy, and is in violation of the conspiracy laws. This association declares 
its unalterable antagonism *to the closed shop and insists that the doors of no industry be 
closed against American workmen because of the'ir membership or non-membership in any 
labor organization" (Ibid., p. 7). 



g4 CONCENTRATION OF ECONOMIC POWER 

The council was considered the right arm of the National Associa- 
tion of Manufacturers. Its primary" purpose was political, to serve 
as the legislative pressure group for the National Association of Man- 
ufacturers. The president of the association, speaking before the 
1909 convention, said : "We have an organization within this organi- 
zation for the purpose of looking after what I will term bad legisla- 
tion and eventually to promote good legislation." n 

The council adopted certain resolutions on August 19, 1907, stating 
that it should have power to establish and maintain (1) a legislative 
bureau, (2) a legal bureau, and (3) a bureau of publicity and educa- 
tion. 12 

In 1908 Mr. James Emery appeared in opposition to bills exempt- 
ing labor unions from the operation of the Sherman antitrust law, 13 
and in 1912 also opposed bills restricting the issuance of injunctions 
in labor disputes. 14 

From 1909 to 1913, the N. A. M. and the National Industrial Coun- 
cil pursued a vigorous policy of opposition to unions on four fronts : 
In the political field, by opposing candidates favored by labor and 
supporting candidates friendly to the association's point of view; in 
the legislative field, by opposing legislation sponsored by labor 
unions; through propaganda, by disseminating printed matter and 
sponsoring lecture' tours throughout the country for the open shop 
and against unions; and, finally, in the field of labor relations, by ad- 
vising and aiding employers in their opposition to labor unions. 
When a scandal over their political activities broke out as a result of 
newspaper articles written by a former agent of the association, both 
Houses of Congress passed resolutions to investigate the activities of 
the association. 15 

The lobbying activities of the N. A. M. were summarized in 1913 
by the select committee of the House of Representatives as including 
opposition to ail legislation limiting the right of workmen to contract 
as to the amount of time they shall labor and limiting the power of 
courts of equity to issue writs of injunction; and opposing the exclu- 
sion of organized labor from the provisions of the Sherman Anti- 
trust Act. While supporting workmen's compensation legislation, 
industrial and vocational education, merchant marine legislation, and 
the creation of a Tariff Commission, the N. A. M. opposed legislation 
permitting unionization of Government employees. It also opposed 
restriction of transportation in interstate commerce of articles pro- 
duced by child labor. 16 

In addition to these activities, a page in the House of Representa- 
tives was put on the pay roll of the N. A. M. with the knowledge and 
consent of its counsel, in order to obtain legislative information. The 
association participated ■, actively in electioneering. 17 It gave active 

11 Proceedings of the National Association of Manufacturers, 1909, p. 231. 
u H. Rept. No. 113, 63d Cong., 2d sess 1913, p. 7. 

13 Hearings before the subcommittee or the Senate Committee on the Judiciary on S. 6331 
and S. 6440 ; also hearings on H. R. 19745, 60th Cong., 1st sess. 
M H. R. 23635, 62d Cong., 2d sess. 

15 Hearings on S. ReJ. 92, 63d Cong., 1st sess. 

16 S. Rept. No. 6, pt. 6, 76th Cong 1st sess., p. 18 ff. 

17 President Kirby, of the association, testified : 

"We have endeavored both to elect and to defeat candidates for office. We have tried 
to elect to Congress men whom we have known to possess the courage of their convictions, 
and to get under the skin of this industrial question, and who fearlessly opposed the legis- 
lation that we have been opposing. We have used every endeavor to put them back into 
Congress, of to elect such men to Congress. We have as openly endeavored to defeat men 
who have openly done the other thing, and that we proposed to continue to do as citizens, 
as a duty which we owe to our country. (Hearings on S. Res. 92, 63d Cong., 1st sess., pt. 
56, p. 4502.) 



CONCENTRATION OF ECONOMIC POWER 85 

support to approved candidates for Congress, attempted to influence 
the selection of House committees, and carried on an ambitious educa- 
tional program. 18 

In the course of the Senate and House hearings no indication was 
given that any of the officers of the association regretted any of these 
activities. On the contrary, they considered the congressional inves- 
tigation an opportunity to present the association's point of view to the 
public. 19 Not only did the association representatives refuse to admit 
the questionable character of their activities, but, on the contrary, con- 
tinued their efforts in the same direction during the administration of 
President Wilson, beginning particularly during his second term. 

Wilson's administration brought with it legislation for the control of 
corporations. Moreover, as a result of the war, demand for American 
industrial production grew so rapidly as to put labor in a position of 
controlling importance. As a result, an upsurge of labor organization 
under the leadership of the American Federation of Labor confronted 
the N. A. M. with the second challenge in its history. Just as it had 
done in 1903, the association fortified its organization and started a 
propaganda program which at this time was called the "Industrial 
Conservation Movement." In March 1916 President Pope of the as- 
sociation sent out a call to all members "urging them to lend their aid 
in a campaign to ref ocus the industrial perspective of the American 
people and to give all classes of citizens a better understanding of their 
responsibility to our industries and of the bearing which industrial 
prosperity has on their own welfare." 20 For this purpose, the N. A. M., 
in conjunction with 18 other national industrial associations, organized 
the National Industrial Conference Board. 21 The objects of thVboard 
were to ascertain "pertinent economic facts underlying and affecting 
industrial conditions," to secure "joint deliberation and joint action by 
the manufacturers of the country through their chosen delegates, for 
the sound development of American industry," to promote "under- 
standing and satisfactory relations between employers and employees," 
to give the public "an accurate conception of the character, scope, and 
importance of industry" and "to command * * * the attention of the 
Government when formulating industrial legislation and policies." 22 
The association also sponsored the formation of the United States 
Chamber of Commerce, thus completing the organization of business 
interests. 23 With the National Council of Industrial Defense (after 
1919 called the National Industrial Council) embracing the employers' 
associations, the United States Chamber of Commerce covering the 
boards of trade and chambers of commerce throughout the country, 
and the National Industrial Conference Board providing the materials 
of propaganda, the National Association of Manufacturers set out to 
"educate" the country by the use of all available channels of com- 
munication. 

From 1916 to 1920 the N. A. M. pursued a vigorous campaign as an 
"industrial conservation movement." After 1920 this movement re- 

M Hearings on S. Res. 92, 63d Cong., 1st sess., pt. 45, pp. 3896, 3935, 4091,4411 : pt 51 
p. 4096; pt. 54, pp. 4349-4350 ;pt. 56, pp. 4373 and 4407. ' P ' 

M Ibid., pt. 56, p. 4502 ; and hearings before the select committee of the House of Repre- 
sentatives under H. Res. 198, 63d Cong., 1st sess., pt. 24, p. 2129. 

80 Proceed inars of the National Association of Manufacturers, 1918, d. 211 

21 Ibid., p. 106. 

22 Proceedings of the National Association of Manufacturers, 1919, p. 144 

** Hearings before a Subcommittee on Education and Labor, 75th Cong., 3d sess., pt. 18, 



g(J CONCENTRATION OF ECONOMIC POWER 

solved itself into its essential characteristic of open-shop propaganda. 
The decade of the twenties was characterized, on the one hand, by the 
"welfare" philosophy in industrial relations, and the open-shop move- 
ment in actual practice. The N. A. M. placed its organization and its 
resources at the service of this movement. After 1926, however, the 
activities of the association were more circumspect and less belligerent, 
perhaps because the upsurge of the labor movement in the years pre- 
ceding Harding's administration had spent itself, and union member- 
ship was on the decline. Furthermore, the association felt that there 
was less danger of undesirable labor legislation under Harding and 
Coolidge. During those years, the National Association of Manufac- 
turers coasted along less actively than before, although still adhering to 
its traditional policy of opposition to trade unionism, and its educa- 
tional efforts. 

ORGANIZED LABOR 

Other things being equal, the lengths to which business has felt itself 
obliged to go in maintaining the upper hand in industrial relations 
have varied with the political strength of labor. This, in turn, has 
varied with the kind" of reception accorded organized labor's requests 
by Government. Until 1933 labor contacts with Government were 
largely confined to Congress and the Federal courts. In these contacts 
labor generally fared better with Congress than with the courts. 24 

Since 1933, with the legal recognition of labor's right to organize 
and bargain collectively, labor has been drawn into closer contact with 
the Federal administration. This situation has drawn organized bus- 
iness into the area of government with a volume of talent, resources, 
and energy hitherto unequaled. Business, especially large-scale busi- 
ness, has resolved to maintain intact its control over industrial rela- 
tions, which was practically undisputed up to 1933. 

The American Federation of Labor. 

In the light of the origins and objectives of organized labor, it is 
not surprising that business has been able to dominate industrial 

21 The American Federation of Labor claims to have influenced the structural work of the 
Government as well as legislation in many ways. The Department of Labor, established in 
1913, was the result of continued pressure from organized labor dating back to 1884. In 
the Clayton Act of 1913 organized labor was able to persuade Congress to exempt labor 
unions from prosecution under the antitrust laws. The 1915 Seamen's Act to improve the 
conditions under which American sailors work and live was pushed through Congress by the 
American Federation of Labor and the International Seamen's Union. In 1932 Congress 
adopted, also under pressure from organized labor, the so-called Norris-LaGuardia Anti- 
injunction Act, recognizing the right of workers to organize and bargain collectively, out- 
lawing the "yellow dog" contract, and rendering legal certain forms of conduct in labor 
disputes. 

The above examples of successful labor political pressure must be considered in con- 
junction with numerous examples of less successful labor pressure upon the courts. While 
the legal right of unions to exist and function has been established for many decades, and 
while the primary boycott, the right to picket, and the right to strike have also been 
accepted, the courts have set many limitations on labor's freedom of action. For instance, 
sec. 20 of the Clayton Act forbade the issuance of injunctions "unless necessary to prevent 
irreparable injury to property or to a property right." The courts ruled that "property 
right means the right of. a man to do business" and that this entitled him to injunctions 
against strikers and labor organizations. Sec. 20 also removed peaceful assembling "in a 
lawful manner" from the reach of injunctions, as well as the doing of "any act or thing 
which might lawfully be done in the absence of such disputes by any party there- 
to * * *" The phrases "in a lawful manner" and "might lawfully be done," inserted 
at the instance of employers' attorneys, were so interpreted by the courts as to nullify the 
limitation. Sec. 6 was intended to end the prosecution of labor under the Sherman Act by 
stating that labor organizations instituted for mutual help shall not "be held or construed 
to be illegal combinations or conspiracies in restraint of trade under the anti-trust laws." 
This, however, left the door open for the courts to regard them as conspiracies under the 
common law, which they did. Among the remedies proposed by the federation are (1) 
direct election of judges ; (2) appointment for short terms, accompanied by recall of judges 
and Judicial decisions; and (3) an amendment to the Constitution providing that a two- 
thirds majority of Congress can override a judicial veto. 



CONCENTRATION OF ECONOMIC POWER gj 

relations for the greater part of the modern industrial period. On the 
basic questions of business development labor has until recently dif- 
fered but little from business. 

When the American Federation of Labor was organized in 1886, it 
was based on the belief of Samuel Gompers and his associates that 
they should seek immediate and tangible ends, such as the 8-hour day 
and ample benefit funds for mutual assistance in strikes, and not 
try to deal with the larger questions of the concentration of wealth, 
the growing power of corporations, and the economic status of labor. 
On such questions, and on the matter of tactics, earlier organizations 
like the Knights of Labor had foundered. The A. F. of L. decided 
that working people could best be organized nationally on the basis 
of a loose federation of craft unions; that specific aims, such as short 
hours, higher wages, and better working conditions are more effective 
in sustaining member interest and support than broader and possibly 
higher-sounding principles; and that direct political nomination and 
support of labor candidates was of doubtful value in realizing labor's 
aims. 

Thus, organized labor did not question the capitalist order as it was 
developing. In this attitude it reflected the view of its leader, 
Gompers. 

Practically, he accepted the capitalist order and concentrated his efforts on high 
wages, short hours, and favorable conditions of labor within its metes and bounds. 
In short, he sought to make labor a contented and prosperous partner of busi- 
ness in the American system of acquisition and enjoyment. 25 

The preamble to the federation's constitution did not square with 
this viewpoint. It portrayed the grim features of a class struggle. 
"A struggle is going on in all the nations of the civilized world between 
the oppressors and the oppressed of all countries, a struggle between 
the capitalist and the laborer, which grows in intensity from year to 
year * * *.-" Yet in article II, where the objects of the A. F. of L. 
are stated, we find them more in accord with the partnership idea. No 
further reference is made to a struggle between labor and capital. 
Instead the federation aims to encourage and form labor unions in 
order to "secure legislation in the interest of the working masses"; 
establishment of national and international trade unions "based upon 
a strict recognition of the autonomy of each trade" ; the establishment 
of departments composed of unions of the same industry; aid and 
encouragement of the labor press of America ; and an American fed- 
eration of all trade unions "to aid and assist each other, to aid and 

25 Charles A. and Mary Beard, The Rise of American Civilization, New York, 1927, p. 
225. In Recent Social Trends, McGraw-Hill. New York, 1933, pp. 835-836. the early 
development, objectives, and tactics of the American labor movement are described as 
following : "* * * During the period of establishment and early expansion of the con- 
temporary trade union movement, American unions were dedicated to a straightforward 
labor policy, involving strikes for the recognition of organized labor, collective bargaining 
over wages, hours, and working conditions, and the spread of trade agreements between 
unions and employers in an expanding industrial area. Except for extensive lobbying 
activities, designed in the main to strengthen the legal position of trade unions, and occa- 
sional participation in political campaigns to de/eat candidates for public office who were 
regarded as unfair to organized labor, the movement restricted its activities to the promo- 
tion of pure and simple trade unionism. Insofar as the constituent unions may be said to 
have had a unified or common policy, it took the form of opposition to independent political 
action by labor, to State interference in industry and in industrial relations, and to partici- 
pation by organized labor in the collateral operations of cooperative enterprise. The ma- 
jority regarded themselves as independent associations of wage earners, organized to pursue 
their own interests free from interference by the Government or other associations of the 
same nature, and more concerned with the achievement of limited particular ends than 
with the problems of fundamental changes in the organization of our economic and political 
society." 

277780 — 41— No. 26 7 



gg CONCENTRATION OF ECONOMIC POWER 

encourage the sale of union label goods, and to secure legislation in 
the interest of the working people, and influence public opinion by 
peaceful and legal methods, in favor of organized labor." 

Association for mutual aid and assistance, securing of legislation 
beneficial to working people, and the creation of favorable public 
opinion by peaceful and legal means, including support of a labor 
press: In these stated aims there is little indication of belief in a 
struggle between capitalist oppressors and downtrodden laborers. Or, 
if the belief exists, the struggle is to be resolved peaceably, employing 
as solvents economic and political pressure, and public opinion. 

Congress of Industrial Organizations. 

For nearly half a century after its founding in 1886 the A. F. of L. 
dominated the organized labor movement. Since 1935, however, the 
Federation has had to share its position with the Congress of Indus- 
trial Organizations. 26 In that year John L. Lewis, eleventh vice 
president of the A. F. of L. and president of the United Mine Work- 
ers, resigned his federation post, and, with the heads of seven other 
A. F. of L. unions, set up the Committee for Industrial Organization. 

As first officially stated, its purpose was as follows : 

It has been formed for the purpose of encouraging and promoting the organi- 
zation of the unorganized workers in mass production and other industries upon 
an industrial basis. Its aim is to foster recognition and acceptance of collective 
bargaining in such basic industries ; to counsel and advise unorganized and newly- 
organized groups of workers ; to bring them under the banner and in affiliation 
with the American Federation of Labor as industrial organizations. 27 

Not until 1936 were the unions affiliated with the C. I. O. suspended 
from the A. F. of L. But the split had been some time in the making. 
For years it had been plain that craft unionism, as it had been worked 
out in the majority of the A. F. of L. constituent unions, had allowed 
little place for unskilled and semi-skilled women workers, Negro 
laborers, and wage earners in the mass production industries. Both 
in manufacturing and in the service industries these groups were 
growing in numbers, and hence were potentially more important to 
organized labor than ever before. Among the unorganized workers 
the desire to organize was getting stronger. For the first time in 
Federal law the N. I. R. A. in 1933 had recognized the right of 
workers to organize and to bargain collectively. Yet the majority of 
the A. F. of L. leadership clung to craft unionism as the basis for 
organizing the non-union working people, a policy of which John L. 
Lewis became increasingly critical. 

The split did not come about, however, until after the federation 
-itself had given partial recognition to the changing face of American 
industry. In 1934 it had decided to try to organize the workers in the 
automobile, cement, aluminum, and other mass production industries. 
Back of this decision was the recognition that new methods in industry 
had "brought about a change in the nature of the work performed by 
millions of workers in industries which it has been most difficult or 
impossible to organize into craft unions." 28 The relative newness of 
mass production systems, and their control by corporations and aggre- 
gations of capital which have resisted all efforts at organization, as 

28 Until November 1938 the Committee for Industrial Organization. 

27 A. P. of L. Report of Proceedings of Fifty-sixth Convention, 1936, p. 69. 

28 Proceedings of the Fifty-fourth Annual Convention of the American Federation of 
Labor, 1934, p. 586. - 



CONCENTRATION OF ECONOMIC POWER 89 

well as the hope inspired in many workers by the labor provisions of 
the Industrial Recovery Act, made it appear to the convention that "a 
new condition exists requiring organization upon a different basis 
[from the craft union] to be effective." 29 Accordingly, the executive 
council was directed to issue charters for international unions in the 
automobile, cement, aluminum, and other mass production industries, 
and to inaugurate and conduct an organization campaign in the iron 
and steel industry "at the earliest practical date." However, direction 
of the affairs of these unions was placed in the A. F. of L. "for a pro- 
visional period." The duty to "protect the jurisdictional rights of all 
trade unions organized upon craft lines" was specifically recognized. 30 

"A breach of faith and a travesty upon good conscience" is John L. 
Lewis' description of the way in which the executive council had in- 
terpreted the 1934 resolution on organization policy. 31 In the auto- 
mobile industry a charter had been issued which, Mr. Lewis said, 
"practically limited the membership of that organization to the men 
employed only in the assembling processes of the plant operations." 32 
In his opinion similar action was taken by the executive council as 
regards the rubber industry. These were, to Mr. Lewis, but the most 
recent examples of a policy which "failed to take into consideration the 
dreams and requirements of the workers themselves, and failed to take 
into consideration the recognized power of the adversaries of labor to 
destroy these feeble organizations in the great modern industries set 
up in the form of Federal labor unions or craft organizations func- 
tioning in a limited sphere." 33 The results of this policy constitute 
"a record of 25 years of constant, unbroken failure." A membership 
of approximately 3,500,000 out of an organizable number of approxi- 
mately 39,000,000 workers was proof to Mr. Lewis of an inadequate 
organization policy. 34 

In holding these views Mr. Lewis was not alone. With five other 
members of the resolutions committee 35 he introduced for approval 
by the convention a minority report containing the following declara- 
tion of policy : "In those industries where the work performed by a 
majority of the workers is of such a nature that it might fall within the 
jurisdictional claim of more than one craft union, or no established 
craft union, it is declared that industrial organization is the tmly form 
that will be acceptable to the workers or adequately meet their needs 
* * *. The American Federation of Labor must recognize the right 
of these workers to organize into industrial unions and be granted un- 

28 Ibid., p. 587. 

30 Ibid., p. 586. In carrying out convention instructions the executive council construed 
this duty in such a way as to evoke bitter criticism from believers in industrial unions. 
In 1935 the council pointed out that the time had not yet arrived to establish international 
unions in the aluminum, radio, and gas, coke, and by-products industries. Nor were condi- 
tions in the iron and steel industry auspicious for an organization campaign. But under the 
council's auspices an international union of rubber workers had been set up, as well as the 
United Automobile Workers of America. Jurisdictional rights of existing trade unions 
organized on "craft lines had been protected in the latter case by embracing within the 
U. A. W. A. only those "employees directly engaged in the manufacture of parts (not 
including tools, dies, and machinery) and assembling of those parts into completed auto- 
mobiles, but not including job or contract shops manufacturing parts, or any other em- 
ployee engaged in said automobile production plants (ibid:, pp. 21, 95). Officers of the 
U. A. W. A. were appointed by President William Green (ibid., p. 824), and questions of 
jurisdictional overlapping were referred to the executive council for consideration. 

31 Proceedings of the Fifty-fifth Annual Convention of the American Federation of Labor, 
1935, p. 537. 

32 Ibid. 

33 Ibid., p, 534. 

34 Ibid., p. 523. 

36 Charles P. Howard, Typographical Union president ; Frank B. Powers, Commercial 
Telegraphers' Union of North America ; A. A. Myrup, Bakers and Confectionery Workers' 
Union ; David Dubinsky, International Ladies Garment Workers' Union ; J. C. Lewis, Iowa 
State Federation of Labor. 



90 CONCENTRATION OF ECONOMIC POWER 

restricted charters which guarantee the right to accept into member- 
ship all workers employed in the industry or establishment without 
fear of being compelled to destroy unity of action through recogni- 
tion of jurisdictional claims made by national or international unions 
* * *. The executive council * * * is expressly directed and 
instructed to issue unrestricted charters to organizations formed in 
accordance with the policy herein enunciated." 3t! But the majority of 
the resolutions committee were opposed to the declaration, and under 
their guidance the delegates rejected it. 37 

According to Mr. Lewis, the action of the executive council not 
only hampered the organization of unorganized workers, but also 
weakened the Federation in dealing with Congress. He felt that the 
A. F. of L.'s legislative record was not what it might be, because the 
basis of chartering new unions was too narrow. This meant fewer 
members, smaller income, less adequate resources with which to main- 
tain a legislative and research staff, and, consequently, an overburdened 
group of legislative agents and an unsatisfactory record of legislative 
achievement. Organize the workers upon industrial and plant lines, 
Mr. Lewis argued, and the Federation would then be in a position to 
organize the thirty-odd million unorganized American workers, take 
in more members, and make itself an "efficient instrumentality so 
that the officers of the Federation may carry out the mandates of the 
convention in making contributions to union welfare." Mr. Lewis 
pictured what might be : 

President Green goes down to the White House sometimes to call upon the 
President of this Republic to discuss the. affairs of labor, and the interests of 
labor and the common people of this country. And sometimes he goes over to the 
congressional halls, and he appears there before great committees of the two 
Houses to make articulate in a public way the things for which labor stands. 
Now, when he goes down there he goes as a representative of perhaps three and 
one-half million American workingmen. How much more powerful and in- 
fluential would be the silver-tongued President Green if he were able to appear 
before the Congress of the United States or the President of this Republic speak- 
ing, not for three and one-half million specialized craftsmen organized in the 
American Federation of Labor, but speaking for 5,000,000, or 10,000,000, or 20,- 
000,000 of workers in American industry who have joined the American Federa- 
tion of Labor when you have given them a chance and made them welcome. 38 

Here, in the C. I. O. leader's own words, is his conception of labor's 
strength, if and when it obtains an adequate basis of organization. 

The cracks which appeared in the A. F. of L. ranks in 1934 widened 
into a split with the setting up of the C. I. O. in November 1935, and 
broke the organized labor movement in two with the suspension of the 
10 "rebellious" unions by the A. F. of L. executive in September 1936. 39 
With their suspension, leaders of the C. I. O. widened their program. 
Wherever they found workers willing to join, they enrolled them. 
They set up craft as well as industrial unions. Open warfare between 
the two movements resulted. Each invaded the other's territory in 

89 Ibid., pp. 524-525. 

37 Ibid., p. 575. 

38 Ibid., p. 540. 

39 United Mine Workers ; Amalgamated Clothing: Workers ; International Ladies Garment 
Workers' Union; United Textile Workers (now the Textile Workers Union of America) ; 
Oil Field, Gas Well, and Refining Workers; International Union of Mine, Mill, and Smelter 
Workers (now the Petroleum Workers' International Union) : Federation of Flat Glass 
Workers (now the Federation of Glass, Ceramic, and Silicon Sand Workers of America) ; 
Amalgamated Association of Iron, Steel, and Tin Workers ; United Automobile Workers ; 
United Rubber Workers ; International Typographical Union ; United Hat, Cap, anil Milli- 
nery Workers. For the last two a special finding was handed down. 



CONCENTRATION OF ECONOMIC POWER 91 

strenuous efforts to lengthen membership lists. Bitter exchanges be- 
tween Green, Lewis, and other leaders of the rival organizations have 
widened and deepened the differences over how best to organize the 
Nation's workers. The A. F. of L. has resented the popular antagonism 
to labor unions following upon the C. I. O. use of the "sit-down" 
strike. Simultaneously, the C. I. O. has charged that the forward 
march of American labor is being impeded by the selfishness of craft 
union officials who fear for their positions if the C. I. O. and A. F. of 
L. should be reunited in a single organization. Several attempts have 
been made to iron out the differences between the two organizations, 
but without success. Neither President Roosevelt nor his Secretary 
of Labor, Frances Perkins, has been able to reconcile them. On the 
other hand, two of the original unions which broke away from the 
A. F. of L. in 1935 have returned to it. 40 

Other Labor Organizations. 

In addition to the A. F. of L. and the C. I. O., there are a number 
of unaffiliated or independent international unions. The largest of 
these are the railroad brotherhoods. They have never affiliated with 
the A. F. of L., but have cooperated freely with A. F. of L. unions. 
Although their problems are, in many respects, not unlike those of 
unions in private industry, the status of railroads as a public utility 
brought the Government into the railroad labor picture at an earlier 
date. One consequence was to create a difference regarding compulsory 
arbitration of labor disputes, the brotherhoods favoring, the A. F. of L. 
opposing it. This is a difference of long standing, and, together with 
the brotherhoods' independent strength, has kept them from formal 
affiliation with the A. F. of L. 41 

Labor Lobbying. 

In striving to realize its aims and purposes through legislation, labor 
has followed the pattern of other organized citizen groups. Instead 
of organizing a political party, the A. F. of L. has exerted pressure on 
Congress through a lobby. This has been the case, too, with the railroad 
brotherhoods. The C. I. O. unions have in general employed the same 
method, although among them the urge for a separate labor party has 
been strong. 42 The method is non-partisan, involves no commitment 
to either the Republican or to the Democratic Party, and is essentially 
one of "rewarding its friends and punishing its enemies." In practice 
it includes two kinds of activities — political campaigning and legisla- 
tive lobbying. 

Through the activities of the national non-partisan political cam- 
paign committee, the A. F. of L. attempts to seat "labor" Congressmen 
and Senators. On rare occasions it nominates an independent candi- 
date, but generally supports regular party candidates who declare 
themselves in sympathy with labor's program. The committee ques- 
tions these candidates for Congress as to their stand on remedial 
legislation, and, where candidates are standing for re-election, pre- 

40 International Ladies' Garment Workers' Union and United Hat, Cap, and Millinery 
Workers. The International Typographical Union has assumed a semi-independent status. 
The United Textile Workers split into the Textile Workers Organizing Committee, which 
affiliated with the A. F. of L., and the Textile) Workers Union, a C. I. O. union. 

41 See ch. X for a further discussion of the railway brotherhoods. 

42 "^Ms urge has found expression in New York in the American Labor Party, which 
polled nearly half a million votes in the New York City mayoralty election In November 
1937. The nucleus of the party was formed from members of the International Ladies 
Garment Workers' Union and other unions affiliated with the C I. O., which before their 
expulsion from the A. F. of L. had favored the formation of a separate labor party. 



92 CONCENTRATION OF ECONOMIC POWER 

pares a record of their votes on labor legislation. Moreover, the 
records of candidates for President and Vice President are printed, 
as well as those party platform provisions which are favorable or 
unfavorable to labor. All these records are furnished to the different 
constituent units, and, indeed, to everyone requesting the information. 
On the basis of these records the A. F. of L. calls upon "the workers 
of our common country to stand faithfully by our friends, oppose our 
enemies and defeat them, whether they be candidates for President, for 
Congress, or other offices, whether executive, legislative, or judicial." *® 
A similar function has been performed for the C. I. O. by Labor's 
Non-Partisan League, which has on occasion made substantial contri- 
butions to the Democratic National Committee. The activities of the 
railroad brotherhoods in trying to elect sympathetic legislators are 
not unlike those of the A. F. of L. 

All three sectors of organized labor maintain legislative committees 
in Washington. Their pattern of action may be described briefly 
by referring to A. F. of L. procedure. At the annual A. F. of L. 
convention in October the executive committee guides the convention's 
action on recommendations for the following year's legislative pro- 
gram. The work of the legislative committee is to carry out as far 
as possible this program. Much of its effectiveness depends in the 
final analysis on the personalities of the committee membership and 
of the executive council. Although difficult to measure, of course, 
the force of personalities must be great, for it is brought to bear on 
legislators and administrators in many ways. It is exerted through 
general publicity, encouragement of union members to bring pressure 
on their Congressmen, conferences with legislators, drafting of bills, 
supporting candidates for congressional committees, providing Con- 
gressmen with speech material, publication of legislative records, co- 
operation with other groups in the interest of desired legislation, 
interviews with the President, and contact with various administrative 
authorities. Thus the A. F. of L. applies pressure to supplement its 
policy of rewarding its friends and punishing its enemies. 

LABOR RELATIONS THE AREA OF CONFLICT 

For over 50 years organized labor has actively followed a policy 
of legislative lobbying. Although it has during this period interested 
itself in many phases of national policy, its primary interest has been 
the employer-employee relationship. It is here that it has come into 
conflict with the National Association of Manufacturers and other 
employer groups. 

The conflict arises out of the attempt to apply democratic prin- 
ciples to industrial relations, and, specifically, out of the place of 
trade unions in the employer-employee relationship. For over 40 
years the N. A. M. has opposed the closed shop enforced by trade 
unions. For an equal period, organized labor has insisted on its right 
to organize and bargain collectively, regardless of the closed shop. 
Since 1933 the issue has been sharpened by the Federal guaranty of 
labor's right to organize and bargain collectively. 

In the philosophy of organized labor, union recognition and col- 
lective bargaining are essential to the attainment of its objectives. For 

43 Non-Partisan Declarations, Half Century Political Policy, American Federation of 
Labor, p. 4. 



CONCENTRATION OF ECONOMIC POWER 93 

all branches of the movement those objectives can be summed up in 
the single phrase, attainment of the American standard of li\ ing for 
their members. From time to time attempts have been made to define 
this term. To the A. F. of L. it means not only the essentials of life 
for all members of the family, but also a steady income, a secure job, 
bank savings against emergencies, and the resources to enjoy cultural 
opportunities. In addition, it means a status of equality and the 
right of self-direction for the worker in industry. The Worker is 
held to have as much stake in his trade or industry as the manager 
or stockholder. He is a partner in production, and as such is entitled 
to an equal voice in shaping industrial policies. If the worker is to 
exercise this right of partnership, his right to be a free man must be 
recognized. Individual dignity and self-respect are possible only 
when the "boss" admits and respects the worker's independent and 
economic rights. 44 While this is an accurate statement of the purposes 
of organized labor as a whole, it emphasizes the partnership angle 
which is becoming an increasingly important part of labor's aims. 
According to the National Resources Committee, "the establishment 
[in the collective agreement] of means whereby workers can influence 
the determination of industrial policies which directly affect them," 
is of special importance. 

The demand for recognition and a voice in industry, clear in all agreements, 
is a product both of recent trends in Government policy, notably the National 
Industrial Recovery Act and the National Labor Relations Act, and of the trend, 
in a country which prizes its political democracy, whereby workers come to 
demand some measure of democracy in the determination of industrial policies 
which affect them. 45 

The N. A. M.'s exposition of the "American system" hardly suggests 
a bitter opposition to the substantive features of labor's standard of 
living. Even after discounting the N. A. M. allegation that the New 
Deal has departed from "the principles of social and economic organi- 
zation upon which American progress, prosperity, and savings have 
been built," one would hardly be prepared, from reading the exposi- 
tion, for industry's intransigence to labor's aims. It is only when the 
general protestations in favor of "inalienable rights," "sovereignty of 
the people," "individual initiative and effort," 46 etc., are read in con- 
junction with the explanations that one begins to sense the realities 
of N. A. M. philosophy. 

According to the N. A. M. there is no place in the American system 
for control, or even regulation, of industrial relations by the Federal 
Government. That right belongs to individuals, and the preservation 
of individual liberty depends upon its protection against alienation 
by government. Attempts to regulate employment relations, produc- 
tion, hours, wages, and working conditions hamper and destroy the 
freedom of individual enterprise which the N. A. M. regards as synony- 
mous with individual freedom. The N. A. M. feels that the Consti- 
tution does not authorize the Federal Government to legislate in this 
field. Under the American system the powers delegated to Congress 
are clearly defined, it is held, and control or regulation of employer- 
employee relations are not among them. The States and the people 

44 American Federation of Labor, Report of Proceedings of Fifty-fifth Annual Con- 
vention, 1935, pp. 4-9. 

48 National Resources Committee, Structure of the American Economy, Washington, 
1939. p. 325. 

46 See the Declaration of Principles Relating to the Conduct of American Industry, 
adopted by the N. A. M., Congress of American Industry, December 1939, pp. 1—2. 



94 CONCENTRATION OF ECONOMIC POWER 

possess the powers not delegated to Congress. Only by strict adher- 
ence to the principle of a separation of powers of the Federal and 
local governments and the division of Federal powers into executive, 
legislative, and judicial does the N. A. M. believe it possible to preserve 
the "sovereignty of the people and their own local self-governments." 
Certain rights of the people are held to be inalienable and are pro- 
tected by constitutions against government encroachment, "even at 
the dictates of majorities." These rights are in the form of consti- 
tutional guaranties which "assure for all citizens freedom of indi- 
vidual contract, freedom of speech, freedom of the press, inviolability 
of obligations, protection of property, and immunity from Govern- 
ment confiscation." According to the N. A. M. labor legislation and 
the exercise of unauthorized administrative discretion are attempts 
to disregard these guaranties, and compel the individual whose rights 
are alienated to resort to the courts for redress. When Government 
officials and lawmakers try to evade "the true intent of constitutional 
guaranties" and make laws "with respect to matters not delegated to 
them" there is placed on the citizen "the heavy burden of asserting 
his rights through judicial procedure, not as to the relation of his 
acts to such legislation, but as to the right of Government to deal 
at all with such matters." Hence, "the preservation of our American 
institutions and form of Government depends upon unqualified recog- 
nition that the power of the Supreme Court of the United States to 
pass on the constitutionality of acts of the legislative and adminis- 
trative bodies of our Government shall be preserved inviolate and 
unhampered." "The Constitution," in the words of the N. A. M., "is 
a protection of human rights." Since the right of each individual to 
ownership and use of property, "encourages the maximum of achieve- 
ment by all individuals," "the preservation of individual liberty de- 
pends upon the maintenance of private ownership and control of the 
facilities of production, distribution, and living. 47 

LABOR AND INDUSTRIAL MANAGEMENT COME TO GRIPS 

Read in conjunction with the 1903 declaration of labor principles, 48 
which, as recently as 1936, was declared by the president of the N. A. M. 
to be "still officially our Bible in this field," 49 the N. A. M.'s conception 
of the rights which inhere in the "American system" are patently in 
conflict with those demanded by organized labor. Not until the advent 
of the New Deal in 1933 did the 40-year conflict enter its bitterest 
stage. Since then the extremes to which business has gone, under 
N. A. M. leadership, in attempting to preserve the status quo in indus- 
. trial relations, clearly reveal its concept of the "American system." 
Its tactics and maneuvers are so significant as to warrant considera- 
tion in some detail. 

The New Deal approach to labor relations put long-cherished prin- 
ciples of the association to a test which the N. A. M. was not in 1933 

47 Besides these points, the N; A. M. voices sharp criticism of "undtle regulation of 
the financing of business, viewing it as a distinct threat of a permanent Government 
invasion into the field of finance and credit in competition with private institutions." It 
is also opposed to economic planning by government : "active and unfair competition by 
the Government" in some 28 lines of business ; the attempt to gain security for all "by 
legislative decree" ; and the use of the Federal tax power for otherwise unattainable 
ends. Ibid., passim. 

* Above, note, pp. 82-83. 

** Hearings before a subcommittee of the Senate Committee on Education and Labor, 
75th Cong., 3d sess., pt. 17, exhibit 3802, p.- 7546. 



CONCENTRATION OF ECONOMIC POWER 95 

quite ready to meet. It was, therefore, necessary to revitalize the 
whole organization. New literature, greater financial resources, more 
highly integrated organization of employer groups, greater coordina- 
tion and unification of employer attitudes, and a broader educational 
campaign than had ever before been attempted, were necessary. The 
years 1933, 1934, and 1935 were devoted to reorganization and replen- 
ishing the association's resources. 

The details of this reorganization, summarized here, are given in 
the report of the Senate Civil Liberties Committee on the N. A. M. 50 

First, a group of business leaders, representing certain large cor- 
porations in the steel, chemical, shipbuilding, and other large-scale 
industries, decided to underwrite an expanded program of activities. 
As a condition of the financial aid so promised, they stipulated a 
change in the management of the association to bring in a large num- 
ber of industrialists and more active leadership. At the same time, a 
vigorous campaign for new members was initiated, and a new educa- 
tional campaign instituted, with appropriate committees and separate 
financial provision. Finally, the National Industrial Council was put 
upon a more formal basis, and its cooperative relations with the 
N. A. M. were systematized and highly coordinated. 

These changes brought quick results. Membership increased from 
1,469 in 1933 to over 3,000 in 1937.' 51 During the same period the as- 
sociation's total annual income expanded from $240,900 to $1,439,548. 52 
The amount of this income derived from subscription for the public 
information program grew from nothing in 1933 to $793,043 in 1937." 
The association's enlarged program was being financed increasingly by 
large contributors whose interest was aroused by what they considered 
the danger confronting industry by the legislative program of the 
Government. Between 1933 and 1937 the 15 largest contributors in- 
creased their contributions from $13,712 to $219,460. and half of the 
income of the N. A. M. during this period was supplied by some 265 
large contributors out of a membership ranging between 1,469 to 
3,008. 54 

The board of directors of the N. A. M. was enlarged, and the large 
contributors gained a majority. 55 Under the leadership of William 
Frew Long, general manager of the Associated Industries of Cleve- 
land, and Homer D. Sayre, commissioner of the National Metal 
Trades Association, the National Industrial Council was reorganized 
on a membership basis, thereby making affiliation with this more clobely 
knit organization a necessary step before N. A. M. advice, counsel, and 
propaganda material could be obtained. During this process, it was 
able to eliminate a competing organization, the American Plan Open 
Shop Conference (which in 1933 changed its name to the Council 
of American Industry). Thus, the National Industrial Council be- 
came the "only federation of employers' associations active in coor- 

60 S. Rept. No. 6. 76th Cong., 1st sess.. pt. 6, pp. 44-60. 

51 Ibid., p. 48. 

82 Ibid. 

53 Ibid. 

04 Ibid., p. 51. E. I. du Pont de Nemours Co. was the biggest contributor. It increased 
its contribution from $725 in 1933 to $55,000 in 1937, G aeral Motors Corporation from 
$1,050 to $13,310, National Steel Corporation from $1,050 to $15,000, Chrysler Corpora- 
lion from $."00 to $15,000. Texas Corporation from $750 to $15i,000. Republic Steel Co. 
from $237.50 to $12,750, Standard Oil Co. of New Jersey from $100 to ^ll.OOO. The 
other 8 largest contributors were U. S. Steel Corporation, Monsanto Cbem.cal Co., West- 
inghou.se Electric & Manufacturing Co., Bethlehem Steel Corporation, Borg-Warner 
Corporation, Socony-Vacuum Oil Co., Swift & Co., and Eastman Kodak Co. 

55 Ibid., table 4 pp. 54-50. 



96 CONCENTRATION OF ECONOMIC POWER 

dination of business attitude toward labor. 56 Industrialists well 
known for their leadershipan eerrain open shop employers' associations 
represented the employment relations group of the National Industrial 
Council in meeting with the staff of the N. A. M. to discuss pending 
legislation and to reach conclusions on unified policy. 57 

The results of these conferences were conveyed to all council 
affiliates. This group also acted in the capacity of a general staff 
whose viewpoint was forcefully represented in Washington to bring 
pressure upon Congress. 

For 30 years the association had fought wage-hour legislation and 
had opposed restrictions on injunctions and the application of anti- 
trust laws against labor. It had fought against regulation of hours 
and wages of women and children in industry. It had opposed pro- 
tection of the workers' right to organize and bargain collectively. The 
only factor that differentiated the activities of the association from 
1933 onward was the intensity with which it carried on its obstructive 
tactics. 

National Industrial Recovery Act. 

From the day of its introduction in Congress, the N. A. M. opposed 
the labor provisions of the National Industrial Recovery Act. 68 A 
special manufacturers' committee appointed at an emergency confer- 
ence on April 28 stated that the bill as introduced wasi unworkable. 
One of the five amendments which the committee insisted "must be 
adopted before the legislation can receive the support of industry" 
recommended the "elimination or revision of the labor provision" so 
as to "operate equally upon both employers and employees." 69 

Robert L. Lund, N. A. M. president, issued a public statement on 
May 26, in which he held that the labor provisions might "promote 
industrial conflicts * * * and force employers to deal with racket- 
eering organizations." "Management in industry has no wish," he 
said, "to use this legislation to change existing satisfactory labor con- 
ditions and believes that their employees, in the vast majority, are of 
the same mind." 60 In a general meeting of industry held in Wash- 
ington on June 3, a resolution was adopted, urging modification of 
the labor provisions to make it clear that there is neither the intention 
nor the power to reorganize present mutually satisfactory employ- 
ment relations, nor to establish any rule which will deny the right of 
employers and employees to bargain, either individually or collec- 
tively, in such form as is mutually agreeable to them. 61 This was a 
typical argument in favor of individual bargaining, which had been 
the rule in industry and which the N. A. M. had found satisfactory. 
The N. A. M. did not want these relations disturbed. 



M Ibid., pp. 57-62. 

87 Ibid., pp. 65-66. , . ,_ ajJ „ it . , . , „ 

88 Several outstanding pressure groups were active in the drafting of this legislation. 
The A F. of L. wrote sec. 7 (f\), which the N. A. M. opposed so forcefully; and the 
code sec. 3 was largely the work of the Chamber of Commerce of the United States and 
the American Bar Association. On May 1, 1933, the N. A. M. itself put out a model 
code which it had prepared in collaboration with the National Association of Furniture 
Manufacturers and the trade association section of the Commerce Department s Bureau 
of Foreign and Domestic Commerce. 

59 Hearings before a subcommittee of the Senate Committee on Education and Labor, 
op. cit., pt. 17. Exhibit 3813, p. 7562. 
«° Ibid., p. 7563. 
81 Ibid., pt. 35, Exhibit 5316, p. 14149. 



CONCENTRATION OF ECONOMIC POWER 97 

Representatives of the association appeared before the Senate 
Finance Committee to express their apprehension of the encourage- 
ment that section 7 (a) would give to the organization of labor 
unions. James A. Emery attacked this provision on the grounds that 
it tended to identify collective bargaining with trade unionism, 
interfered with the employee's liberty to choose the form of organiza- 
tion and relationship best suited to his interests, and did not provide 
sufficient protection for employers. Charles R. Hook criticized sec- 
tion 7 (a) on the basis that it did not prohibit non-employees from 
interfering with the employees of a corporation — a direct attack on 
union organizers. The American Iron & Steel Institute, represented 
by Robert P. Lamont, formerly Secretary of Commerce, also opposed 
section 7(a) because the institute stood for the open-shop, and refused 
to deal with anyone except its own employees. Each of these men 
proposed amendments which would in effect nullify the basic objec- 
tives of the section. 62 

After the act was passed and approved by President Roosevelt on 
June 16, 1933, the National Association of Manufacturers began a cam- 
paign of nullification. On June 20, it sponsored a national industrial 
conference in Chicago. Resolutions were adopted urging trade groups 
to include in codes of fair competition clauses upholding constitutional 
rights to bargain individually and operate an open-shop, and making 
individual merit the basis of selection, retention, and advancement; 
also, urging employers to inform employees that open shop conditions 
would be maintained. 63 By a circular letter from its secretary, the 
N. A. M. brought these resolutions to the attention of its members and 
circularized bulletin board posters for employee education to the effect 
that "there is nothing in the bill that compels, or even encourages, em- 
ployees to join any organization." 64 N. A. M. President Lund, in a 
press release on September 7, 1933, urged "the strongest possible em- 
ployer opposition to union organization," hinting at an employer cam- 
paign to set up company, unions, and stating that the N. A. M. leg- 
islative program envisaged, among other things, the repeal of section 
7 (a), or, if that appeared impracticable, repeal of the Norris-LaGuar- 
dia Anti-Injunction Act (1932), and enactment of legislation imposing 
responsibility upon labor unions for the acts of its officers and agents. 65 

This organized opposition naturally hampered the operation of the 
National Labor Board, which was established by the President in 
August 1933, with Senator Robert F. Wagner of New York as chair- 
man. The coup de grace was dealt to the power of this Board by E. T. 
Weir, president of Weirton Steel Co., and at that time an active mem- 
ber of the American Iron & Steel Institute and a very energetic sup- 
porter of the National Association of Manufacturers. His refusal to 
recognize the jurisdiction of the Board in a case involving election of 
employee representatives in December 1933, finally resulted in a sweep- 
ing decision by Judge Nields of the United States District Court of 
Delaware on May 29, 1934, questioning the statutory power of the 
Board in this case. The N. A. M. publicly supported Mr. Weir against 
the National Labor Board." 66 



82 S. Kept. No. 6, pt. 6, 76th Cong., 1st sess., pp. 77-78. 

"Hearings before a subcommittee of the Senate Committee on Education and Labor, op. 
Cit, pt. 17, exhibit 3815, pp. 7571-7572. 

94 Ibid., pt. 17, exhibits 3814, 3815, and 3816, pp. 7570-7572. 

48 Ibid., pt. 17, exhibit 3807, p. 7349. 

•o.S. Rept. No. 6, 76th Cong., 1st sess., pt. 6, pp. 82-83. 



9g CONCENTRATION OF ECONOMIC POWER 

Labor Disputes Bill. 

It was clear early in 1934 that section 7 (a) of N. I. R; A. would have 
to be strengthened in order to accomplish the purposes of the act. On 
March 1 Senator Wagner (New York) and Representative Connery 
.(Massachusetts) introduced similar labor disputes bills in the Senate 
and House. 67 

During the hearings held in the Senate, James A. Emery testified 
in opposition to the measure. A committee of the N. A. M. was also 
appointed to see Hugh S. Johnson and President Roosevelt. A radio 
program was started, and the executive committee was authorized to 
arrange for a meeting of manufacturers in Washington to oppose the 
bill. 68 

The newspapers, too, were flooded with propaganda about the bill, 
charging that it disregarded "every fundamental concept of legal right 
and remedies." The association also urged a public inquiry, for the 
purpose of discovering "the amount of money union organizers take 
from the wages of working men." 69 

Urgent appeals from the association were sent to other employers' 
organizations. 70 The National Metal Trades Association, in particular, 
became active, and telegraphed its members, suggesting that they send 
the "strongest possible industrial group" to appear at the hearing, but 
warned that request for appearance be made"in the name of individ- 
uals or local groups and not in the name of the association." 71 It 
pointed out that the bill, if enacted, would "completely unionize Amer- 
can industry; assure domination of Labor Boards by American Fed- 
eration of Labor, abolish all employee representation plans, discour- 
age employer-employee cooperation, encourage strikes." 72 Commis- 
sioner Sayre of the association wrote: 

If this measure should become a law, it would simply act as a wedge between 
employers and employees, and instead of promoting cooperation in the interests 
of national recovery, it would establish a permanent caste system'in the United 
States which would have a most lasting detrimental effect upon the economic 
and social welfare of our citizens." 

He advised employers to meet in Chicago to appoint a spokesman 
in Washington, 74 and suggested that delegations to Washington should 
communicate with him at "either the Mayflower Hotel or at the office 
of the National Association of Manufacturers in the Investment 
Building." 75 

Sayre also suggested to members of his association that they try to 
have their employees appear in opposition to the bill, or, if this was 
not possible, to have "as many employees as possible write their Con- 
gressmen and the committee chairman in opposition to it." 76 Sayre 

67 rjijjg ] aDor disputes bill made it an unfair labor practice for employers to Interfere 
with organizations of employees ; to refuse to recognize or to deal with representatives 
of employees for purposes of collective bargaining; or to maintain and support a labor 
organization. A board of seven members — two representing employers — could hold elec- 
tions to determine collective bargaining representatives and designate the proper unit 
of bargaining. It could also act as an arbitrator in labor disputes. 

68 Hearings before a subcommittee of the Senate Committee on Education and Labor, 
op. cit., pt. 35, exhibit 5258, p. 14056. 

89 National Association of Manufacturers, news release, March 13. 1934. 

70 Hearings before a subcommittee of the Senate Committee on Education and Labor, 
pt. 35, exhibit 5258, pp. 14055-14056 ; exhibit 5335, pp. 14153-14154 ; news release, March 
13. 1834. 

71 National Metal Trades Association, mimeographed letter to members, March 12, 1934. 

72 Ibid. 

73 Ibid. 

74 National Metal Trades Association, mimeographed letter, March 22, 1934. 

75 Mimeographed letter to members. March 14. 1934. 
79 Ibid. 



CONCENTRATION OF ECONOMIC POWER 99 

also organized group action on the part of employers' associations 
located in the Chicago district : The Illinois Manufacturers' Associa- 
tion, Chicago Association of Commerce-, National Founders' Associa- 
tion, Chicago Employers' Assocation, and the Chicago branch of the 
National Metal Trades Association. 77 On May 1, Sayre wrote to 
members of his association in Pennsylvania, suggesting that they write 
to their Congressmen and Senators. "As we have previously pointed 
out," he warned, "the results would be disastrous if any bill of this 
nature were passed as an employee cannot be forced to work against his 
will, but the employer would be forced to live up to the Board's man- 
dates." 78 On June 6, Sayre passed on to the membership of his asso- 
ciation a wire received from the N. A. M., which said : 

Do not be misled by newspaper reports into thinking Wagner bill situation is 
hopeless. It is not. If expressions are especially heavy to Congress and Presi- 
dent next 2 or 3 days it will be most effective. 70 

The Wagner bill did not reach the floor of the Senate. The 
N. A. M. itself claimed credit for this in a bulletin issued in January 
1935, summarizing the association's work in the 73d Congress: 

Wagner labor disputes bill to create permanent National Labor Board : Se- 
cured three important concessions from Wagner, which made bill less acceptable 
to labor. Mustered witnesses against bill, conducted Nation-wide educational 
campaign against it. Obtained compromise resolution. 50 

On August 20, 1934, Walter B. Weisenburger, executive vice presi- 
dent of the N. A. M., wrote to Charles K. Hook, saying, in part : 

Much of our attention was devoted last winter to the Wagner labor disputes 
bill. There are those kind enough to say that but for the National Association 
of Manufacturers being the spearhead of this attack it would have gone over. 
Now when it comes to firms and manufacturers who have benefited by the 
failure of this act to pass, it cannot be said that the interest north of the Mason 
and Dixon line is greater than that south. * * * 

When the National Association of Manufacturers almost lonehanded went 
down the line against the provisions of 7A, and told the industrial world what 
it pretended, we took what was for the nonce considered a rather unpopular 
position. But the basis of our position and the soundness of our arguments are 
being brought home more clearly every day, as the working out of this particular 
section continues to harass progress and recovery. 81 

National Labor Relations Act. 

The compromise resolution mentioned above was passed by the Con- 
gress on June 16, 1934. This resolution empowered the President to ap- 
point a board or boards to investigate violations of section 7 (a), and 
also to hold elections to determine representatives for collective bar- 
gaining. Under this act, the National Labor Board was replaced by 
the National Labor Relations Board, with three members: Lloyd K. 
Garrison, chairman, and dean of Wisconsin Law School (resigned in 
December 1934, and replaced by Francis Biddle) ; Harry A. Millis, 
professor of economics at the University of Chicago; and Edwin A. 
Smith, former Commissioner of Labor in Massachusetts. This Board 
served from June 29, 1934, until August 1935, when it was replaced 
by a new board under the National Labor Relations Act of 1935. 

77 National Metal Trades Association, mimeographed letter to branch secretaries, 
March 22, 1934. 

78 National Metal Trades Association, mimeographed letter, May 1, 1034. 
TO Mimeographed letter, June 6, 1034. 

80 Hearings before a subcommittee of the Senate Committee on Education and Labor 
op. cit.. pt. 17, exhibit 3703, p. 7534. 
51 Ibid., pt. 35, exhibit 5401, p. 14264. 



100 CONCENTRATION OF ECONOMIC POWER 

The N. A. M. put impediments in the way of every major decision 
of the N. L. R. B. It contested the majority rule principle established 
by the Board, on the premise that it would "deprive the minority 
which did not desire to deal through the union, of the right of collec- 
tive bargaining assured them by section 7 (a) of the National Indus- 
trial Recovery Act." 82 Essentially, the position of the association 
was one of complete opposition to any Federal legislation protecting 
the rights of workers to organize. This was explicitly stated when 
the Congress of American Industry, at its annual convention in 
December 1934, resolved that "the Federal Government should not 
assume or attempt to control local relationships between employees 
and employers." 83 

Thus, a national association of America's largest corporations, each 
operating plants in many communities throughout the United States 
regardless of State lines, and each with uniform labor policies con- 
trolled and directed from a few industrial and financial centers, vo- 
ciferously argued that employment relations are not the concern of 
the Federal Government but should be settled locally. 

Government efforts to protect labor's right to organize during 1933 
and 1934 were effectively nullified by the obstructive tactics of indi- 
vidual employers, aided by the N. A. M. and' its affiliated organiza- 
tions. The Labor Board had proved powerless to enforce section 
7 (a) of N. I. R. A., because of the ambiguity of terms, diffusion of 
administrative responsibility, and lack of power of enforcement — 
defects of which employers and employers' associations took full 
advantage. Employers refused to appear before the N. L. R. B. be- 
cause it had no power to subpena witnesses. The Board had diffi- 
culty in establishing the interstate character of the company against 
which charges had been instituted, and could not make adequate 
records which the Department of Justice could use for prosecution. 84 
Refusal to abide by the Board's decisions in election cases stopped it 
in the initial stages of its effort to settle industrial disputes amicably. 
Garrison, the first chairman of the N. L. R. B., told the Senate Com- 
mittee on Education and Labor in 1935 that the majority rule was 
opposed "because collective bargaining is opposed." 85 

Senator Wagner introduced a bill to broaden the powers of the 
N. L. R. B. on February 15, and the Committee on Education and 
Labor held hearings on the bill from March 11 to April 2. 

Immediately the N. A. M. galvanized into action. James A. Emery, 
addressing the National Metal Trades Association, called Senator 
Wagner's bill "lynch law," and Ernest T. Weir asked members of 
the Union League Club of Chicago to "urge your employees and your 
fellow-citizens to register their will down in Washington" and "to 
be vigilant in the fight, carry it to your people, make them see the 
fallacy of the radicalism, and the folly of the demands for over-night 
change emanating from Washington." 86 Upon announcement of pub- 
lic bearings, to commence on March 11, the N. A. M. sent a call, through 
its news letter of March 4, to all industrialists who would like to ap- 
pear in opposition to this bill, to communicate immediately with its 

82 Law Department Bulletin, August 24, 1934. 

83 Hearings, pt. 17, exhibit 3793, p. 7530. 

84 Hearings before Senate Committee on Education and Labor on S. 1958, 74th Cong., 
1st sess., vol. 1, p. 94. 

86 Ibid., vol. 2, p. 127. 

86 National Association of Manufacturers News Release, Apiil 3, 1935. 



CONCENTRATION OF ECONOMIC POWER 101 

New York office. On March 29, C. L. Bardo, president of the associa- 
tion, suggested that members advise their suppliers and dealers of 
the importance of this bill to the company, register their opposition 
with their Senators and Representatives, and request groups with 
which they were affiliated to take similar action. 87 On the following 
day he again urged manufacturers to write to their Senators and to 
"bring the bill to the attention of your local board of trade, other 
business groups, and individual employers, urging them to take simi- 
lar action." 88 

On the same day Walter B. Weisenburger wrote executives of the 
employers' associations affiliated with the National Industrial Coun- 
cil, suggesting "'Washington pilgrimages" by industrialists. "Of 
course, one of the most effective means of combating this legislation 
is the 'come to Washington' idea," he wrote. He offered to meet with 
local delegations in Washington before their calls and "check over 
the presentation of material." 89 He also urged distribution of pam- 
phlets prepared by the National Industrial Council in collaboration 
with the N. A. M. to stir up local campaigns against legislation pend- 
ing in Congress. In submitting the pamphlet entitled "The Indus- 
trial Truth," for this purpose, the legislative advisory committee of 
the National Industrial Council suggested methods of disseminating 
the material therein. It was said, for instance, that "two large firms 
pledged to. put loudspeakers in their plants, and for 5 minutes each 
day — on company time — to give some portion of the messages in this 
manual." The letter summarized "specific activities which might be 
undertaken and should be undertaken in every community." "Action 
must be the by-word of industrialists, action of a positive type." 90 

87 Hearings before a subcommittee of the Senate Committee on Education and Labor, op. 
cit., pt. 35, exhibit 5352, pp. 14187-14188. 
» 8 Ibid., exhibit 5352, p. 14188. 

89 Ibid., exhibit 5355, pp. 14194-14195. 

90 "The following methods were suggested : Every industrialist has contacts with civic 
clubs, social and business groups. Many wives of manufacturers belong to the League of 
Women Voters and to various other women's clubs. They certainly would welcome both 
sides of the story. In most cases he would be able either to get an invitation himself to 
speak before these various groups in support of the industrial viewpoint or to get one for 
someone else who is, perhaps, more articulate on these subjects. The possibilities of mold- 
ing public opinion through thousands of speeches over the country during the next few 
months are virtually unlimited. 'The Industrial Truth' and the N. A. M. Platform of 
American Industry * * * offer a wealth of material for this purpose. Your com- 
mittee will gladly furnish additional speech material or fully prepared speeches upon 
request. 

"2. A small committee might be organized in every community to arrange for these 
speeches and to contact persons who are speaking quite often and supply them with 
material. 

"3. The same committee probably would find it practical to encourage industrialists to 
issue statements to the local press dealing with the vital problems presented here. Addi- 
tional material upon request. 

"4. Newspaper editors, while most often fair toward the industrial viewpoint, often lack 
the necessary material to editorialize upon these problems. This committee might well 
undertake to keep tbe local press supplied regularly with informational material, such as 
that included in this manual, and with other information which comes from the National 
Industrial Council and the N. A. M. In addition, this committee might well consider the 
possibility of occasionally inviting the publishers, editors, and managing editors of their 
newspapers to informal dinners and luncheons to discuss mutual problems. 

"5. Local businessmen support their local radio stations, and in most cases ft will be 
found possible to arrange for a series of broadcasts by local people discussing the current 
■national problems. A series of five to ten 15-minute broadcasts might be arranged present- 
ing a local editor, attorney, industrialist, or some other clever speaker each night. 

"One manufacturer has done a very logical thing. 'Few manufacturers or employees 
know who their Senators and Representatives are — that is, by name, initial, and address — 
so we have posted, without any other message, a list of the two Senators and the Repre- 
sentatives from our district. All we say is, "when you have legislation of interest to you 
and wish to write your Congressman, here they are." ' This is an important suggestion. 

"It should be borne in mind that whether in public speaking, newspaper releases, or 
radio speeches the thought should be directed upon the effect the proposed legislation would 



1Q2 CONCENTRATION OF ECONOMIC POWER 

The collaboration of the N. A. M. and the National Metal Trades 
Association in presenting witnesses in opposition to S. 1958, the Wag- 
ner Labor Relations bill, was effective, for the committee was besieged 
from all quarters by requests to appear in opposition to the bill. 91 
The witnesses who appeared against the bill represented, principally, 
the N. A. M. and the National Industrial Council. More specifically, 
the National Metal Trades Association and the American Iron & Steel 
Institute, both affiliates of the National Industrial Council, were most 
prolific in supplying witnesses against the measure. Inasmuch as 
secretaries of local branches of the National Metal Trades Associa- 
tion appeared as representatives of local employers' associations, of 
which they were, in fact, also staff members, there was considerable 
duplication of adverse witnesses. 92 Apparently some members of the 
press penetrated through this political camouflage, for the "Washing- 
ton correspondent of the Kansas City Star wrote : 

The National Association of Manufacturers and the Metal Trades Association 
have heen largely responsible for the demoralization of the Wagner laboi 
disputes bill, the pet measure [sic] of the American Federation of Labor. 93 

The association continued, unabated, its opposition to the measure 
after the hearings closed. Weisenburger urged industrialists to con- 
verge upon Washington for personal conclaves with Congressmen. 
•Executives of the association bombarded the public over the radio 
about the dangers of the Wagner bill. The favorable report on the 
bill on May 1 intensified this campaign. James P. Selvage wrote: 
"One, two, or three speeches from every radio station in the country 
during this crucial period when Congress is formulating its final pro- 
gram explaining important issues to the people, urging them to express 
their views to Congress, would be tremendously effective. * * * 
Our experience indicates that virtually every radio station will give 
time to a prominent citizen to discuss vital national issues." He held 
himself in readiness to "rush you additional material upon any one of 
these subjects upon telegraphic request." 94 

The N. A. M., as well as the National Industrial Council, began to 
issue "action letters." 95 More and more of them were issued, and 

have upon the people. The average person is interested primarily in his own welfare, his 
own job, and his own pay envelope. 

"Fundamental is the need that employers should undertake to speak to their employees, 
explain to them in understandable language what the legislative proposals mean, and 
stimulate them to write to their legislators. 

"In this crisis in the industrial field your committee will stay in constant contact with 
the situation, and invites your correspondence. 

"Our purpose as a liaison committee working in your behalf will be of little productive 
value to you and your membership unless all industrial associations respond quickly and 
whole-heartedly to a course of supporting action" (ibid., exhibit 5354, pp. 14190—14191). 

91 S. Rept. No. 6, pt. 6, 76th Cong., 1st sess., pp. 106-107. 

92 Ibid., pp. 108-115. 

93 This quotation was sent by James P. Selvage, director of public relations of the 
N. A. M., to Homer D. Sayre, of the National Metal Trades Association, with the sug- 
gestion that he disseminate it among his membership. Hearings before a subcommittee 
of the Senate Committee on Education and Labor, op. cit, pt. 35, exhibit 5i356, p. 14196. 

94 Ibid., exhibit 5358, p. 14198. 

96 One of these stated : "Although the Nation's employers, under the encouragement 
of N. A. M. leadership and that of other national organizations, have waged against the 
Wagner bill a campaign which the 'United States News' has quoted as 'the greatest ever 
conducted by industry regarding any congressional measure,' that campaign has not 
been sufficient. » * * 

"No matter how many times you may have done it before, wire or write your Repre- 
sentative and Senators again today. Express your opposition to this bill. Recruit your 
stockholders, the firms with which you do business, your own executives, and department 
heads. Have them do the same thing. ' 

"And do not forget that the 90 percent of American employees who heretofore have 
declined to pay dues to American Federation of Labor unions also will be opposed to 
this measure, which will in effect tax their pay rolls by forcing many of them into 
A. F. of L. membership. They will want to express their opposition. Many petitions 
against this bill, signed by hundreds of employees, are being sent to Washington" (Ibid., 
exhibit 'Si>0, \\ 11199). 



CONCENTRATION OF ECONOMIC POWER 103 

more pilgrimages "on a concerted basis" were undertaken. A legis- 
lative action conference was called by the National Industrial Council 
at the Mayflower Hotel in Washington on May 22. Association execu- 
tives were advised to bring with them "at least one business leader from 
each congressional district," who was "best acquainted with the legis- 
lative situation— and with the Congressmen." 96 

In spite of all these efforts, the Wagner labor relations bill passed 
both Houses on June 28, and was signed by the President, on July 5. 
N. A. M. activity subsequent to passage of act. — Undaunted, the 
leaders of the N. A. M. and National Industrial Council immediately 
met to decide upon their next step. Even before the President had 
signed the bill, officers of the council wrote their respective member- 
ship, setting a secret meeting in New York City at the Hotel Roosevelt 
on Tuesday, July 9. Sidney Cornelius, chairman of the employment 
relations group of the council, suggested to his membership that "no 
publicity oil this meeting is necessary, so do not mention it in youri 
bulletins." 9T 

George F. Kull, chairman of the State association group of the 
council, asked his membership to avoid giving any public announce- 
ments of this meeting. 98 

Robert L. Lund, chairman of the board of the association, and C. L. 
Bardo, president, invited the board of directors and members of the 
executive committee to attend special all-day conferences on July 10 
and 11 at the Waldorf Astoria Hotel in New York City, following the 
council meeting of July 9. First on the agenda mentioned by Mr. 
Lund in his letter was "consideration of Wagner labor disputes bill 
as passed ; validity ; future policy, etc." 99 Both Lund and Bardo em- 
phasized "future organized effort necessary to protect American indus- 
trial system." Referring to this future effort, Mr. Bardo hinted that 
"there have been various suggestions for additional organization of 
shareholders and the teaming together of manufacturers to study the 
effects of politics on their businesses." This was to be covered in detail 
at the executive committee meeting. "This industry attitude on the 
Wagner Act," he continued, "and other items on the program I am 
sure warrant your participation in this all day session." x 

According to the report of William Frew Long to the Associated 
Industries of Cleveland : 

It was unanimously agreed at the above conference that industry's attitude 
toward the new act would be predicated wholly on a determination to preserve 
the constitutional rights of employers and those employees who prefer to deal 
with their employers individually or through various plans of employee repre- 
sentation. 2 

In a booklet dated July 23 the legal department advised manufac- 
turers that the Federal Government was not warranted, under the 
interstate commerce clause of the Constitution, in assuming jurisdic- 
tion over labor disputes in ordinary manufacturing; that the act did 
not apply to employment relations between a manufacturer and his 
employees engaged in ordinary manufacturing; and that the majority 

86 Ibid., exhibit 5360, p. 14201. 

87 Ibid., exhibit 5421, p. 14297. 

88 Ibid., exhibit 5420, p. 14297. 
90 Ibid., exhibit 5422, p. 14298. 

1 Ibid., exhibit 5423, p. 14299. 

2 S. Rept. No. 6, 76th Cong., 1st sess., p. 123. 

277780 — 41— No. 26 8 



104 CONCENTRATION OF ECONOMIC POWER 

rule is invalid by virtue of the fifth amendment to the Constitution. 3 
Thus, while the N. A. M. had argued, prior to the passage of the 
Wagner Act, that it would subject the most intimate relations between 
employer and employee to Federal control and regulation, 4 it now 
argued that the act was unconstitutional, and that these same employer- 
employee relationships were beyond the reach of congressional power. 
When the attack shifted from the political arena to the courts, the 
strategy shifted too. The effect of this attitude on the operations 
of the N. A. M. is described by the Senate Civil Liberties Committee as 
follows : 

This attitude expressed itself, of course, in the experience of the National Labor 
Relations Board. The members of the Board were appointed by the President 
on August 23, and the Board was organized and began functioning August 27, 
1935. From that time until March 1, 1937, 83 injunction suits were brought against 
the Board in the district courts of the United States. Among the companies which 
took advantage of injunction proceedings in order to retard the application of 
the National Labor Relations Act, there were such well-known companies and 
large contributors and supporters of the National Association of Manufacturers 
program as E. I. du Pont de Nemours & Co., General Motors Corporation, Bethle- 
hem Shipbuilding Corporation, Chrysler Corporation, Goodyear Tire & Rubber 
Co., Remington Rand, Inc., and many other members of the National Association 
of Manufacturers and the National Metal Trades Association. 5 

As in the preceding years under the N. I. R. A., the association con- 
tinued to supply its members with material for use in educating 
employees as to the limitations of the Wagner Act. Posters were sup- 
plied, as before, in question and answer form, which in effect informed 
employees that they need not join and pay dues to a labor organiza- 
tion; that the employer is not forced to agree to the demands of a 
labor union ; that they would not be descriminated against if they did 
not belong to the union ; that the act did not advocate a closed-shop 
agreement ; and that it did not restrict the company's authority to deal 
with its employees on the basis of individual merit. Unwilling to 
accept the principle of collective bargaining, the association en- 
couraged its membership to adopt an attitude of non-compliance with 
the act on the basis of its unconstitutionality, and one of hostility 
against the N. L. R. B. Both the act and the Board were subjected to 
a continued barrage of criticism and ridicule in letters, bulletins, radio 
addresses, posters, and cartoons. Then, having done everything 
within its powers to obstruct the Board, the association began to 
ridicule it as an abject failure. 6 

On April 12, 1937, the Supreme Court of the United States upheld 
the constitutionality of the National Labor Relations Act, The asso- 
ciation continued, however, to advise industrialists regarding methods 
of reforming company unions into so-called independent unions; it 
supplied them with materials for posters, again informing employees 
of the limitations of the act ; and it advised corporation officials on the 
methods of opposing organization of employees by either the 
A. F. of L. or the C. I. O. 7 

The association chose not to comply with the act, but rather to 
campaign for its repeal or amendment. Arguing in a press release of 

3 Hearings before a subcommittee of the Senate Committee on Education and Labor, 
op. cit., pt. 17, Exhibit 3825, pp. 7589, 75193, 7594, 7596. 

4 Ibid., pt. 35, Exhibit 5342, p. 14175. 

• S. Kept. No. 6, 76th Cong., 1st sess., pt. 6, p. 127. 

a S. Rept. No. 6, 76th Cong., 1st sess., pt. 6, pp. 132-133. 

i Ibid., pp. 134-139. 



CONCENTRATION OF ECONOMIC POWER 105 

April 22, 1937, that the "Supreme Court decisions on the labor act have 
left many problems of interpretation and policy for the future," it 
canvassed its National Industrial Council's member list for proposals 
to amend the Wagner Act, framed a series of amendment^ and stepped 
up its propaganda efforts in order to create and mobilize favorable 
public sentiment. 8 Having failed to prevent passage of the Wagner 
Act, and having seen it declared constitutional by the Supreme Court, 
the N. A. M. sought to return a Congress favoring amendment of the 
act in accordance with industry's views* N. A. M. President Lund 
expounded the propaganda program in partisan political terms in a 
speech before the Annual Congress of American Industry December 
7, 1938 j and in the same speech asserted that it was a major factor 
between 1933 and 1938 in causing public opinion to shift to the right. 9 

N. A. M. support of limiting amendments. — The story of the 
N. A. M.'s fight on the Labor Relations Act is not yet complete. How- 
ever, it shows signs of achieving some success. The most recent evi- 
dence of this success is the adoption by the House of Representatives 
of amendments proposed by the Smith investigating committee in 
June 1940. 

During the 5 years of the act many changes have been proposed. 
In 1938 Senator Burke, of Nebraska, suggested changes in the act. 
In January 1939 Senator Walsh, of Massachusetts, introduced amend- 
ments which embodied A. F. of L. proposals for revision. These pro- 
posals were attacked by the C. I. 0. The following month the 
executive council of the A. F. of L. decided to press the fight for their 
adoption. In April the Chamber of Commerce of the United States 
proposed amendments. In May John L. Lewis of the C. I. O. charged 
that the A. F. of L. cooperated with the N. A. M. in pressing for 
amendments to the act. This was denied by A. F. of L. President 
Green. In June the American Iron and Steel Institute advanced 
further amendment proposals designed to safeguard employers' right 
of free speech, and court appeal for both sides. On June 20 the 
N. A. M. suggested further modifications regarding amendments to 
define the intent of the act and reduce the discretion of the Board. A 
few days later the Railroad Labor Executives' Association charged 
that the Association of American Railroads was endeavoring to alter 
the statutory basis of settling railway labor disputes as part of an 
ambitious employer program to change the Labor Relations Act. 

Finally, on July 20, the House of Representatives appointed a five- 
man committee to investigate the Labor Relations Board and make 
suggestions for its amendment. After lengthy hearings at which 
B r rd officials and representatives of industry and labor testified the 
committee reported its findings and recommendations on March 20, 
1940. 10 In June the House adopted the amendments recommended 
by the Smith committee. They were then forwarded to the equate, 
where hearings before the Senate Committee on Education and Laoor 
were still in progress in November 1940. 11 

8 These proposed amendments included provisions restricting the right of representa- 
tion of any labor organization which did not submit audited reports, which made polit- 
ical contributions, which required the check-off, which sanctioned general strikes, and 
which permitted aliens to hold office or be employed in any capacity. An amendment 
prohibiting coercion from anv source was also approved. 

9 S. Rept. No. 6, 76th Cong., 1st sess., pt. 6, pp. 176-177. 

10 H. Rept. No. 1902, 76th Cong., 3d sess. pt. I (majority) and pt. II (minority). 

11 The majority of the House investigating committee recommended that the act be 
amended so that collective bargaining be denned as not including any duty on the part of 
the employer to make counter proposals over labor proposals, nor to reach an agreement ; 



106 CONCENTRATION OF ECONOMIC POWER 

Civil liberties of agricultural as well as of industrial workers have 
been denied by employers, acting both individually and collectively. 
The Senate Civil Liberties Committee held hearings in California on 
this subject, and took extensive testimony. While the committee re- 
port is not yet available, the testimony shows clearly that employer 
associations in San Francisco and Los Angeles conducted anti-union 
activity and engaged in operations opposed to the closed-shop. As 
farm mechanization and industrialization proceed, the importance of 
the right of agricultural workers to organize and bargain collectively 
becomes greater. Agricultural labor is excluded from the scope of 
the National Labor Relations Act, but the interpretation of the term 
has been within the authority of the Board. The Smith amendments 
would deprive the Board of this authority, and, by incorporating into 
the Act the definition of agricultural labor written into the Social 
Security Act in 1939 would exempt certain categories which the Board 
found were non-agricultural. 

Allies of the N. A. M. — In its fight for amendment of the National 
Labor Relations Act, the N. A. M. has had formidable assistance. The 
division in the ranks of organized labor has been capitalized, of course, 
but in addition the Chamber of Commerce has worked persistently for 
amendment. 12 The American Iron & Steel Institute has lent direct 
support in stimulating employee representation plans. The American 
Bar Association, through its sponsorship of its administrative law 
bill (for further discussion of the Walter-Logan bill, see ch. XII, 
infra) has also been of great help. The Special Conference Committee 
of New York has worked behind the scenes in a very effective way. 

This Special Conference Committee is an organization of high exec- 
utives of 12 of the country's largest corporations. 13 Organized in 1919, 
it has been active in an unobtrusive way in developing its philosophy 
of cooperation between employers and employees and in using its 
influence to keep Congress from adopting "objectionable" labor legis- 
lation. Since 1933 it has maintained close relations with the chamber 
of commerce and with the N. A. M. working through these organiza- 
tions rather than lobbying directly. Possibly the most significant 
contribution of the Special Conference Committee was the support it 
lent the N. A. M. and the National Industrial Council in the coordi- 
nation of efforts to stimulate employees' representation plans and 



separate the administrative functions of the Board from its judicial functions, vesting the 
former in a new administrator to be nominated by the President for a period without 
term, subject to Senate confirmation, and leaving the discharge of the judicial functions 
and the conduct of elections for the choice of representatives for collective bargaining to 
a new three-man Board. The Board would be directed to hold an election on petition by 
an employer and to certify the appropriate bargaining unit ; to withhold certification of a 
collective bargaining unit, where two or more petitions are filed by rival units, until a 
single unit shall have been agreed upon by all the rivals. Amendments would also require 
the Board to adhere, as far as practicable, to the rules of evidence and the ^common law 
rule regarding preponderance of evidence, and would make the Board's evidence in certifi- 
cation proceedings final and reviewable by the courts. Other amendments would leave the 
Board less discretion in issuing subpenas for production of witnesses ; would narrow the 
scope of the act's applicability by writing into it the Social Security Act definition of agri- 
cultural labor ; would limit the Board's right to order reinstatement of employees to those 
not guilty of willful violence ; and would re-define the policy of Congress as stated in the 
act's preamble to read that "failure to bargain collectively" and not "denial .by employers 
of the right of employees to organize, and the refusal by employers to accept the procedure 
of collective bargaining," leads to strikes ; and would delete the reference- in the preamble 
which has been interpreted as encouraging collective bargaining. (Ibid., pt. I, pp. 85-95.) 

12 See above, ch. IV, "Business Outposts in Washington." 

13 The American Telephone & Telegraph Co., Bethlehem Steel Co., E. I. du Pont de 
Nemours & Co., General Electric Co., General Motors Corporation, Goodyear Tire & Rubber 
Co., International Harvester Co., Irving Trust Co.. Standard Oil Co. (New Jersey), United 
States Rubber Co., United States Steel Corporation, Westinghouse Electric & Manufac- 
turing Co. 



CONCENTRATION OF ECONOMIC POWER 107 

work councils (in reality company unions 14 ) prior to the Supreme 
Court validation of the act, and the intensification of those efforts 
afterward. 

The committee had very active and efficient sources of information 
on the status of legislation. Gerard Swope, of General Electric, was 
chairman of the Business Advisory and Planning Council in the United 
States Department of Commerce. He appointed Walter Teagle, of 
Standard Oil of New Jersey, chairman of the council's industrial rela- 
tions committee, and the secretaryship was given to E. S. Cowdrick, 
who was secretary of the Special Conference Committee. Teagle then 
proceeded to appoint all the members of the Special Conference Com- 
mittee to the council's industrial relations committee. 15 

In addition to promoting employer-employee cooperation through 
company unions, the Special Conference Committee also attempted to 
control the opinion of the workers through foremen and advisers. 
Such companies as the Goodyear Tire & Rubber Co., and the Interna- 
tional Harvester Co. instituted training programs. Company policies 
were made clear to those in supervisory positions, and it was expected 
that such information would be passed on to the employees. 

The committee sought, furthermore, to influence public opinion 
through the press, and through cooperation with local civic groups 
such as women's clubs and businessmen's clubs. 

The experience of the Federal Government since 1933 in the field 
of labor relations shows clearly that employers of labor, particularly 
large employers, when organized and under unified leadership, ham- 
per^ if they do not entirely bar, the establishment and administration 
of any public policy not in accord with business views. The gains 
made since 1938 indicate that business has managed to maintain most 
of its control of industrial relations despite the efforts of labor and 
Government to loosen it. It is too early to say that business will have 
its way, yet there is evidence to show that public policy is veering 
more in the direction of management's views. The staying power of 
corporate business, its resources, and ability to give aid and assistance 
in the fields of law, of the newspaper press, and of advertising have 
proved powerful weapons in this struggle, and the intensity of the 
battle on the labor relations field since 1933 has indicated their effec- 
tiveness. 



u A statistical study conducted by the Bureau of Labor Statistics on 592 establishments 
having employee representation plans indicated that in 41.6 percent of the establishments 
the plan was introduced because trade unions were making headway in the particular 
plant or locality (Department of Labor, Bureau of Labor Statistics, Bulletin No. 634, 
Characteristics of Company Unions, 1935, p. 81). Furthermore, in 22.4 percent of the 
cases the plan was Instituted because strikes were in progress or had recently ended. As 
strikes are usually called by outside trade unions, it would be a fair inference that these 
plans, too, were introduced as substitutes for such unions. According to this study, there- 
fore, 64 percent of the 592 establishments studied had acquired representation plans be- 
cause the managements were motivated by a desire. to supplant trade unions. Finally, an 
additional 24^8 percent of the cases were established as a result of the influence of the 
National Industrial Recovery Act. The Special Conference Committee attempted to get 
the Bureau of Labor Statistics to modify this report prior to its publication. Some mem- 
bers, such as the Goodyear Tire & Rubber Co. and the International Harvester Co., threat- 
ened to withhold employment and other statistics from the Bureau of Labor Statistics. 

15 Mr. Cowdrick explained the organization of this committee to one of the members, Mr. 
W. A. Griffin, vice president of the A. T. & T. Co. : "Each member is invited as an indi- 
vidual, not as a representative of his company, and the name of the Special Conference 
Committee will not be used * * *. The work of the new committee will supplement 
and broaden — not supplant — that of the Special Conference Committee. Probably special 
meetings will not be needed since the necessary guidance for the industrial relations com- 
mittee's work can be given at our regular sessions. ' (Hearings before a Subcommittee of the 
Senate Committee on Education and Labor, op. cit., pt. 45, exhibit 7680, p. 16980.) 



CHAPTER VII 
TARIFFS AND TAXES 

The three fields of tariffs, taxes, and public expenditures are par- 
ticularly subject to control by the business community. Their struc- 
ture is complex, yet the immediate interest of business is easily dis- 
cernible in any such legislation passed. The complexity -and detail 
involved in all three make it easy for business to divide the strength 
of the opposition and defeat its aims. This is particularly true when 
the opposition is divided within itself on the various considerations of 
fiscal policy. A single fiscal policy may affect even a single individual 
in various ways, so that in order to determine his own attitude he must 
weigh the effect on himself as producer and consumer, and as a mem- 
ber of any one of a number of social and economic groups. This con- 
fusion is multiplied enormously when individuals attempt to act in 
groups for pressure purposes, and business has a very real advantage 
because it is legitimately concerned primarily with its interest as a 
producer. 

Even business, however, does not alwavs act intelligently in its own 
interest, as the tax structure is a powerful mechanism, capable of ef- 
fecting fundamental changes in the economic system. Business has 
always favored taxes on consumers rather than on either individual or 
corporate incomes, apparently preferring to tax the consumer expendi- 
tures out of which future profits must come than to tax the profits 
themselves. 

The protective tariff also tends to cut consumer expenditures, and 
thus dry up a source of future profits, as does a curtailment of Gov- 
ernment expenditures. Business, however, has generally considered 
all three policies solely in the light of their immediate effect on its 
pocketbook. 

EARLY FISCAL POLICY 

The dominance of business in Federal fiscal policy goes back to the 
earliest days of the Republic, when the business community gained most 
of its objectives in the struggle over the drafting of the Constitution. 
Since that time the dominant concepts in fiscal matters have been fixed 
by business, and as a general rule the country has proceeded on the 
assumptions that a protective tariff is beneficent, that taxes hurt busi- 
ness, and that the Federal Budget should be balanced. There have 
been strong counter-currents, but they have prevailed for only rela- 
tively short periods of time, if at all. 

As in other fields of political pressure, the chief spokesmen for busi- 
ness have been the National Association of Manufacturers, the United 
States Chamber of Commerce, the American Bankers' Association, the 
Investment Bankers' Association, the American Tariff League, the 
National Economy League, and other smaller organizations. On oc- 
casion, and with some success, they -have enlisted the aid of farm and 

109 



HO CONCENTRATION OF ECONOMIC POWER 

unemployed groups, municipalities, labor, veterans' organizations, etc., 
although these groups are primarily interested in other causes, and 
have affiliated with business only temporarily, for particular ends. 

These latter groups are rather loosely organized, and on occasion 
business has been able to use them for its own purposes without recip- 
rocation. An outstanding example is the farmer's acceptance of pro- 
tectionist propaganda, although he has been little aided by the tariff 
on farm products, and as a consumer has been injured by the indus- 
trial tariff. Most of the large crops the farmer grows are on an ex- 
port basis, and their prices have been fixed in world markets, without 
reference to tariff walls against incoming farm products. Yet on the 
products the farmer must buy, the prices are set in the domestic mar- 
ket, and tend to be raised by the tariff wall which keeps out foreign 
goods. In spite of this situation, business has for decades been able to 
win farm support for industrial tariffs, merely by promising to support 
agricultural duties which are larrply meaningless. 1 

THE NATION COMMITTED TO TARIFF PROTECTION 

No occasion offers such a wide-open opportunity for individuals 
and groups to translate private aims into public law as does a revision 
of the tariff. Its very theory is an invitation to domestic producers 
to present their claims for protection to Congress for sympathetic 
examination and approval. They want protection against foreign 
competition, and have come to have a vested interest in the continu- 
ance of such, protection. They advance a number of reasons — the 
general welfare, national defense, the American standard of living, 
upbuilding of infant industries, high domestic labor and material 
costs, among others. On the assumption that tariff benefits granted 
to a few also work for the welfare of the population as a whole, Con- 
gress has irrevocably committed the Nation to the protective system. 
This commitment in turn has created a political environment in which 
immediate beneficiaries of the system hold a favored position. In 
reality, Congress makes a tariff under pressure from these insiders. 

The first tariffs in the United States were levied for revenue only, 
and were largely on commodities not locally produced, such as tea, 
coffee, sugar, and other items which might be regarded as luxuries, 
and could not be grown or manufactured in the United States. This 
was the case up to 1808, when the embargoes imposed by Great Britain 
virtually stopped American importation of foreign goods. The re- 
sultant drop in revenues was negligible compared to the equivalent 
of complete protection which the embargo forced on American indus- 
try. Dozens of factories started up, manufacturing the iron, textiles, 
and other items that had formerly been imported from England. 
Their costs were naturally high, at the beginning, and their techniques 
inefficient. Since foreign competition was effectually throttled, how- 
ever, they could remain in business. 

At the close of the War of 1812, foreign commerce returned to its 
former status, and the American industries feared a complete loss of 
their markets to cheaper foreign goods. They immediately went 
before Congress with demands for a protective tariff, basing their 

3 Lippert S. Ellis, The Tariff on Sugar, 1933; C. K. Alexander, Tariffs on Pork and 
Mutton, 1934 ; R. R. Renne. The Tariff on Dairy Products, 1933 ; and T. W. Schultz, 
Tariffs on Barley, Oats, and Corn, 1933; all publ'shed by the Rawleigh Tariff Foundation 
Frecport, Illinois. 



CONCENTRATION OF ECONOMIC POWER \\l 

arguments in large part on Hamilton's famous report on manufac- 
tures, published in 1790, with its arguments for protection of infant 
industries. 

Since that time, the United States has always had a protective 
tariff. The levies increased so steadily from 181C to 1828 as to earn 
the Act of 1828 the nickname "Tariff of Abominations." From 1832 
to 1846, the duties were lowered considerably, and the period from 
1846 to 1857 is sometimes referred to as an era of free trade. This is 
erroneous, as protective duties were in force all that time, although 
they were lower than they had been in many years. 

The drastic necessity for raising money during the Civil War led 
to abrupt increases in 1861 and 1864, which put the duties far above 
what the country would have permitted in the absence of a national 
cataclysm. Some efforts were made to reduce the rates in 1872, but 
they were unseccessful, and by 1883, the time of the next attempt, 
the public had grown accustomed to the extraordinary war rates, and 
many of them were actually revised upward. The MeKinley tariff 
of 1890 raised the rates again, as did the acts of 1911 and 1922. 2 

Throughout these changes, the business approach has been to secure 
from Congress a tax on articles of foreign manufacture high enough 
to put their price above that of the domestic goods. The wool manu- 
facturers of the Nation were among the first to be interested, as a 
group, in tariff legislation, and their interest has continued unabated 
down to the present. The National Association of Wool Manufac- 
turers, founded in 1864, has had a continuity of management and 
financial interest which, has been able to impose its desires upon a 
Congress which was both less permanent and less singleminded on 
tariff policy. 

As a natural result of its long contact with the problem, the National 
Association of Wool Manufacturers developed techniques of securing 
what it wanted by the use of technicalitips in tariff legislation, which 
it understood better than many of the members of Congress. The 
institution of compensating duties, established in 1867, is a case in 
point. The first such tax was simple, merely setting up a tax on im- 
ported woolen cloth to equalize the duty on raw wool. That is, it 
was assumed that if the wool duty was 3 cents a pound, and it took 
4 pounds of wool to make a pound of cloth, the cloth duty should be 
12 cents. As time went on, however, the duty on finished goods began 
to include provisions for dyestuffs used, and other fibers mixed with 
wool, which became sol complicated that a detailed knowledge of 
manufacturing was necessary to fix the compensating duty. As a 
result, this "compensating" duty was frequently considerably higher 
than the tax on raw wool. 

Up to 1870 the chief arguments for the tariff had been protection 
for infant industries, and equalization for the farmer. At about that 
time, the agitation among farmers for lower industrial tariffs began 
to make itself felt, and in 1872 the argument was laid before Congress 
that a "scientific" tariff was needed — one which would equalize the 
duties on raw materials and manufactured goods, as well as give the 
farmer parity with industry. 

This concept of a "scientific" tariff has stuck, even when the tariff 
provision obviously reflected the desires of interested parties. In 

2 P. W. Taussig, Tariff History of the United States, Putnam's, New York, 1023. 



112 CONCENTRATION OF ECONOMIC POWER 

1883 the Senate passed a rate of $20.16 a ton on bar iron, while the 
House fixed a rate of $20. The conference committee composed the 
difference by setting a rate of $22.40. 3 It is perhaps merely coincidence 
that the House was the largest of the three bodies, and the conference 
committee the smallest. 

In the fight for a "scientific" tariff, the Tariff Commission was set up 
in 1916, largely at the insistence of the. protectionists. It was charged 
with the duty of making recommendations to the President and to 
Congress, on the basis of information which it was to collect on the 
effect of existing tariff laws. This meant, among other things, that 
business now had another instrumentality to use in tariff revision. In 
addition to working with Congress and the Executive, it now could 
transmit its views and apply its pressure through the Tariff Commis- 
sion as well. 

The Fordney-McCumber tariff of 1922 set up the principle of a 
flexible tariff, under which the President could revise the rates upward 
or downward, within a range of 50 percent, according to changes in 
the tariff situation. This, again, increased the scope of lobbying from 
the former sporadic moves at the time when tariff changes were in 
prospect to a regular, day-to-day pressure for revision through the 
Executive. 4 

The changes of this kind, however, were limited to revisions in exist- 
ing rates. As the decade of the 1920's progressed, pressure grew for 
general revision of the tariff laws, and was given extraordinary im- 
petus by the difficulties which confronted the farmers, particularly 
after 1926. Agitation for parity with industrial prices became 
stronger and stronger, as farm prices and farm values declined. The 
McNary-Haugen bill, establishing an export equalization price on 
exported products, was also the result of this pressure from the farm- 
ing areas. 

Hawley-Smoot Tariff Act. 

Finally, in 1929, Hoover called a special session of Congress to help 
agriculture by means of tariff legislation. This was the signal for 
extraordinary pressure from the high tariff advocates among the 
manufacturers. Of the many interests likely to be affected by the 
legislation, they were by far the most effective. Farmers, laborers, 
veterans, patriotic groups, bankers, and lawyers all would be as much 
affected as business. Yet their organizations were, on the whole, sin- 
gularly ineffective, not because they were not concerned, nor even be- 
cause they were undisciplined, but only because they did not clearly 
recognize their interest as consumers. 

3 Taussig, op. cit., p. 233. 

4 The philosophy on which tariff lobbyists proceed was expressed by Mr. Joseph Grundy, 
president of the Pennsylvania Manufacturers' Association, when, during the lobby investi- 
gation of 1929-30, he was questioned in regard to the $750,000 which Pennsylvania 
manufacturers contributed to the Coolidge campaign fund in 1924. Senator Caraway, 
chairman of the committee, asked, "They put up the campaign expenses, and they ought 
to get results for their money. Is that the obligation that rested on you — to see that they 
got their money's worth?" 

Mr. Grdndy. I think they have & right to see t- at the Republican platform adopted at 
Kansas City is put into law. * * * 

Senator Caraway. They put up the money to take care of the election, and you feel they 
ought to get it back in legislation? 

Mr. Grdndy. If that platform was put into law they would get their money back. 

Senator Caraway. And you were down here to see that they got their money back? 

Mr. Grdndy. Yos, sir ; I was helping every way I could. 

(This colloquy is reported in S. McKee Rosen, Political Process, Harpers, New York, 
1935, p. 28.) 



CONCENTRATION OF ECONOMIC POWER H3 

On the other hand, a few pressure groups were active, and effective. 
What is more, the members of certain "single purpose" groups were 
not only active, but a,lso practically dominated the proceedings. Where 
opinions differed on the question of changing existing duties, "the 
struggle in the actual event in nearly all cases was confined narrowly 
to the manufacturers and importers of the commodity levied upon, 
with the latter able, sometimes, to count upon the support of their 
manufacturing customers." 5 Businessmen thus held the center of the 
political stage. "The politics of the tariff consists largely of a 
maneuver executed by a minority of the interests affected by the legis- 
lation in the presence of hosts of inert groups who derive benefits 
from the policy that are often obscure and dubious." 6 

It was not the citizen groups with general interests but those with 
narrowly defined interests which were active. The League of Women 
Voters was conspicuous by its absence, as was the American Federa- 
tion of Labor. The farm groups, however, were active. The Farm 
Bureau Federation and the Grange testified before the congressional 
committees, not in opposition to the industrial schedules, but for higher 
agricultural schedules. "The great farm organizations * * * 
subscribed strongly to the strategy of reciprocal non-interference in 
their drive to establish a parity of agriculture and industry." 7 

In conducting this drive the Farm Bureau and the Grange joined 
hands with farm commodity organizations and affiliated groups in 
an attempt to secure a new competitive position for fats and oils. In 
so doing they encountered stout opposition from groups of processors 
using imported fats and oils. The petition for protection was initiated 
by the National Cooperative Milk Producers Federation. 8 In addi- 
tion to the Farm Bureau and the Grange, it was signed by the Farm- 
ers' Union, the National Livestock Producers' Association, and the 
American Cotton Growers' Exchange as well as by numerous secondary 
groups. 9 Arrayed in opposition were various groups of makers and 
users of soap and oil products. 10 

Although the drive was generally unsuccessful, it illustrates how 
specific producer groups rather than general interest consumer groups 
moved to get what they wanted. Through their national association, 
wool manufacturers were active, just as their predecessors had been 
in every tariff contest since 1816. 

In the ability of its members to take a unified stand in favor of 
protection, however, the wool manufacturers were fortunate. Other 
national producers' groups found themselves divided. The Silk As- 
sociation, for example, wanted increased duties, while the Silk Defense 
Committee, a temporary organization, wanted existing rates main- 
tained. Proposed duties on oil, lumber, and logs provoked such a 
conflict between "all- American" producers and larger producers who 
were exploiting foreign sources of raw materials that neither the 

B E. E. Schattschneider, Politics, Pressures, and the Tariff, New York, 1935. p. 122. 
• Ibid., p. 136. 

7 Ibid., p. 137. 

8 Ibid., p. 149 ff. 

8 Fhre national cattle breeders' associations, an association of manufacturers of dairy and 
ice cream machinery and supplies, the International Association of Dairy Supply Houses. 
the National Association of Ice Cream Manufacturers, the National Cheese Institute, and 
the "Dairy Farm and Trade Press." 

10 The American Laundry Soap Manufacturers' Association, the Soap Institute of America, 
the Textile Soap and Oil Manufacturers Association, the Institute of Margarine Manufac- 
turers, the Laundry Owners' National Association, the National Association of Cleaners 
and Dyers, and the American Hospital Association. 



114 CONCENTRATION OF ECONOMIC POWER 

American Petroleum Institute nor the National Lumber Manufac- 
turers Association was active in the revision. Rival interests had to 
act through temporary organizations. 

The American Tariff League and the National Council of American 
Importers and Traders were the most active and the most important 
of the citizen groups which took part in the tariff revision of 1929. 
Much of the really significant pressure for and against increased 
duties came from their members. The former, is "without ques- 
tion * * * the greatest repository of skill and experience in the 
pressure politics of the tariff." n It has been described as "fiercely 
Republican," and as "the spearhead of the (1929) drive of the most 
experienced and most strategically placed industrialists for higher 
tariffs." 12 

The National Council of American Importers and Traders, on the 
other hand, was "by all odds the most active opponent of a long series 
of increases sought by domestic • manufacturers." 13 In the main, the 
membership of the American Tariff League is the group whose objec- 
tives are advanced further by tariff legislation than those of any 
other. According to the record, the only group which stands in the 
way of a more complete realization of the league's objectives is the 
Council of Importers and Traders. 

As the Hawley-Smoot Tariff was finally passed in 1929, its rates 
were even higher than those of 1922, and the discretionary power of 
the President to raise or lower them within a 50 percent range was 
retained. The farmers got out of the bill higher rates on their export 
crops, which affected their prices not at all, and the Federal Farm 
Board. 

The number of farmers-interested was far greater than the number 
of industrialists; the farmers wanted low industrial rates as well as 
high farm rates, and yet were able to secure nothing more than mean- 
ingless increases in rates on exported crops. The history of tariff 
legislation seems to make it clear that farmers and consumers have 
found it easier to get increased duties through Congress, even where 
they are ineffective, as the farm duties have been, than to obtain 
rate reductions which would mean money in the pockets of consumers. 

Business has been very successful in convincing the ordinary citi- 
zen that his interest is identical with that of business — that is, that 
his interest as a producer overshadows his problems as a consumer. 
Almost invariably, business has been able to whip up public sentiment 
against imports of manufactured articles, on the basis of alleged pro- 
tection of wage scales, ignoring the higher prices which consumers 
consequently pay for the whole range of protected articles. 

Use of Import Excises to Strengthen Tariff. 

In the few cases in the Hawley-Smoot Tariff where business could 
not secure tariff increases, the next maneuver was to persuade Congress 
to levy import excises. The movement was started by Franklin Wirt, 
of the Independent Petroleum Producers Association, and he was 
almost immediately joined by Battle and Madera of the National Coal 
Association. 14 



u Ibid., p. 9. 

12 Ibid., p. 138. 

13 Ibid., p. 141. 

14 See Time, May 16, 1932, pp. 15-16. 



CONCENTRATION OF ECONOMIC POWER H5 

Wirt was interested because the dissension among the oil producers 
in 1929 had resulted in the elimination of the oil duties from con- 
sideration. The independents are largely confined to domestic wells, 
whereas the larger producers secure a large part of their oil from 
foreign sources. Hence, when the independents failed to secure the 
oil duty they wanted in the Hawley-Smoot Tariff, the import excise 
tax suggested itself to Wirt. The Coal Association was interested 
because of the imports of Russian coal at that time. They managed 
to enlist the aid "of Senator Huey Long, as well as the National Asso- 
ciation of Lumber Manufacturers, since there were charges of lumber 
dumping by foreign nations at that time. The rich copper mines in 
the Belgian Congo were going into production, landing copper on 
our shores at prices sharply competitive with domestic production. 
This situation resulted in the interest of Senator Ashurst, and this 
small group became the nucleus of what Senator Harrison has called 
the "unholy alliance" of 28 Senators from coal, oil, copper, and lumber 
States. 

Efforts were made at the same time to enact such import excises on 
vegetable oils and fats, and tropical starches, but they were unsuc- 
cessful. 

The effect of such excises is exactly the same as that of a tariff, 
and they were resorted to after being defeated in the tariff bill because 
they provided a way of getting around the omissions of that bill 
without reopening the whole tariff schedule to new. negotiations and 
log-rolling. 

Reciprocal Trade Agreements. 

One of the first acts of the New Deal was to institute a general 
policy of reciprocal tariff reductions by agreements with foreign 
countries. The Hawley-Smoot Tariff had brought retaliation from 
numerous foreign governments, and it soon became apparent that 
mere reductions on our part would not secure reciprocal action from 
these foreign nations. Therefore, trade agreements were negotiated 
between the United States and numerous other countries, reducing 
our tariffs on given items produced in those countries, in return for 
their reductions on our exports to them. 

Business was hostile to these agreements from the start, and fought 
their extension bitterly both in 1937 and 1940. The National Asso- 
ciation of Manufacturers was heard at length on the subject of exten- 
sion, as were numerous other representatives of business, as well as 
many farmer, labor, and consumer representatives. These latter 
three groups were seriously divided in their opinions. The Farm 
Bureau has at times favored, while the Grange opposed, extension. 
Matthew Woll testified for the Wage Earners Protective Conference in 
opposition to the proposal, while the Brotherhood of Railroad Train- 
men supported it. Consumer organizations generally supported it. 
Business, however, was very generally in opposition, with only minor 
exceptions. When the agreement power was extended, in 1937 and 
1940, there were suggestions of testing it in the courts; but this has 
never been done. 15 

The New Deal farm program is generally agreed to have been of 
less aid to the dairy sections of the country* than to the producers of 

16 Hearings before the House Committee on Ways and Means, 76th Cong., 3d sess., on 
H. J. Res. 407, vols. II and III. 



11(3 CONCENTRATION OF ECONOMIC POWER 

corn, cotton, tobacco, and wheat. 16 This is probably due to a number 
of causes, but one of them is the luxury status of dairy products for 
a large proportion of the population. When times are hard, these 
people shift to corn and pork products and wheat, and they will not 
return to the consumption of dairy products until their incomes in- 
crease. Their incomes have not increased sufficiently to raise dairy 
prices as the A. A. A. program has raised corn, hog, and wheat prices. 
The dairy farmers' discontent with New Deal policies has been capi- 
talized by the foes of the trade agreement program, with considerable 
success. In the 1938 election in Wisconsin and Minnesota, for instance, 
a strong campaign was made by the Republican Party against the 
trade agreement with Canada in particular, and Republicans displaced 
all but one Minnesota Farmer-Laborite, and two Wisconsin Progres- 
sives. There were other factors in this sweeping defeat, of course, but 
a large part of the apparent reaction in these States may be traced 
to the dissatisfaction of the dairy sections with the trade agreements, 
and the use of this dissatisfaction by Republican leaders for their own 
ends. 

One of the chief reasons for the objections of business to the trade 
agreements program has been that tariff legislation has for decades 
been a matter of log-rolling in Congress. It is notoriously easy to gain 
support in Congress for a concession, providing the support of another 
group for another concession can be offered in return. Log-rolling 
with the executive branch is not so easy. Different pressures can be 
applied, but it is impossible to swap votes for different provisions in 
a single tariff bill. Any- politician knows, or will learn to his cost, 
that a promise of future support is worth little in comparison with 
present aid. Successful log-rolling is a process of swapping a vote 
on one measure up at the moment for a vote on another measure up 
at the moment. Under the reciprocal trade agreements program, busi- 
ness can tell the Executive that they will support other measures in 
return for concessions granted in a particular agreement, but the force 
of the argument is lost, since the support of other measures is in the 
future, and may never materialize. 

Another reason for the fight against the trade agreements has been 
that in some cases they have permitted foreign competition to reduce 
prices. Business spokesmen have naturally tried to avoid stating this 
directly, so as not to provide an argument for consumers' groups. 
Mr. Arthur Besse, president of the National Association of Wool 
Manufacturers, was very insistent that although the domestic manu- 
facturer supplied 96 percent of the domestic market, the 4 percent 
imported was not an adequate measure of the damage to American 
producers, but merely indicated the extent to which American pro- 
ducers had been unable to make enough concessions to keep the mar- 
kets. Specifically, he said, "One of the depressing factors on the price 
situation was the press of competition from England, * * * it 
made it very difficult to get an adequate price for our goods." 17 Later 
he added a specific illustration. "A maker who* perhaps, is the 
highest grade marufacturer of men's wear fabrics in this country had 
to reduce his top line 35 cents a yard in January (from his December 

10 See F. F. Lininger, Dairy Products Under the Agricultural Adjustment Act, Brook- 
ings Institution, Washington, 1934. 

" Hearings before the House Ways and Means Committee, 76th Cong.. 3d sess., on 
H. J. Res. 407, p. 2391. 



CONCENTRATION OF ECONOMIC POWER H7 

prices) after the treaty went into effect in order to meet the competition 
offered by English mills." 18 These lowered prices may mean lower 
profits, and as a result of this potentiality they incur the bitter 
antagonism of producers. 

taxes 

The present tax structure is a combination of direct and indirect 
levies, progressive and regressive taxes, based either on ability to pay, 
or ease of collection. It results from 150 years of constant pressure 
for tax reduction on the one hand, -and for increased Government 
services on the other. 

It is impossible to divide the country into two definite camps on 
the issue of taxation. Such a characterization as "the haves against 
the have-nots" is in some ways true, but in others inadequate. Gen- 
erally speaking, however, the great mass of citizens has struggled for 
increased Government responsibility, with its greater costs borne in 
large part by those with large incomes. The possessors of such large 
incomes have sought to circumscribe Government activities, at least 
in certain fields, and have wished to pay for the indispensable services 
by sales taxes and other indirect levies, most of which finally come to 
rest on the individual consumer. 

In our early history, the Federal revenue was almost entirely con- 
fined to customs duties, with excises on some items internally pro- 
duced, such as tobacco and liquor. This state of affairs continued 
until the Civil War, when the sudden demand for increased revenue 
led to the imposition of a wide variety of internal revenue taxes 
(including an income tax). Most of these were removed, and in the 
next 10 years the Government had again come to depend largely 
upon whisky and tobacco levies in addition to customs duties. 

However, a new income tax was adopted in 1894, when a violent 
recession and an attempt by the Democrats to carry out their prom- 
ises of lower tariffs brought a sharp reduction in government reve- 
nues. This tax was declared unconstitutional by the Supreme Court. 

There followed a period of popular agitation for the income 
tax which finally led to the adoption of the sixteenth amendment in 
1916, permitting the Government to levy taxes on incomes. The 
N. A. M. has repeatedly shown hostility to the sixteenth amendment, 
attacking with especial bitterness the proposal for a graduated cor- 
poration income tax. 19 Convinced at last, however, that the income 
tax has become an integral part of our fiscal structure, the N. A. M. 
has turned its efforts to keeping the graduation from becoming too 
steep, and raising as much of the money as possible from the lower 
brackets. 

Pressure on taxation measures did not begin with the income tax, 
however. Earlier taxes were in large part locally raised, generally 
on property. Here pressure has taken the form of attacks on both 
the rate of taxation, and the valuation on which the tax is levied. In 
many localities the real estate tax is still assessed on a fraction of the 
actual value of the property, while in others the effort to keep the 
rate down has been successful. 



18 Ibid., p. 2415. 

18 A flat corporation income tax rate is also advocated by the United States Chamber 
of Commerce in its 1940 statement of policy. 



TQg CONCENTRATION OF ECONOMIC POWER 

As a matter of fact, the general property tax has not been an 
adequate means of raising revenue, from the viewpoint either of the 
Government or the taxpayer. It is an unsteady source of revenue, 
sometimes resulting in foreclosures and tax sales at the precise time 
when revenue is most needed, and when tax sales further damage an 
already demoralized market. Mere ownership of property is go indi- 
cation of the owner's ability to pay taxes, as was all too clearly shown 
by the experience among farmers in 1930-33, when foreclosures were 
rife, and there was no money available with which to redeem the tax 
liens. 

Partly because of this failure of the general property tax, and 
partly because of the increased need for revenue, many States have 
enacted State income taxes. These have been fought as bitterly as 
the Federal tax, though frequently with more success, since business 
has been able to argue that if income taxes are raised too high, they 
will move out of the State. Usually other factors weigh more heavily 
in the location of their plants than taxation, but it is undoubtedly 
true that there is a point beyond which State income taxation cannot 
go for fear of the consequences of such a threat. 

The course of State tax legislation is too complex and too diverse 
to permit full discussion here, except to point out that in essence the 
.same procedure is used as in Federal legislation, with greater or less 
success, depending on local factors. 

The emergency of wartime is usually the excuse for drastic revi- 
sions in the tax structure. As has been pointed out, the Civil War 
involved a great deal of commodity taxation, which was generally 
paid by the ultimate consumer. 

Taxation in the 19Ws. 

The strain of the World War, however, was too great to permit 
resort only to such measures. Borrowing was resorted to on a greatly 
increased scale, and the income tax was made to yield large sums. It 
was over the bitter opposition of business, however, that the income 
tax was passed, and the tax on excess profits was even more bitterly 
opposed. Both yielded enough revenue to make it vital that they 
should be continued until the end of the war. In 1920, one of the 
strong, if ungrammatical, talking points of Harding's campaign was 
"back to normalcy," and his support from business was open-handed 
and enthusiastic. 

Immediately after his election he appointed Andrew Mellon as 
Secretary of the Treasury, where he was responsible for extraordi- 
nary tax reductions. A special session of Congress was called in 
December 1926. For many months prior to this session, the N. A. M. 
had been active in a movement to obtain a reduction of the income 
tax rates. On April 7 it issued a call for the appointment of a com- 
mittee to consider the simplification and clarification of existing tax 
laws, and the possibility of reducing the rates. This call, which was 
sent to 15 outstanding producers' organizations in the country, re- 
sulted in a meeting at Washington on April 27, presided over by 
James A. Emery, general counsel for the National Association of 
Manufacturers. 

At that meeting a committee of seven was appointed, representing 
the manufacturing, mining, lumber, oil, cotton, boot and shoe, and 
automobile industries of the country, as a working group on tax co- 



CONCENTRATION OF ECONOMIC POWER H9 

operation. "While the Committee was primarily to assist the newly 
created Joint Congressional Committee on Internal Revenue Taxa- 
tion in obtaining the industries' views as to simplifying and clarifying 
the * * * tax law, the whole question of another tax reduction 
was not overlooked." 20 The Revenue Act of 1928 reduced the tax 
rate on corporation incomes from 13 to 121/2 percent. 

There was little general complaint at this tax reduction policy, 
although here and there murmurings were heard that the debt should 
be retired, and that taxes should be collected in amounts sufficient to 
provide for such retirement. With the collapse of 1929, however, 
income dropped off precipitously, and the revenues from income taxes 
likewise declined. The revenues from such excises as were in force 
fell along with other revenues, and at the same time the Government 
was being frantically urged to use its resources to care for the unem- 
ployed. 

New Deal Tax Policies. 

Tax rates were raised slightly before 1933, but the inauguration of 
the New Deal marks an extraordinary increase in both tax rates and 
tax collections. The income tax has been far more steeply graduated 
than before, and the exemption has twice been lowered. At the same 
time, a long series of excise taxes has been included, in the revenue 
program, in the beginning largely on consumers' luxuries, but more 
and more shifting to taxes on consumers' necessities. 21 

At the same time, in an effort to force distribution of earnings, and 
to stop tax avoidance by stockholders who wished to leave their divi- 
dends in the company, the administration established a tax on the 
undistributed profits of corporations. 

Up to 1936, the tax structure affecting corporation earnings had 
included only a straight corporation income tax. 22 Also, stockholders 
receiving cash dividends on corporation stock were taxed under the 
personal income tax laws. This personal income tax was avoided if 
the corporation retained its profits instead of distributing them, or 
if it issued stock dividends. Many people of wealth in control of cor- 
porations found it advantageous to leave their dividends in the corpora- 
tion, rather than pay the personal income tax on them. 

During the 1920's about 40 percent of all corporate earnings were 
so reinvested. 23 

Supporters of the 1936 act hoped that the tax would discourage over- 
investment and force this money into the hands of stockholders. 

Business vigorously opposed the act and immediately started a cam- 
paign for its repeal. It took advantage of the recession in 1937 to urge 
that the undistributed profits tax hindered the flow of investment 
funds into new production and enterprise. 

The National Association of Manufacturers, the United States 
Chamber of- Commerce, the Investment Bankers Association, the 
American Bankers Association, the Association of American Railroads, 
the New York Board of Trade, the Guaranty Trust Co., and various 

20 Congressional Record, 67th Cong., 1st sess., June 23 1926, p. 11831. Article bv 
William P. Helm, Jr., in t)- Brooklyn Daily Eagle introduced into the Record by Mr. 
Jacobstein. 

21 See H. Dewey Anderson, Taxation, Recovery, and Defense, Temporary National Eco- 
nomic Committee Monograph No. 20, Washington, 1940, pp. 77-161. 

» Ibid., p. 127. 

■ Hearings before the Senate Finance Committee on revenue revision, 74th Cong., 2d 
sess., -1936, p. 18. 

277780 — 41— No. 26 9 



120 CONCENTRATION OF ECONOMIC POWER 

other organizations carried on a continuous campaign by means of 
their various publications, meetings, and the speeches by their 
members. 

Representatives of these various organizations appeared before 
House and Senate committees considering tax bills. They argued that 
corporations were being penalized for conducting their affairs in a 
businesslike way, that corporations, like individuals, should be encour- 
aged to save for a "rainy day." Mr. G. H. Houston, president of the 
Baldwin Locomotive Works, attacked the levy, saying that the system 
of private enterprise would be destroyed. 24 Winthrop W. Aldrich, 
chairman of the board of directors of the Chase National Bank, appear T 
ing before the Senate Committee on Relief and Unemployment, said 
that the tax affected the capital market. 25 

Owen D. Young, of General Electric, and many other industrialists 
have testified that the tax might be expected to hinder the flow of 
investment capital. 26 

In 1938 the undistributed-profits tax was retained in principle, but 
the rates were greatly reduced. In 1939 it was repealed, and a flat 
levy of 18 percent was placed on all corporation incomes over $25,000. 
This rate has since been lifted to 24 percent by the Revenue Acts 
of 1940. 

The business community, however, has not ceased to fear that the 
undistributed-profits tax may at some time be reestablished. The 
same is true of the publicity provision for incomes over $20,000 a year. 
The law providing that incomes of this size should be made public 
was passed in 1934, and aroused a storm of protest from businessmen. 
Immediately it began to be nibbled away. First the "pink slip" on 
which income was reported for publication was eliminated, and finally 
the law itself was repealed, in 1937. But agitation against such pub- 
licity has by no means ceased. A moving picture released in 1940 
devotes a scene to two crooks gomg over the list of published salaries, 
commenting with surprised approval that the Government is kind 
enough to furnish them a "sucker list." 

The pressure of business for a sales tax instead of an income tax 
has at times been so strong as to deceive even sincere representatives 
of the man in the street. In the "lame-duck" session of 1933 the sales 
tax was sponsored in the House of Representatives, and for a short 
time, until the general public became aroused, had secured the support 
of a number of the outstanding liberals in the House. It was later 
defeated, but only after a hard fight. 

Taxation for Defense. 

The problem of defense and armament in 1940 has again brought up 
the question of taxes. There is a widespread opposition to meeting the 
increased expenditure by borrowing, and yet both business and other 
groups fight increased tax burdens for themselves. 

The conscription of wealth ("universal service") has for many 
years been a battle cry of the American Legion, along with other pres- 
sure groups, and efforts were immediately made to pass an excess 
profits tax which would deal with the problem of war profiteering, and 
at the same time provide needed Federal revenues. The net result of 

24 New York Times, Jan. 9, 1939. 
«> Ibid.. Jan. 15, 1939. 

26 See hearings before the Temporary National Economic Committee, Part 9, p. 3615- 
a619. 



CONCENTRATION OF ECONOMIC POWER ]21 

the effort so far has been the passage of the Revenue Acts of 1940, 
which raised the corporate income tax rate to 24 percent, as stated, 
lowered the personal income tax exemption, and put on each bracket 
a flat increase of 10 percent, rather than the' graduated increase which 
the liberals espoused. The excess profits measure was laid aside, 
promised in January 1941, revived, and laid aside again, but finally a 
hybrid measure was passed in September 1940. 

The study, Taxation, Recovery, and Defense, by Dr. Dewey Ander- 
son, of the Temporary National Economic Committee, shows clearly 
the change in the composition of our tax structure since 1915. The 
revenues from all sources dropped off somewhat in the 1920's, and 
increased with extraordinary rapidity from 1932 onward. The pro- 
portion of the revenue made up by consumers' taxes has also increased, 
indicating that the relative pressure brought by consuming groups is 
considerably less than that exerted by business. Some of this pres- 
sure took the usual form of direct approaches to Congress, in hearing 
rooms, and in lobbies, but an ever greater amount of it has been in 
the form of propaganda directed at the ordinary citizen to convince 
him that direct taxation of business, such as the corporate income tax 
or taxes on undistributed earnings, hampers business and keeps it 
from going ahead in its "normal" fashion. 

Business has led the attack on these taxes, but has managed by 
means of skillful propaganda to convince a large part of the popula- 
tion that the Government was strangling business, and persuade those 
people to communicate their disapproval of the bill to Congress. 

This, in its broad outlines, is a picture of the tax struggle in this, 
country. There have been many minor struggles, however, between 
various interests. An outstanding example is the fight on the oleo- 
margarine tax. 

The dairy producers have always been plagued by the luxury 
status of butter, milk, and cheese in the ordinary diet, and at precisely 
those depression periods when other deflationary factors work against 
them, they find that their market dwindles. Small income families 
are much, inclined to shift to oleomargarine, for instance, when the 
price spread between butter and oleomargarine is wide, and they 
merely forego the consumption of fresh milk. 

One of the chief aims of the dairy lobby, therefore, has been to 
increase the price of oleomargarine to a point which will make the 
shift of little financial value to the consumer. This approach has 
proved only partly successful, and further efforts have been made, both 
nationally and in some State legislatures, to put a prohibitive tax on 
the sale of oleomargarine. 

Here is an extraordinary example of a real division of immediate 
interest between farmers and urban workers. In the absence of an 
adequate solution, which would permit dairy farmers to supply wanted 
dairy products to city dwellers at a fair price, any compromise drives 
a wedge between the two groups. 

GOVERNMENT EXPENDITURES 

Just as vigorously, if not as successfully, as it has argued tax and 
tariff matters, business has espoused a balanced budget. It has 
argued that Government should so arrange its budget that current 
income equal current outgo, "as business does." Obviously, business 



122 CONCENTRATION OF ECONOMIC POWER 

does nothing of the kind, hence the argument is illustrated by point- 
ing out that the individual would soon come to grief if his outgo 
continued for a long time to exceed his income. "A man whose expenses 
exceed his salary," the argument runs, "has two alternatives. He can 
get a higher salary, or he can cut his expenses to a point where his 
salary will cover them." Since this example has a familiar ring to 
the ordinary citizen, and since particularly in hard times he finds it 
difficult to increase his salary, he may be convinced that both business 
and Government should do as he would be forced to, and cut expenses. 

In this case, however, the alternative has been clear, and the general 
public recognizes the result of curtailment of spending. Economies 
were installed in 1932, and the downward spiral gathered speed. 
They were instituted again in 1937, and the recovery suddenly col- 
lapsed into a depression. People generally would rather spend the 
money than take a chance on another recession. 

The theory of "compensatory spending" which has been advocated 
by the administration, has gained many adherents in the country, 
not so much as a theory of which they wholeheartedly approve as it 
is a method of handling a problem which they see no other means of 
meeting. The efforts of businessmen to break down the acceptance 
of the theory have been largely based on their insistence that if the 
Government stopped spending, business could take over, and they have 
been generally unsuccessful. Apparently, a large segment of the 
people adheres to the view that Government was not spending in 
1930, 1931, and 1932, and business did not take up the slack. They 
seem to prefer to see some diminution in the number of unemployed 
before they begin to trust business to hire them in private industry. 

The advocates of the "compensatory spending" program, as distin- 
guished from those who merely vote for its continuance as a practical 
necessity, argue that its function is to compensate for the nonin vestment 
of funds by business ; that when business investment declines, govern- 
ment must take up the slack. When business finds it profitable to 
invest, it will do so, but until that time Government must assume the 
responsibility. 

The general public has grown to accept the idea that the Govern- 
ment must apply correctives to "redress the unbalance that exists be- 
tween business and the rest of the country." They seem convinced 
that the economic system does not operate adequately without Gov- 
ernment intervention of some kind, but feel that Government inter- 
vention should be confined to an effort to correct minor maladjust- 
ments in the system, rather than to reorganize the system. 

In the beginning business was bitterly opposed to the establishment 
of the Securities and Exchange Commission, the Wages and Hours Ad- 
ministration, the National Labor Relations Board, the Social Security 
Board, and many others, as it had been to the Federal Trade Com- 
mission earlier. Later it tried to amend the acts setting up these 
agencies, or, failing that, emasculate them by cutting their appropria- 
tions. In the election campaign of 1940, the spokesmen of business 
upheld regulation of the securities and commodities markets, collec- 
tive bargaining by an agency of the workers' choice, social security, 
and other New Deal objectives. They refrained, however, from advo- 
cating the specific agencies which are charged with- these functions, as 



CONCENTRATION OP ECONOMIC POWER 123 

well as from saying how they would deal with the problems if they 
were in power. 

Defense expenditures. 

The attitude of the business community to Government expenditures 
has changed considerably since the shift of emphasis to national de- 
fense. Where industrialists and manufacturers formerly opposed 
Federal expenditures, they now regard them as of immediate impor- 
tance, and feel that they should be expanded even more rapidly. 

It seems unlikely that this change is entirely due to the need of 
national defense. The earlier New Deal expenditures were also de- 
fended on the basis of their emergency character and the welfare of 
the country as a whole. But these earlier expenditures, while they 
poured billions of dollars into the business channels of the country, 
were not directed from the Treasury immediately into the hands of 
business. Defense expenditures are paid to business, and are dis- 
tributed thence according to the will of business. The conflict be- 
tween the New Deal and business as regards Federal expenditures, 
therefore, springs not so much from the amount of funds spent, as 
from the situs of the power produced by the expenditures. In the 
earlier welfare expenditures, the power was lodged in the Govern- 
ment; under the defense program it is to a much greater extent 
lodged in business. 

FISCAL POLICY DOMINATED BY BUSINESS 

Learning from business groups, and observing their success in the 
manipulation of financial policy, other economic groups, such as agri- 
culture, labor, the unemployed, municipalities, etc., now seek legisla- 
tion in their own behalf. The formation of these pressure groups has 
to some extent weakened the control of business over such policies, 
although the business community has still the greatest resources and 
the widest experience in dealing with legislation and administration of 
laws affecting it. 

The uniting of agriculture in the National Grange and the Farm 
Bureau Federation has enormously increased the pressure potentiali- 
ties of the farm States. They have put their strength behind numer- 
ous objectives, some of them regulatory, like the Interstate Commerce 
Commission, some of them, like the tariff, more closely connected with 
farm policy. Many of the victories of organized farmers have proved 
unsatisfactory, again like the tariff, but they do indicate a tremendous 
potential strength if it is effectively awakened to its own real interest. 

The unemployed banded together, briefly, at the bottom of the de- 
pression, and secured, first, Federal assumption of the relief problem, 
then the Civil Works Administration, the Federal Emergency Relief 
Administration, the Works Progress Administration, the Public Works 
Administration, and the Civilian Conservation Corps. As the coun- 
try began to come out of the funk which overwhelmed it during the 
worst years of depression, however, the business community found it 
easier and easier to split the supporters of unemployment relief and 
public works. They pointed out that the unemployed would be better 
off in private industry doing "honest work," and that if business were 
freed from the shackles of Government interference it could reemploy 
most of the unemployed. They objected both to the cost and the up- 



124 CONCENTRATION OF ECONOMIC POWER 

keep of the public works program, and were in many cases successtul 
in convincing the public of their viewpoint. 

The pressures that have been exerted upon the legislative branch 
since the founding of the Republic have been diverse in both their 
source and effect. The laws enacted, however, particularly those deal- 
ing directly with the Nation's pocketbook, have generally tended to 
follow the viewpoint expressed by business, rather than that of less 
powerful groups. This is the natural result of the long experience 
which business has acquired with the subject, the tremendous re- 
sources of publicity at its command, and the relatively small size and 
compactness of its organizations. 

The tariff laws have provided high protection for the benefit of 
comparatively few businessmen and industrialists, at the same time 
damaging the interests of the far greater number of farmers and urban 
consumers. The tax laws, a compromise between opposing groups, 
have been subject to tremendous pressure from the large masses of 
citizens, but are less steeply graduated and based less on ability to pay 
than would have been the case if this pressure had not been offset by 
the power of business. Government expenditures likewise have been 
greatly increased as a result of mass pressure, but that pressure has 
been nullified to a considerable degree by the desires of the much 
smaller business group. 



CHAPTER VIII 
BANKING AND INSURANCE 

In the fields of banking and insurance, business pressure on gov- 
ernment is exerted through individual corporations and important in- 
terest groups. The larger banks and insurance companies are an in- 
tegral part of the business community and are dominated by much the 
same group of individuals which dominates the business community 
generally. 1 The two large bankers' organizations, the American 
Bankers Association and Investment Bankers Association of America, 
are "extensions" of the corporate community. 2 In speaking of bank- 
ing and insurance, one speaks not of professions separate from business 
and industry, but of citizens closely, even organically, related, in philos- 
ophy and general attitude, to business and industrial groups. 

COMMERCIAL BANKING 

Of the 15,000 commercial banks in the United States, more than four- 
fifths are members of the American Bankers Association. They are 
widely and evenly scattered over the entire country, more than 60 
percent being located west of the Appalachian Mountains. The as- 
sociation is highly organized and draws forth and mobilizes the views 
of country and metropolitan banker alike. Through a skillfully led 
set of promotional departments, continuous efforts are made to im- 
press these views on the American people as being "best for the Na- 
tion," hence, best for banking. 3 

Since its founding in 1875, the history of the association has been 
one of development and growth to conform with the changing and ex- 
panding conditions of banking and the country. In recent years, how- 
ever, the rate of change has not been fast enough to forestall wide- 
spread criticism and questioning of the banking structure. The Bank- 
ing Act of 1935 departed so widely from what the association regarded 
as basic principles of banking in the United States that the association 
drew up a statement of its views. They are worth examination. 

Bankmg and the Government. 

The first of these principles is that the Nation's financial require- 
ments are unrelated to political changes. 

"The real conditions that create the necessity for the expansion or 
contraction of credit arise from the needs of agriculture, industry, and 

1 National Resources Committee, The Structure of the American Economy, Washington, 
1939, pp. 160-163. 

3 Ibid., p. 163. 

3 For the most part, the publications of the American Bankers Association itself have 
been used in preparing this section. The principal ones are : Official Lists, Constitution 
and By-Laws ; the A. B. A., Its Purposes and Activities as an Organization of Service 
to the Banks and to the Nation ; Recommendations of the Special Committee of the 
A. B. A. on the Proposed Banking Act of 1935 ; and statement of R. S. Hecht, president, 
A. B. A., on the same before the Senate Subcommittee on Banking and Currency. 

125 



126 CONCENTRATION OF ECONOMIC POWER 

trade themselves, wholly independent of the administrative policies of 
the party which happens to be in power. We [the association] feel 
that the financial requirements of the Nation's business constitute a 
continuing economic process that is not related to political changes. 
The fundamental principles of sound credit do not vary with varia- 
tions in public thought." 4 

This statement does not mean that banking, according to the view 
of A. B. A. membership,, should be completely free of governmental 
contact. The Government may properly exert — 

"a certain amount of control over banking operations so far as they affect the 
Nation's currency and general monetary policy. Nor do we [the association] 
object to broad powers of supervision over the operation of our banking institu- 
tions because of the semi-public responsibilities they carry." 5 

Beyond these limits, however, the Government should not go. The 
granting of credit and the making of investments are questions of busi- 
ness policy that should remain in the control of the bankers. 

It seems clear that the bankers in the A. B. A. want control over the 
money supply of the country. They protest vehemently against vest- 
ing this function in the hands of the Government. Today, the money 
supply of the American people takes two forms: (1) Currency, and 
(2), more important, "check book money," that is. demand deposits 
in the banks which become current through checks. It is »e power to 
influence the quantity of this deposit money which the -inkers feel 
should be beyond the reach of the Government. 6 

This power should, in their opinion, lie in the hands of the bankers 
themselves,, or at the most in the hands of a nonpolitical, though gov- 
ernment ally-appointed, board. Such a board would consist of five 
persons appointed by the President with the consent of the Senate, 
holding office for a long term of years, and removable from office only 
for cause. 7 Together with four additional persons selected by bank- 
ers, the board would constitute the "open market committee" in whose 
hands would rest the actual authority to influence the quantity of de- 
posit money. A credit system so controlled would realize the A. B. A. 
ideal of a "supreme court of finance." 8 

Such a banking mechanism would, according to the bankers, divorce 
credit control from "politics." "Special care should be taken to keep 
our credit control and banking mechanism free from any sort of po- 
litical considerations." 9 "The policies of the . [Federal Reserve] 
Board should have no reference to the politics or the changes in politics 
of the National administration." 10 The bankers fear that Govern- 
ment will, by the means indicated, add to its multiplying functions 
the control of the credit system of the Nation. 11 

4 Hearings before a subcommittee of the Senate Banking and Currency Committee, 74th 
Cong., 1st sess., on S. 1617 <»nd H. R. 7617, Washington 19S5, p. 518. 

5 Ibid., p. 517. 

6 Ibid. The power is exercised through open market operations (buying and selling 
of Government bonds by a central board) ; fixing the discount rate (the price at which 
"bankers' banks" (Federal Reserve banl:s) extend credit to their members) ; and fixing 
reserve requirements (the backing required for demand deposits). 

7 Ibid., pp. 519, 520. 
3 Ibid., p. 520. 

9 Ibid., p. 518. 

10 Ibid., p. 519. 

11 Although the American Bankers Association suggestions as to the make-up and powers 
of the Federal Reserve Board were not adopted in the Banking Act of 1935, the act was 
thought "on the whole" to be "an acceptable piece of legislation." (Letter of transmittal 
from the Special Committee on the Banking Act of 1935, to the American Bankers Asso- 
ciation, accompanying text of Banking Act of 1935, dated August 23, 1935.) 



CONCENTRATION OF ECONOMIC POWER 127 

During the discussion on the 1935 Banking Act the view was ex- 
pressed that political control was possible without political domina- 
tion. Between the extremes of political control of credit by Govern- 
ment, on the one hand, and nonpolitical control by private bankers, on 
the other, is a third possibility — political control Of credit by persons 
not in public office. Mr. Winthrop W. Aldrich, chairman of the Chase 
^National Bank, and a member of the A. B. A. special committee, told 
a Senate subcommittee that the proposed legislation permitted polit- 
ical control of credit by Government, in the sense that — 

to place the control of the currency and the credit of the country in the hands 
of individuals who are subject to removal by an administration [as he con- 
tended was the case in the pending legislation], is to place the power in an 
administration to utilize the system for the purpose of creating a boom at the 
time when an election approaches. 12 

Under questioning by Senator Couzens, Mr. Aldrich agreed that — 

in the booni of 1929, when these Reserve banks were advocating a rise in dis- 
count rates, the mere contact of any administration here with the Federal 
Reserve Board would have been an influence against any act which would help 
to boost the boom. 13 

So, I do not get so stirred UP about this mere technical assertion of political 
control — 

Senator Couzens commented. 

You can have political control whether you have political domination or not. 
* * * When you talk about political control of the Federal Reserve Board 
or political control of anything else, as a matter of fact it does not have to be 
on the statute books in order to give political control. You can have political 
control of all kinds without a word on the statute books. 14 

If I understand the meaning of "politics" — 

he continued — 

it does not just apply, or at least it has not in the past just applied to public 
officials. * * * Does not politics apply, in part at least, to other activities 
of life, I mean other than to holding public offices? 

Mr. Aldrich replied, "I suppose it does." 15 

In other words, it is not necessary to occupy political office in order 
to take action having political results. A "nonpolitical" board can 
control bank credit to achieve political results. So can a Apolitical" 
board. Adoption of the A. B. A. proposals regarding the composi- 
tion and powers of the board 16 would not have guaranteed nonpolit- 
ical credit control. 

Between 1922 and 1932 the relationship between the State Depart- 
ment and private bankers appears to have coincided with these views of 
the American Bankers Association. 

American bankers intending to float foreign issues or to grant credits 
to foreign governmencs consulted the State Department before they 
took final action. After deliberation, the Department notified the 
bankers of its attitude whether or not objection to the financing was 
interposed. The conference of Cabinet members and bankers at which 
this policy was formulated was called at President Harding's request. 17 

12 Hearings before a subcommittee of the Senate Committee on Banking and Currency, 
op. cit, p. 393. 

13 Ibid., pp. 407-408. 
« Ibid., p. 458. 

15 Ibid., p. 393. 

M See Recommendations of special committee of the American Bankers Association on 
the proposed Banking Act of 1935. 

17 E. P. Herring, Public Administration and the Public Interest, McGraw Hill, New York, 
1936, pp. 80-81, 84. 



128 CONCENTRATION OF ECONOMIC POWER 

Of the results of its operation there is little question : "There is no 
doubt that the foreign loan policy of the Federal Government (from 
1922 to 1932), as it worked out in practice, aided the bankers and 
ignored the investors." 18 No simple statement of fact is possible as to 
whether the pressure for * the formulation of this policy came from 
the President, from his Secretary of State, from a private citizen, or 
from officials of a bankers' association. Yet this is not necessary in 
order to grasp the significance of this informal manner of translating 
group aims into public policy. This informal policy-making was 
possible because the granting of credit and the making of investments 
were not under effective Federal supervision. 19 

Business and the Government. 

In addition to its conviction that politics and banking are and 
should continue to be divorced, the A. B. A. makes plain its position 
on other public questions. Even after several years of the gold sterili- 
zation policy of the Federal Government, the A. B. A. continues its 
historic stand for ''sound money." Also, the association believes in 
private enterprise and individual initiative. "It is our conviction that 
preponderant public opinion in this Nation is against any form of 
socialization of our national industry, commerce, or finance." The 
Federal Government should neither control nor should it operate the 
Nation's economic and financial machinery. During times of economic 
depression such governmental intervention may be justified; but "with 
the passing of emergency conditions, the need for the retirement of 
the Federal Government from the field" should be recognized "as a 
matter of national policy." Also, widespread social benefits to the 
Nation would result from such recognition. "We believe," say the 
bankers, "that the only fundamental cure of unemployment is through 
the stimulation of reemployment by the removal of unjustified barriers 
to the free play of private enterprise and individual initiative." Gov- 
ernment credit operations, although necessary in depression, should be 
discontinued. "It is our duty as bankers," they claim, "to facilitate 
in every effective way the retirement of Government agencies from 
credit activities by promoting public understanding of the proper 
function of privately owned banking." Terming the competition of the 
Postal Savings System "inequitable," the A. B. A. advocates its modi- 
fication, if not its total abolition. 

Equally plain are the association's views on taxation and Govern- 
ment expenditures. Government costs too much, the bankers feel. 
The public demands more of the Government, hence, functions have 
increased. When undertaken by Government, the cost of such activi- 
ties is "relatively high." Also, there is "the inevitable wastefulness 
of bureaucratic organizations." The result is an increase in taxes 
constituting "an outstanding public problem from which no class of 
our people ultimately can remain exempt," The tax burden is not the 
concern of ariy one class of the people ; it is "a problem and a menace 

18 Ibid., p. 84. 

19 The difficulty in ascertaining the facts about the administration of foreign policy makes 
confident generalization hazardous. .Professor Herring says: "The -position of the State 
Department renders^t immune to the influence of such pressure groups [those with a direct 
economic interest in foreign policy], and its contacts with these associations are of little 
significance in the administration of the Department's work" (Ibid., p. 77). However, "no 
one seems to have made a systematic study of the identity and the activities of private 
pressure groups seeking political intervention to promote and protect American interests 
in foreign countries." H. H. Sprout, "Pressure Groups and Foreign Policies," Annals of 
the American Academy of Political and Social Science, May 1935, p. 121, note. 



CONCENTRATION OF ECONOMIC POWER 129 

for all our people." Unless the upward trend of taxes is curbed, 
individual initiative and enterprise will be repressed. In that case, 
the increased taxes will "increase the very types of human misfortune 
which they in so large part are aimed to relieve.'-' 

Solution of the unemployment problem hinges not only on the 
restoration of free enterprise and initiative and on curbing taxation, 
but also on a balanced National Budget, hence on decreased Govern- 
ment expenditures. The "illusion" that "Government expenditure is 
of itself a cure for economic ills" is, according to the belief of the 
bankers, "one of the most serious dangers confronting the Nation." 
Continued deficits are partially justified by efforts to relieve human 
suffering and deprivation in depression times. Nevertheless, "there 
are well defined, though limited, fields within which Government 
expenditures are justified." "The prime consideration of sound 
national fiscal policy" should be "definite efforts to return to a bal- 
anced National Budget," presumably through limiting Government 
expenditures to the fields referred to. Whatever these fields may be, 
spending for unemployment relief purposes is not one of them. A 
balanced budget "is the surest way of relieving human suffering and 
deprivation, chiefly because., of the stimulus and confidence it would 
give to private industry and trade whose normal activities should be 
the fundamental source of employment and security." 

Although in general it condemns Government control of business 
and finance, the association welcomes such control in the issuance of 
bank charters. Issuance of new chatters in those localities too small 
to support a bank or which are adequately supplied with banking 
facilities should be prevented. Governmental power to inquire into 
such matters as a condition precedent to admitting a new bank to 
the benefits of Government deposit insurance is looked on with favor 
by the bankers. The pattern of most pressure groups is to seek the 
assistance of Government for certain ends, at the same time remain- 
ing free from its control in other ways. 

Propaganda Methods. 20 

The American Bankers Association is conducted on the broad prin- 
ciple that "what is best for the Nation is best for banking. The wel- 
fare of the two is indivisible." The task of the A. B. A. public edu- 
cation commission is to publicize the bankers' thoughts on "what is 
best for the Nation." 

The organized bankers aim to sell themselves and their ideas to 
the American public. In its completeness, their public relations pro- 
gram goes far foeyond the mere use of the newspaper press. In its 
deliberateness it surpasses the calculated activities of many other 
citizen groups. It is a frank and open effort to gain more extensive 
public approval of bankers and of bankers' methods, in order to secure 
public acceptance of the ideas which the bankers think are "the best 
for the Nation." The primary objective of the A. B. A. public rela- 
tions program is "to focus attention on, and give impetus to, those 
ideas which it believes are beneficial in promoting understanding and 
solidarity among banking, business, and the public." The program 
"is calculated to produce a continuous and cumulative effect by varied 



20 The material from p. 129 to p. 131 is derived from the pamphlet, "The Public Relatione 
Program of the American Bankers Association," August 1935. 



130 CONCENTRATION OF ECONOMIC POWER 

efforts which are aimed to work day in and day out in the desired 
direction." 

Among these varied efforts are the preparation and distribution to 
the - newspaper press of "canned" articles; advertising in the news- 
papers ; publication of books and pamphlets for distribution in agri- 
cultural areas; and the association's official monthly magazine, 
Banking. 

The publicity department writes and distributes the "canned" 
articles. They deal particularly with, the activities of the A. B. A. 
"in improving banking and business conditions." Over 6,000 city and 
country daily and weekly newspapers receive the matter at frequent 
intervals in the form either of matrices or plates of type. "The sub- 
ject matter always deals with principles and never deals with person- 
alities or individualized controversies." It is estimated that more 
than 25,000,000 people read the papers in which the articles are 
published. 

The newspaper advertising is dispensed by an advertising depart- 
ment, and is available at a moderate price for all members who care 
to use it "in bringing about better public understanding in their own 
communities regarding banking and its services." 

For aid to farmers in setting up better financial, accounting, and 
operating methods on their farms, the agricultural commission has 
published two books, Making Farm Investments Safe 21 and Factors 
Affecting Farm Credit. 21 The commission also publishes a regular 
bulletin which circulates to about 10,000 persons, among them the 
county agricultural agents throughout the United States. 

Some 20,000 people subscribe to Banking, about two-thirds of 
whom are bankers, while the remainder are bank directors, business 
executives, economists, law firms, Government departments, libraries, 
colleges, public schools, and publications. "To these groups it brings 
each month articles regarding banking and banking viewpoints." 
Little attempt is made to pitch the subject matter on a popular level. 
Instead, it is aimed to reach the leaders in industry, commerce, trans- 
portation, and finance. "Among thoughtful and influential business 
leaders, it serves as a continual liaison in respect to the aims and ac- 
tivities of organized banking and banking thought." 

Another, and most subtle method of propaganda is the preparation 
of "plain language" talks about banking by the public education com- 
mission. These are for use by bankers when speaking before grammar 
and high, school classes, before civic clubs and over the radio. The 
same material is also supplied to lay speakers, and is disseminated 
widely through. State bankers' associations. Thus, "although the 
forces thus set in motion by the American Bankers Association are 
having far reaching effects, the part played by this association, itself, 
is not obvious in them when their effects reach the public." 

Another scheme for improving public relations in which the associ- 
ation stays in the background, is the instruction of banking 'employees 
in methods of making banking customers better satisfied. This activ- 
ity is based "on the proposition that, if tne attitude of the many mil- 
lions of persons who come into the banks as customers were made 
better informed [sic] and more sympathetic, this would act as a leaven 

* Agricultural commission, American Bankers' Association, Making Farm Investments 
Safe, Madison, 1933 ; and Factors Affecting Farm Credit. Madison, 193C 



CONCENTRATION OF ECONOMIC POWER 131 

and an improved state of public mind toward the banks in general 
would necessarily result." About a thousand members have organized 
employee conferences, using as the basis of instruction the materials 
prepared for this purpose by the pubfic education commission. 

Besides organizing special material for use of farmers, the agri- 
cultural commission has designated 2,300 key bankers covering every 
county in the United States "to act as focal points in their districts 
in fostering better understanding between bankers and farmers." 

In addition to these informal propaganda methods, the associa- 
tion, through the American Institute of Banking, maintains an insti- 
tution for the technical education of the younger banker. But it is 
also an institution which has in recent years "been consciously di- 
rected more clearly toward playing a part in improving public rela- 
tions for banking as a whole." The textbooks and courses emphasize 
the public responsibilities and ethical aspects of practical banking. 
The various institute chapters are also active in the presentation of 
addresses before schools and civic bodies and over local radios. These 
talks are "aimed to improve the attitude of the public toward bank- 
ing." Thus, the American Institute of Banking becomes a clear chan- 
nel for presenting its students and the public with organized banking's 
best ideas for the Nation. 

Representation at Washington. 

Special pains have been taken by the executive officers of the associa- 
tion, working with the committee on banking studies, to improve the 
standing of organized banking at Washington. These efforts toward 
better public relations stand in a class by themselves.' There is little 
doubt that they amount to lobbying, pure and simple, despite the 
association's claim that it maintains no lobby at the Nation's Capital. 
The two groups "have been constantly active at Washington in consul- 
tation with administration and congressional leaders * * * they 
have had an opportunity to play a constructive part in shaping bank- 
ing legislation." Although "these activities have involved a consider- 
able increase in the expenditures of the association," they are clearly 
regarded as worthwhile. They have brought about "a much more 
favorable political atmosphere at the National Capital toward bank- 
ers and banking." "Bankers," it is maintained, "are no longer looked 
upon as obstructionists in respect to desirable changes in the banking 
law." Instead, they are "a very important influence for good on public 
opinion and on the political attitude of the day regarding banking." 

The association's candid description of its own nr-opaganda creates 
some doubt as to the accuracy of its evaluation of tire results obtained, 
and well known opposition of bankers to banking legislation increases 
this doubt. There is no doubt, however, that the association has made 
a Nation-wide effort to bring its views and those of America's millions 
into close agreement. Perhaps, in the light of the evidence, the bank- 
ers' guiding principle, "What is best for the Nation is best for bank- 
ing," should read, "What is best for banking is best for the Nation." 

INVESTMENT BANKING 

The Investment Bankers Association was established in 1912. Since 
that time, productive capacity in American industry has advanced 
tremendously, and the automobile, oil, rubber, chemical, and electrical 



132 CONCENTRATION OF ECONOMIC POWER 

equipment industries have advanced to the front rank of large-scale 
enterprise. A total of $125,000,000,000 of nongovernmental securities 
was offered publicly during this period. 22 The Investment Bankers 
Association has since its establishment been the recognized spokesman 
of the distributors of these securities. 

By no means all or even a majority of the units in this distributing 
system belong to the I. B. A. The Securities and Exchange Com- 
mission reports nearly 7,000 registered firms dealing in securities, 23 
of which only 800 are I. B. A. members. But there is little doubt 
that this minority speaks for the industry. The association's selected 
membership is composed of "especially high grade investment bank- 
ers." Its sponsorship of the investment banking code under the 
N. R. A. signifies its position as industry spokesman. Finally, through 
the Investment Bankers Conference, with which it is closely associated, 
the association speaks for the entire industry before the Securities 
and Exchange Commission. Therefore, the views entertained by the 
association may be accepted as representing those of the industry. 

Generally speaking, the attitude of the Investment Bankers Asso- 
ciation toward Federal regulation of their business has been one of 
resignation, mingled with hope. Like most private business, invest- 
ment banking is willing to cooperate with the Federal Government 
to eliminate so-called unfair trading practices. But beyond this, 
investment bankers want to police themselves. In fact, their ultimate 
aim, even today, is self regulation. 

The Role of Investment Banking. 

The investment bankers' belief in the wisdom and desirability of 
relative freedom from Federal intervention is accompanied by a deep- 
seated conviction that they perform a vital social and economic func- 
tion for the country, and that the country's welfare demands the 
performance of this function with as little interference and dislocation 
as possible. Through the American Bankers Association, the com- 
mercial bankers voice their conviction that "what is best for the 
Nation is best for banking." No such neat identification of interests 
sums up the philosophy of the country's investment bankers. In 
fact, the only reference to general welfare in the I. B. A. constitution 
is in the phrase "general welfare and influence of dealers in invest- 
ment securities," which, amdng other things, the association was 
founded to promote. Nevertheless, there is no doubt that the Nation's 
progress is, in the minds of the membership of the I. B. A., closely 
bound up with their own. 

This feeling expresses itself in a number of different ways. One 
illustration is the association's own high opinion of its part in reopen- 
ing the capital markets in 1935. Amendments to the Securities Act 
(1933) advocated by the I. B. A. and later (1934) embodied in the 
Securities and Exchange Act resulted, in the association's opinion, 
in the preservation of the capital-raising machinery of the country 
and constituted a beginning of economic recovery. "* * * the 
machinery for translating the savings of the public into brick and 
steel, jobs and products, through the employment of capital in pro- 
as In the preparation of this section, proceedings of the I. B. A. annual conventions 
tave been used, as well as reports of its various committees and its professional periodical, 
nvestment Banking. 
23 Securities and Exchange Commission, Selected Statistics on Securities and on Exchange 
Markets, Washington, 1939, p. 40. 



CONCENTRATION OF ECONOMIC POWER 133 

duction was effectively preserved," said Orrin G. Wood, I. B. A. 
president in 1936, "because of the approach this association gave to 
this vital question confronting it in 1933." "Furthermore," he said, 
"when the economic historian studies the depression that followed 
1929, I believe that one outstanding signpost of recovery will be the 
re6pening of the capital markets in 1935." Another example is in 
the association's acceptance of responsibility for helping prevent stock- 
market crashes. In 1937 it affirmed its recognition of "a definite 
responsibility to help in every way it can to prevent a recurrence of 
a major panic such as that from which we have recently emerged." 
Also in placing investment banking alongside the railways, the tele- 
phone and telegraph system, and the news gathering and disseminating 
systems as agencies responsible for the growth of the Nation and "for 
making the modern world go around, '' Edward B. Hall, president 
in 1937, was viewing progress for the Nation and progress for the 
investment bankers in similar, if not identical, terms. 

Regulation and — Regulation. 

The investment bankers are resigned to Federal regulation at the 
same time that they hope for self regulation. The Federal Govern- 
ment restrictions under which securities' distributors operate date from 
1933. In that year, the first of two major regulatory laws governing 
the sale of securities was enacted, the second dating from 1934. In 
a very real sense, these laws constituted the public response to the 
question posed by the stock market crash of 1929 and by the economic 
depression which followed. The public wanted to know who was 
responsible. The answer was that the major blame should fall on the 
bankers. The obvious remedy was to restrict the operations of com- 
mercial and investment bankers alike, and these restrictions are em- 
bodied in the Securities Act of 1933 and the Securities and Exchange 
Act of 1931. 24 

While agreeing that certain minimum standards of conduct are of 
value both to the public and to the industry, the investment bankers 
feel that the restrictions in these laws are too severe. They have for 
many years, they say, been striving to realize the same, or at least 
"virtually identical," objectives which are the goal of the regulatory 
laws. In 1936 these were stated by Orrin G. Wood, I. B. A. president, 
to be (1) full disclosure and proper presentation of facts to investors, 
(2) honorable practices and fair dealings with all investors, and (3) 
fair trade practices among dealers. Moreover, Mr. Wood continued, 
"long before the Exchange Act was passed, we favored full and fre- 
quent reports by companies seeking capital from the public." The 
association does not object to the goals of Federal regulation ; it would 
"welcome" "intelligent" Federal regulation to supplement State regu- 
lation, improve business standards, and drive from business those who 
do not serve the interest of the investor. It is the methods of the 
regulatory approach which draw the association's criticism. These 
methods are claimed to be "unnecessarily expensive" to the issuing cor- 
poration, impractical, and to expose the securities handlers to unreason- 
able risks. "* * * the business does not want to be bound by laws, 
rules, and regulations to such an extent that it is impossible to transact 
a relatively simple piece of business without inadvertently overstep- 

24 To these two pieces of legislation should be added the Banking Act of 1933, the Banking 
Act of 1035, and the Public Utility Holding Company Act of 1935. 



134 CONCENTRATION OF ECONOMIC POWER 

ping the bounds." In making these criticisms, the association claims 
to be thinking beyond its own interests. "* * * it is in the interest 
both of the investment banker and the public to limit so far as possible 
the field of Government regulation and to leave as large a scope as pos- 
sible for regulation of our business by the industry itself," said Mr. 
Wood in 1937. The association apparently feels that self regulation 
by the industry is synonymous with "intelligent" Federal regulation. 

The investment bankers are hopeful of better times. They hope 
that the public mood expressed by "excessive" regulation will prove 
transitory. The way would then be open to relax stringent restrictions, 
retaining those features of Federal regulation which have the industry's 
support and, at the same time, allowing ample room for self regulation. 
According to a member of the I. B. A. board of governors, the mood 
is world-wide, and in the United States, it is one of anger directed 
toward investment bankers, among others. But it will not continue 
indefinitely, "because people in the mass never stay mad permanently 
over one thing." They get bored and tired with their anger. "There- 
fore," the argument goes, "the mood will change," and in the meantime, 
it is better not to question the motives of the Federal authorities. The 
industry will do well to accept them as well-intentioned and to recog- 
nize that there is much good in what is being done. But the argument 
clearly infers that when the popular mood changes, there will be an 
opportunity to rectify the things which the investment bankers "do 
net like" and which they regard "as inequitable," not only to them- 
selves but also "to the economic structure of the country." In other 
words, the advice is to make the best of an admittedly bad situation 
and hope that with the passage of time the lot of the investment banker 
will again be a happy one. 

The shrewdness of this analysis has been confirmed. Although basic 
features of Federal regulation show few signs of weakening, in other 
respects the persistence and long-suffering attitude of the I. B. A. are 
being rewarded. Among other things, the Investment Bankers Asso- 
ciation has objected to what it felt were unnecessarily full and de- 
tailed data required in registering a security issue and to the 20-day 
waiting period between the filing date and the public offering of the 
issue. Working through the Investment Backers' Conference, the I. B. 
A., by August 1940, had come to an agreement with the Securities 
and Exchange Commission to reduce the waiting period provision, 
under certain circumstances. 25 

Propaganda. 

By formal resolution, the association, both "as an association and 
through its members," does "whatever is appropriate * * * to assist 
in carrying out" the sense of its attitude on Federal fiscal policy. This 
it does "in the spirit of the best American tradition" and while "con- 
tinuing to maintain its freedom from political affiliations." While 
referring specifically to fiscal policy, this statement presumably applies 
equally to other policies directly affecting the business of investment 
banking. A publicity program in the country at large, in addition 
to direct representation in Washington, suggests the methods employed. 

To gain a relaxation of the more restrictive features of Federal 
regulation, to bring national tax and fiscal policies more in line with 

26 Securities Act News release. 



CONCENTRATION OF ECONOMIC POWER 135 

its own. views, and to make known its position on other Government 
policies, the association is represented in Washington by a tax expert, 
and, as occasion demands, by its officials and committee chairmen, as 
well as indirectly through the Investment Bankers 1 Conference. 

The latter organization is separate and distinct from the associa- 
tion, although "practically every member of the conference governing 
committee is with a firm that is a member of the I. B. A." Appar- 
ently, the conference was set up at the direct request of the Securities 
and Exchange Commission, following the experience with the Invest- 
ment Banking Code. It has been called "an advisory committee to 
the S. E. Ci" The association, however, is a trade organization. "It 
can and should go to Washington on behalf of the industry and fight 
any regulation or bill that it desires to," said Sidney J. Weinberg at 
a meeting of the I. B. A. board of governors in 1937. The conference, 
on the other hand, "has no power to advocate or oppose anything. It 
can only determine what is in the best interests of the public, and 
then present it as a matter of advice." "All the work which the con- 
ference is doing it is doing in a spirit which you might compare to 
the gentle persuasiveness of Paul the Apostle. The work which the 
I. B. A. inevitably has to do is characterized by what you might call 
the militant pursuit of an objective by the Crusaders." The tax 
expert is employed "to officially represent the association before the 
proper tax bodies or committees in Washington." 

To provide public support for its Washington efforts and to spread 
its views generally, the Investment Bankers' Association has an edu- 
cation committee, employs an educational director, and conducts a 
program of educational activities. But its propaganda program is by 
no means as vigorous as that of the American Bankers Association, 
nor is it as clearly shaped to enlist believers in its cause. It is aimed 
at benefiting the investor, and seeks the support of the general public 
to that end. It "is designed principally to give the investing public a 
better understanding of investment problems and of investment bank- 
ing. It also undertakes to get the great mass of available information 
on finance and investments to the public in a manner that will be more 
beneficial to the investor." 

Nevertheless, the association hopes for a wider circulation of its 
material by furnishing material to writers, authors, and speakers deal- 
ing with subjects pertaining to investments. A lectur *■ on finance who 
appears before women's clubs and similar organizations" is supplied 
material by the educational committee. Furnishing speakers on in- 
vestment subjects for clubs, service groups, and other similar organi- 
zations appears to be "a big but neglected opportunity for educational 
work" which the educational committee plans to grasp more strongly 
than heretofore. The committee is also aware of the possibilities of 
publicity through syndicated newspaper articles in small town and 
country newspapers as well as in metropolitan dailies. Material sup- 
plied by the committee has already been used as features in financial 
newspapers. 

One additional educational feature is worth comment. Bond sales- 
men are the industry's contact with the public. The possibilities of 
disseminating through them the point of view of the industry's leader- 
ship has not been overlooked. Each salesman is "a center of radiation 
of opinions." Through him the people of the country are to be im- 

277780 — 41 — No. 26 10 



136 CONCENTRATION OF ECONOMIC POWER 

pressed "with the fact," to quote one of the association's board of gov- 
ernors, "that, while there are a good many things going on that we 
do not like or believe in — things which we regard as inequitable not 
only to ourselves but to the whole economic structure of the country — 
yet we do recognize that there is much good in what is being done, 
and, recognizing that, we give due credit for it. Such an attitude will 
help us to do our part in minimizing the bad." "That is a point of 
view," it is thought, "which in the long run, if spread by every last 
member of our organizations, is going to appeal to the people of the 
country." In other words, investment bankers think they are able to 
wait for the inevitable turn of the political wheel. 

THE LIFE INSURANCE LOBBY 

The life insurance companies are well organized for the purpose of 
defeating or influencing State and Federal legislation. 26 The most 
powerful insurance lobby is an association known as the Association 
of Life Insurance Presidents. This association, set up in 1906, repre- 
sents 85 percent of insurance business and is the group which con- 
ducts the legislative activities. The New York City staff of 60 as- 
sembles statistical information, participates in or supports "test liti- 
gation," and engages in lobby activities. This last activity in 1937 
absorbed $181,246 of the total expenses of $390,380. 27 The staff fol- 
lows bills bearing on insurance business, whicn includes a wide variery 
of legislation, and gives special attention to "objectionable bills." 
Policy holders are not consulted as to their opinion of "objectionable." 

The method of lobbying is to name in every State a "legislative cor- 
respondent" who is an insurance company employee and who is known 
as a "voluntary worker" because he turns in only expense vouchers 
for his work as a lobbyist. 28 This representative tries first to kill bills 
before they are initiated. Failing here, he works to secure friends 
on committees or manipulates the introduction of an opposing bill. 
If an "objectionable bill" passes one house, he repeats his former tac- 
tics in the other house. Testimony before the T. N. E. C. showed 
that by using these tactics in the 1935 session of the Georgia legislature 
only one bill opposed by insurance interests got onto the floor of the 
house. 29 

Methods also used are personal contacts with, legislators, distribu- 
tion of legal patronage, campaign contributions for the candidate 
favorable to the insurance companies, and coercive methods. In Geor- 
gia, for example, a legislator, who was also a physician, was threat- 
ened with withdrawal of medical examination fees by the insurance 
companies. 30 Policyholders are solicited to send wires and letters 
to legislators, often at the expense of the insurance company. 

Although the association stays behind the scenes as a ule, executives 
are sometimes called on to act directly. In Florida, in 1935, the 
elaborate and efficient organization of pressure, maps, cards, indexes, 
with information on legislators (the personal file being always kept 

2(1 This section has been prepared from testimony presented before the Temporary Na- 
tional Economic Committee, pt. 10, pp. 4345-4447,- and from the Report on the Study of 
Legal Reserve Life Insurance Companies, prepared at the committee's direction by the 
Securities and Exchange Commission. 

27 Hearings before the Temporary National Economic Committee, pt. 10, p. 4356. 

28 Ibid., p. 4357. 

=" Ibid., pp. 4708-60, 4777. 
s0 Ibid., p. 4777. 



CONCENTRATION OF ECONOMIC POWER 137 

separate) resulted in the defeat of every bill introduced in that ses- 
sion of the legislature deemed "objectionable" by the association. 31 

State legislation authorizing mutual savings banks to sell life insur- 
ance direct to consumers has been fought by the association with par- 
ticular bitterness and with unusual success. Since the passage of the 
Massachusetts savings bank life insurance law in 1907, bills to authorize 
such sales have been introduced in the legislatures of many States, 
but have all been defeated. The law adopted in 1938 by the New York 
Legislature was not opposed by the association. 32 

Although the major portion of the association's lobbying is done 
before State legislatures, it is active on occasion in Washington also. 
The association in 1985 opposed the Frazier-Lemke Act for refinancing 
farm mortgages when it was before Congress. When the measure 
passed, the association continued its opposition by arranging for the 
act's constitutionality to be tested in the courts. In the case of Radford 
v. Joint Stock Land Bank, the Supreme Court, in an unanimous de- 
cision, held the Frazier-Lemke Act unconstitutional. To fight this 
case, the association retained special counsel costing $60,000, yet the 
association's hand was not disclosed until the testimony of its manager 
was presented to the T. N. E. C. 4 years later. During the period 
from 1934 to 1938, the association gave financial support to over 30 
different actions and paid legal fees of over $197,000 and expenses of 
over $27,000. 33 

The association was founded in 1906 for the purpose, among other 
things, of providing a means whereby legal reserve life insurance 
companies could present their views openly to legislative bodies on 
measures pending before them. The Armstrong report to the New 
York State Legislature had severely criticized the "'clandestine activi- 
ties" then pursued by lobbyists acting for the insurance companies. 
Presumably taking this criticism to heart, the association adopted as 
one of its guiding principles the careful consideration of "measures 
that may be introduced from time to time in legislative bodies with 
a view to ascertaining and publicly presenting the grounds which may 
exist for opposing or advocating the proposed legislation." The testi- 
mony before the T. N. E. C. shows that the "clandestine" lobby com- 
plained of by the Armstrong report still exists. "While present day 
practices are not as crude as those scored by the Armstrong com- 
mittee in 1906, the life insurance lobby has become more polished and 
its effectiveness has been increased through concentration of funds and 
initiative in the hands of a single unit. No justification exists for a 
sub rosa lobby carried forward without adequate disclosure and 
financed with the funds of policy holders whose interests more prop- 
erly should be guarded by the free judgments of their elected repre- 
sentatives." 34 

Assistance- From Other Groups. 

It must not be assumed that political activity concerning banking, 
finance,, and insurance matters is confined to the maneuvers of the 
American Bankers' Association, the Investment Bankers' Association 
of America, and the Association of Life Insurance Presidents. While 

31 Ibid., p. 4764. 

32 Ibid., p. 4420. 

33 Ibid., pp. 4352-4354, 4750. 

34 S. E. C. Report on Legal Reserve Life Insurance Companies, op. eit., p. 382. 



J 38 CONCENTRATION OF ECONOMIC POWER 

these groups are perhaps more directly concerned over Government 
policy in this field than any others, the interests of associated business 
groups are also concerned. This means that other associations from 
time to time render aid and assistance to the major groups concerned. 

One such group is the Edison Electric Institute, which is hardly less 
concerned with Government policy regarding public utility financing 
than the banking and insurance companies themselves. Both the in- 
stitute and the banking associations were extremely active in the 
Utility Holding Company Act of 1935. 35 

Another group lending aid and assistance to the banking and insur- 
ance interests is the American Federation of Investors. This group, 
purporting to speak "in the interest of millions of thrifty American 
citizens who have invested in the securities of American industries, in 
life insurance policies, and in savings bank deposits," appears to havt> 
been brought into existence with the approval of the public utilities, 
if not at their direct suggestion. It became active in 1935 when it 
began to engage in many of the propaganda and pressure group 
methods which other better known groups have already made familiar 
to the public. The American Federation of Investors published a 
small monthly periodical, Investor America, which advocated "a fair 
deal for the honest investor." In addition, the Federation ascer- 
tained the standing of incumbents and candidates for Congress on 
what it felt were current vital questions, and mailed the resulting 
information to many voters for their guidance. 

The vital questions on which candidates for Congress were quizzed 
were obviously designed to distinguish between candidates with a 
"sound" political philosophy and those who were "unsafe." Only a 
candidate who saw these vital questions in terms of either black or 
white found it possible to answer the questionnaire fully. 36 

The federation also communicated directly with Senators and Con- 
gressmen with respect to pending legislation and other congressional 
activities. Thus, on October 21, 1935, Dr. Hugh S. Magill, federation 
president, wrote to Senators and Congressmen, protesting against 
activities of the congressional committee then investigating lobbying 
activities. 37 

These activities of the Edison Electric Institute and the American 
Federation of Investors are, perhaps, typical of nonbanking groups 
which are sympathetic with the views of banking groups in public 
affairs. Also, the Association of American Railroads, with the nu- 

45 See ch. IX for a fuller discussion of this activity. 

3" Besides asking candidates whether they favored Government ownership and opera- 
tion of railroads and other public utilities, whether they favored as a public policy Gov- 
ernment competition with private business and industry, and whether they favored the 
centralization of governmental function and the enlargement of the powers of the Federal 
Government with respect to business and industry by amendment to the Federal Con- 
stitution, the federation also asked for "yes" or "no" answers to such questions as : Will 
you uphold and protect the right of every American citizen to possess and enjoy property 
honestly and legally acquired? Do you favor the setting up of committees or commis- 
sions of Inquisition that harass and intimidate innocent citizens in order to suppress 
opposition, and do you favor limiting the powers of the Federal judiciary to declare 
unconstitutional laws enacted by Congress? 

37 It is interesting to note the federation's point of view with respect to the "so-called" 
lobby bill. In federation opinion, this bill "represented an attempt on the part of Con- 
gress, composed of representatives of the people, to prohibit any of the people from 
effectively promoting measures which they might regard as in the interest of public 
welfare, and, likewise, from opposing bills which they might regard as hostile to their 
best interests ; * * * it is hard to understand how in a government of the people, 
by the people, and for the people, such a measure should be promulgated by the repre- 
sentatives of the people." 



CONCENTRATION OF ECONOMIC POWER 139 

merous State railroad associations established at its direction, has 
been active in regard to railroad financing legislation. 38 

Even such organizations as the National Association of Manufac- 
turers from time to time issue statements on banking and investment 
questions. Thus, on January 13, 1939, the president reported the 
results of a random poll of 3,000 stockholders, conducted by the Na- 
tional Association of Manufacturers, attributing the stagnation of 
capital to the New Deal. The results of this survey were referred to 
committees in both Houses of Congress as an advisory document. 39 
The results of the survey were, in general, in line with the ideas of 
the Investment Bankers Association and other banking and insurance 
groups. 

BUSINESS AND GOVERNMENT SHARE THE BANKING FIELD 

Current Federal policy in the banking and investment field does not 
bear the imprint of business or banking philosophy to the extent that 
it does in the industrial relations field. The 1933 banking crisis was 
so severe and the revelations of congressional investigating commit- 
tees so significant that the relative freedom of action enjoyed by bank- 
ers prior to 1933 has been severely circumscribed. Legislation gov- 
erning truth in securities, issuance of securities, stock market prac- 
tices, and regulatory laws in such fields as public utility and railroad 
financing leave to investment banking and commercial banking alike a 
narrower field in which to operate than heretofore. 

On the other hand, Government has expanded its functions in the 
field of credit. In such fields as agricultural credit this expansion 
dates back many years before 1933. But the absence of credit during 
the depression, starting in 1929, was so marked that the Government 
had to go to the aid of numerous sectors of the population. In addi- 
tion to farmers, Government now extends credit in one form or an- 
other to States and municipalities, present and prospective home own- 
ers, shipbuilding companies, ship owners and operators, as well as to 
banks, railroads, insurance companies, etc. 

Thus far the insurance companies have managed to escape Federal 
regulation. In this respect, they enjoy a freedom once enjoyed by 
commercial and investment banking. The insurance companies, aided 
by such general business organizations as the chamber of com- 
merce, havr long argued that their business should not be regulated 
by Federal ' w, but by the States. 40 The evidence is insufficient to 
indicate tha the insurance lobby is responsible for the present lack 
of Federal regulatory legislation in this field. Yet there is no doubt 
that Congress has at least tacitly accepted the viewpoint that insur- 
ance should be subject not to Federal but to State legislation. 

38 See in this connection information regarding such activities of the Association of 
American Railroads discussed below, ch. IX, pp. 144-146. 
sb The New York Times, January 14, 1939. 
40 See p. 35. 



CHAPTER IX 
UTILITIES AND RAILROADS 

The electric and gas utilities and the railroads have a long history of 
lobbying both in Washington and at the various State capitols. Al- 
though both are publicly regulated private industries, both follow the 
lobby pattern which has been fixed by unregulated private industry in 
the matter of striving to shape public policy. 

The business community is active in this field just as it is in the fields 
of industrial relations, banking and insurance, tariffs, and taxes. Nat- 
urally the national associations into which the utilities and the railroads 
are organized are the most active groups. The Edison Electric Insti- 
tute is the trade association of the electric utility industry and per- 
forms many of the functions of a lobbying organization, as well as 
those of a regular trade association. The railroads are organized na- 
tionally into the Association of American Railroads. 1 

The lobbying record of the Association of American Railroads is 
longer than that of the Edison Electric Institute, but the latter has 
been very active since the electric utility industry came of age in the 
early twenties. At that time the utility trade association was known as 
the National Electric Light Association. Since 1935 the driving force 
of the utility lobby has been the Committee of Public Utility Execu- 
tives, a group which has been extremely active not only in the legislative 
lobbying field but also in the field of public relations and propaganda. 

These groups, with an immediate interest in public policy toward 
utilities and railroads, are aided and supported in greater or lesser de- 
gree by others. As indicated above, the Chamber of Commerce of the 
United States gave considerable attention to the matter of Federal pol- 
icy toward the railroads in its 1940 declaration of policies. 2 Various 
nonbusiness groups are active as well, either jointly with business or 
in opposition to the program of the railroads and utilities. Of neces- 
sity the railway labor unions are in more or less continuous contact 
with the Association of American Railroads. To a greater or lesser 
degree this is true of other branches of organized labor, as well as 
groups of farmers and other shippers. Certain Government depart- 
ments are authorized to make themselves heard in the matter of ad- 
ministration of Federal policy regarding railroads ; thus, the Secretary 
of Agriculture is given authority to intervene in rate cases before the 
Interstate Commerce Commission. 3 The public interest, as such, is 
not directly represented by any well organized or well financed group. 

1 The Association of American Railroads was organized on November 1. 1934, as a 
merger of all of the important railroad associations then existing. When the merger 
took effect, the following associations passed out of existence : The American Railway 
Association, the Association of Railway Executives, the Bureau of Railway Economics, 
and the Railway Accounting Officers Association. The railroads belonging to the first 
two had an aggregate mileage of 296,869 miles. 

2 See ch. Ill, pp. 35-36. 

3 This authority is granted in sec. 201 of the 1938 Agricultural Adjustment Act. 

141 



142 CONCENTRATION OF ECONOMIC POWER 

It is assumed that authority given such Government regulatory agen- 
cies as the Interstate Commerce Commission will be sufficient, if prop- 
erly used, to protect the public interest. 

PUBLIC REGULATION 

The principle of public regulation of natural monopolies, appar- 
ently well established, developed shortly after the post Civil War 
period, following the hectic period of railroad construction. In fix- 
ing the principle, farmers in the Middle West and Northwest took a 
leading part. 

In the 1870's and 1880's the railroads fought vigorously against 
public regulation of any kind. At that time the now universally 
accepted right of a State to regulate a public utility was still in the 
process of being established. The National Grange played the major 
role in securing the acceptance of this principle by the Supreme Court 
and the enactment of the Interstate Commerce Act in 1887. This law, 
as amended, contains the principles under which interstate commerce 
on railroads, highways, and waterways is regulated by the Federal 
Government. 

The Granger Mo vement. 

The National Grange was founded in 1867 and almost immediately 
gained prominence as a force in the enactment of State legislation. 
Particularly was this the case in the granger States of Illinois, Iowa, 
Minnesota, and Wisconsin. There, its principal interest in the legis- 
lative field was the passage of State laws regulating railroads. 
"Among the subjects upon which the Patrons of Husbandry at- 
tempted to secure legislation, first place was occupied during this 
period [1870's] by the question of regulating railroad corporations. 
* * * The different granges were practically unanimous in de- 
manding some measure of regulation of railroads by the State and the 
enactment of 'antipass' legislation." 4 In varying degree these de- 
mands were satisfied by the passage of regulatory laws in Minnesota 
in 1871, in Illinois in 1873, and in Iowa and Wisconsin in 1874. 5 The 
form of railroad regulatory legislation adopted by other States in 
later years was so definitely affected by these laws that "it is not too 
much to say that the fundamental principles upon which American 
regulation of railroads by legislation has developed were first worked 
out in the granger States of the Northwest during the decade of the 
seventies." 6 

But the battle for State regulation was by no means won with the 
passage of these various laws. The railroads opposed and obstructed 
their adoption by the legislatures, continued after their passage to 
hamper administration, and at last challenged their validity, first in 
the State courts then in the United States Supreme Court. For 
the first time there was thus brought before the highest Court of 
the land the important c^iestion of the right of a State government 
to fix rates for railroad and warehouse services. The Court de- 
cided, in a series of cases involving the validity of the Illinois, Iowa, 

* S. J. Buck, The Granger Movement, Harvard University Press, Cambridge, 1913, p. 103. 
6 Ibid., pp. 123-205. "There is no doubt that the influence of the organized farmers was 

the principal force back of these movements for railway legislation, giving to them many of 
their distinctive aspects." p. 124 

• Ibid., p. 205. 



CONCENTRATION OF ECONOMIC POWER 143 

Minnesota, and Wisconsin statutes, known as the Granger cases, 
that the State had the right to regulate and fix the rates of a business 
which is public in its nature. Possibly the best known of these 
cases is that of Mwnn v. Illinois, 1 upholding the validity of the Illinois 
law of 1871 fixing maximum rates for the storage of grain in the 
elevators of Chicago. 8 The principles of constitutional law laid 
down in them are "perhaps the most important results of the Granger 
railroad legislation/' 9 The claim of the National Grange to have 
been principally responsible for securing: these results is probably 
not exaggerated : "At a time when the railroads of the country were 
largely a law unto themselves, and when they were guilty of many 
excesses, the Grange secured from the courts a decision that the 
creature can never be greater than its creator." 10 

The force of the movement for effective regulation of the railroads 
did not spend itself when the right of the States to exercise regu- 
latory powers was upheld in the Granger cases. It continued to 
work until the Federal right and machinery to regulate interstate 
commerce were also established. 

In the case of the Federal Government the question of power appar- 
ently was less uncertain than in the States, since article I of" the 
Constitution states specifically that Congress shall have power "to 
regulate commerce * * * among the several States." The only 
question was whether commerce should be defined to include the 
rates and services of railroads across operating State lines. This defini- 
tion subsequently became of importance with respect to how many 
things Federal regulation could include, but it gave relatively little 
concern during the eighties to those interested in obtaining Federal 
legislation. 

The Grange was very active in the agitation which culminated in 
the passage of the Interstate Commerce Act in 1887, although the 
drive was relatively less important than the earlier ones for State 
laws. Merchants and manufacturers seem to have desired the 1887 
law as much as farmers ; X1 nevertheless, the leadership exercised by 
the Grange in the agitation for Federal regulation is not questioned 
and its importance should not be minimized. "The Patrons of Hus- 
bandry and other agricultural organizations of the seventies, to whose 
agitation for railroad regulation, both State and Federal, the general 
term 'Granger movement' is applied, should be given credit for in- 
augurating the first important movement for Federal regulation of 
railroads. This movement, though unsuccessful in itself, was a fore- 
runner of and paved the way for the more extensive agitation which 
finally produced the Interstate Commerce Act." 12 Therefore, the 
significance of the Grange role does not appear to be overrated in its 
ofhcial statement/: "The Interstate Commerce Commission * * * 
had its inception in the successful culmination of this great fight in 
defense of the rights of the people. The right of the Government 

7 94U. S. 113. 

8 The other cases are listed in Buck, op. cit., p. 206. 

• Buck, op. cit., p. 206. 

k> The Grange Blue Book, p. 10. 

"""The claims of certain Grange enthusiasts that the credit for tbis [Interstate Commerce] 
act belongs to the order of Patrons of Husbandry can hardly be substantiated, for ar 
examination of the report of the Cullom [Senate] committee [on railroad legislation] 
shows that the demand for regulation of railroads was fully as insistent among merchants 
and manufacturers at this time as among farmers." Buck, op. cit., p. 230. 

"Buck, op. cit, pp. 230-231. 



144 CONCENTRATION OF ECONOMIC POWER 

to control public service corporations is predicated upon the principle 
which was established in this connection. 13 

This principle (that public transportation agencies are subject to 
public regulation) has become the basis for more recent regulation in 
many other fields. It has been extended to electric and gas utilities, 
pipe lines, communications, and many other activities affected with a 
public interest, which were once considered private. 

The Association of American, Railroads. 

The historical position occupied by the railroads in the field of 
transportation makes their views regarding public policy of particular 
interest. In the depression following 1929 the railroads were particu- 
larly hard hit. From 1929 to 1933 the.$20,000,000,000 railroad industry 
witnessed a decline in its operating revenues of more than 50 percent. 14 
In order to consolidate their forces, various existing organizations 
were merged in 1934 in the Association of American Railroads. The 
principal point in the program which they recommended to Congress 
and to the public was one which sought "restoration of confidence in 
railroad securities, equality of opportunity as among all agencies of 
transportation, and the adoption of methods which will permit effi- 
ciency and economy. 1 ' This program urged that national transpor- 
tation policy should recognize that the country is committed to private 
ownership and operation of all forms of transportation under suitable 
regulation. The statement was apparently published in response to 
the position taken by the American Federation of Labor and the 
railway labor unions in 1920 favoring Government ownership and 
operation of the railroads. In this proposal by organized labor the 
Association of American Railroads found no "promise of better serv- 
ice, more economical operation, or improved conditions for workers." 
Sound public policy, in the opinion of the Association of American 
Railroads, requires that all forms of transportation should be treated 
alike as respects regulation, taxation, and subsidies. By this decla- 
ration the railroads have hoped to bring all competing forms of trans- 
portation, including busses, trucks, and water transportation, whether 
intracoastal, intercoastal on the Great Lakes, or on inland natural and 
artificial waterways, under the same degree of Federal regulation im- 
posed by law upon the railroads. 16 They urge the removal of the long 
and short haul clause, and seek permission to consolidate along natural 
economic lines, and to own other types of common carriers. A final 
point in their 1934 program was to convey to the public a proper under- 
standing of the railroads' capital structure. 17 

13 The Grange Blue Book. p. 10. 

M Association of American Railroads, Railways of the United States, Washington, 1940, 
p. 28. 

35 Association of American Railroads, The Railroads, a Statement as to Policies, Wash- 
ington, 1934, p. 6. 

ie The railroads argue that indirect subsidies to transportation by heavy busses and 
trucks is the consequence of allowing them the use of publicly constructed and maintained 
highways. The railroads figure, that busses and trucks pay in taxes of all sorts 6 cents out 
of every dollar received, while the railroads who, it is claimed, must provide their own 
roads, must pay out for interest, maintenance, and taxes 34% cents out of every dollar of 
revenue. Ibid., p. 11. 

17 The Association of American Railroads pointed out in the pamphlet referred to that 
"hereafter no well-iuformed person will sav that on the whole they (th<* railroads) are 
overcapitalized or that there is water in their stocks and bonds. The Federal Cooi'dthator 
has definitely shown that such a claim is without foundation. He points out that the 
work of the Interstate Commerce Commission in the* field of railroad valuation demon- 
strates that after making full allowance for depreciation and including nothing for in- 
tangibles, the physical value of railroad property exceeds the outstanding capitalization at 
par, including both stocks and bonds by about one and one-half billion dollars." 



CONCENTRATION OF ECONOMIC POWER 145 

SHAPING PUBLIC POLICY. 

While paying lip service to the principle of public regulation, the 
railways and electric utilities have done everything in their power to 
avoid it, or at least to control it in their own interest. 

After the World War the railroads were transferred from Govern- 
ment to private ownership and operation. This was due, among 
other things, to the interest which the Chamber of Commerce took in 
the matter and in the pressure put upon Congress to effect it. The rail- 
roads' 1934 statement of policies reiterated their adherence to private 
ownership and operation. To a considerable extent, the main features 
of their program have been embodied in the Transportation Acts of 
1939 and 1940. These two measures give the Interstate Commerce 
Commission authority to regulate water-borne and highway trans- 
portation, as well as railroads. They also permit voluntary consoli- 
dations, under certain conditions, modify the long and short haul 
clause, and permit railroads to own certain competing forms of trans- 
portation. The Interstate Commerce Commission is also directed to 
study the various forms of transportation, with an eye to determining 
efficiency, and the extent to which each receives any special benefits, 
or any type of subsidy. Thus, the legislation goes far toward meeting 
the railroad demands made in 1934. 

Without doubt passage of this legislation represents the successful 
termination of a long and costly propaganda and lobbying campaign 
by the railroads. The Association of American Railroads has for 
many years spent millions of dollars annually in newspaper and 
magazine advertising, in the publication and distribution of special 
booklets, and in the establishment of subsidiary propaganda and educa- 
tional organizations. The Railroad Securities Owners Association, 
the Fuel Power Educational Foundation, and the Transportation 
Association, among others, have been organized and financed at least 
in part by the A. A. R. 18 The latter in turn published various 
brochures dealing with various phases of the railroad problem, such, 
for example, as labor (particularly railroad labor), farmers, shippers, 
and investigators. 19 

So numerous and expensive did these subsidiary organizations be- 
come that the president of at least one railroad, F. W. Sargent, of the 
Chicago & North Western, wrote to the president of the A. A. R. in 
1935 protesting against them : 

We are getting so many new organizations and the assessments and fees are 
so numerous that the burden is becoming a material one. 20 

Estimates of the amount of money spent by the A. A. R. and its nu- 
merous subsidiaries on propaganda and lobbying activities are so 
high as to be almost incredible, running to far over $100,000,000 for 
the period since 1918. 21 

In Washington the pressure generated by these subsidiary organi- 
zations, as well as public opinion generally, is concentrated on Con- 
gress and the Government's administrative arm. The association sees 
that the views of the railroad industry on pending legislation are pre- 
sented to committees of Congress. The presentation does not stop 

M Cong. Rec, 75th Cong., 3d sess., pp. 9167-9169. 

18 Labor, official weekly newspaper of the Railroad Brotherhoods, April 12, 1938. 

20 Ibid. 

21 Ibid. 



146 CONCENTRATION OF ECONOMIC POWER 

at that point. A continuous effort is made to back up the presentation 
with strong support. Literature is distributed to Members of Con- 
gress and to influential citizens throughout the country. State rail- 
road associations are maintained which concern themselves with both 
State and national legislation. The national association in Washing- 
ton is in close touch with the State associations, furnishing them with 
literature and in a way directing their activities, particularly in na- 
tional matters. 22 The principal objective of this impressive activity is 
the enactment of legislation regulating the railroads' competitors in 
the same degree as the railroads, an objective whir \ seems to have been 
achieved. 23 

BANKER CONTROL OF THE RAILROADS 

The successful conclusion of the A. A. R.'s campaign for Federal 
regulation of competitors can be surpassed in many respects by pres- 
sure campaigns in the States. Extensive hearings held before the 
Senate Committee on Interstate Commerce on the subject of railroad 
reorganization have revealed the various methods utilized by certain 
industrial and business leaders to gain their objectives. In 1935 
Jesse Jones, Chairman of the Reconstruction Finance Corporation, 
stated : "I have long been of the opinion that the railroads are dom- 
inated by the bankers." 24 The findings of this committee with respect 
to the financing, reorganization, and merger methods and practices 
of interstate and affiliate railroads substantiated Mr. Jones' opinion. 

The suspicion of Senator Burton K. Wheeler, committee chairman, 
that financial control of railroads by the bankers was the reason for 
perennial difficulties and that Government loans were bolstering a 
condition due to flagrant abuses was also substantiated. "One railroad 
purchased 275,000 shares of stock in another railroad, one-third on their 
own account. They disposed of this at a substantial profit, while the 
rest was held by the railroad at a loss." 25 

In another case, Mr. Ball of the Mid-American Co. bought control of 
the Alleghany Corporation for $275,000. This holding company con- 
trolled six or more railroad systems. The Mid- American Corporation 
in turn controlled an amazing variety of interests — from peach orchards 
and trucking to mines, hotels and railroads. One-third of 1 percent 
of the total property of the Mid- American Corporation gave control 
over a vast railroad system. 26 

Control of the railroads was gained in many cases not only by out- 
side parties but by the use of unscrupulous methods. The following 
case is a good example of the pressure on Government officials and 
agencies, the press, and citizen groups to achieve control. 

The Missouri Pacific engaged in a program of expansion between 
1923 and 1929. As a holding company, it controlled the Gulf Coast 
Lines and through them, the International Great Northern, the Texas 
& Pacific, and, jointly, with the Western Pacific, the Denver & Rio 
Grande Western. The Van Sweringen interests became interested in 



32 Letter from R. V. Fletcher, vice president and general counsel, Association of American 
Railroads, December 3, 1935. 

23 At the same time that the Association of American Railroads was engaging in this 
costly propaganda and lobbying campaign, they petitioned the Interstate Commerce Com- 
mission for a flat increase of 15 percent in freight rates and a flat cut of 15 percent in 
railway labor wages. In addition, Congress was considering legislation authorizing loans 
to the railroads. 

24 S. Rept. 434, 74th Cong., 1st sess.', p. 3. 
23 Ibid., p. 2. 

38 Congressional Record, 75th Cone., 1st sess., p. 699. 



CONCENTRATION OF ECONOMIC POWER 147 

the Missouri Pacific holdings in 1928. Following the formation of 
the Alleghany Corporation, which consolidated their position in the 
East, they began to buy Missouri Pacific stock. In 3 months $100,000,- 
000 of Alleghany Corporation funds had gone into Missouri Pacific 
stocks and convertible bonds. The Van Sweringens now controlled a 
majority of votes in the Missouri Pacific election, and, since holding 
companies were not then under the jurisdiction of the Interstate Com- 
merce Commission, they believed this acquisition of control would not 
have to be submitted to that body for approval. 

However, they discovered that a Missouri statute forbade the trans- 
fer of more than 10 percent of a Missouri railroad's stock to a holding 
company without the consent of the Missouri Public Service Com- 
mission. At this point, pressure was brought to bear on all sides to 
permit an eastern company to acquire 12,150 miles of southwestern 
railroads, without Government supervision and disregarding consoli- 
dation plans of the Interstate Commerce Commission. 

The management of the Missouri Pacific would not permit the stock 
transfer without the consent of the State Public Service Commission. 
Alleghany Corporation officials were pressed for time, since Missouri 
Pacific elections were imminent. First, they worked on the commis- 
sioners, attempting to arrange an ex parte hearing. 27 

Alleghany had almost persuaded the Commission to approve its acquisition of a 
great railroad system after a drumhead bearing, on 24 hours' notice, with no one 
present but officials whom an Alleghany ally characterized as our friends. 88 

One commissioner, then in Washington, changed his mind due to "the 
activity of Mr. Eastman or the Couzens resolution." But even so, 
only a week was allowed for the Federal authorities to prepare the case. 
Notifications were not sent to the railroads concerned, not even the 
Missouri Pacific; 29 

After the St. Louis Star had condemned the Alleghany deal in its 
issue of March 14, 1930, officials began to work on the press with the 
result that a change in the general attitude was brought about. This 
change is shown by reference to the following letter from Mr. W. T. 
Kemper (a Missouri Pacific director who had become a "volunteer" 
for the Alleghany company) to Mr. E. J. White, vice-president of 
the Missouri Pacific : 

Deab Ed : Here is a clipping from the Kansas City Star of the 17th. Looks like 
they were with us. Love and good cheer. 30 

The Kansas City Board of Trade changed its mind after a conference 
with President Baldwin of the Missouri Pacific (who had been assured 
of running the property under the new owners). 31 A letter from one 
of the group running the campaign settled the question of the State 
attorney general. The attorney general did not appear at the hear- 
ing. 32 The mayors of St. Louis and of Kansas City and the St. Louis 
Chamber of Commerce followed the suggestions made by the Van 
Sweringen group and stated no objections to the proposal. 

27 78th Cong., 3d sess., Rept. No. 25, Investigation of Railroads, Holding Companies, and 
Affiliated Companies, Part 8, pp. 1 ft*. 
38 Ibid., p. 5. 
38 Ibid., p. 6. 
30 Ibid., p. 9. 
81 Ibid., p. 9. 
32 Ibid., p. 13. 



148 CONCENTRATION OF ECONOMIC POWER 

On May 6 the Missouri commission handed down its order granting 
the Alleghany Corporation the permission it sought to acquire the 
stock. 33 

It is not surprising that Federal control of railroad reorganization 
is unwelcome and that in spite of a constant showing in the red and 
of appeals for Government loans, the railroads still maintain the 
strongest lobby in Washington. The issue raised by the Alleghany 
Corporation' acquisition of the Missouri Pacific Railroad Co. and by 
numerous other similar instances uncovered by the Senate Interstate 
Commerce Committee has been well summarized by Senator Wheeler's 
statement that the great size and leadership of the corporations and 
individuals in question presented a contemporary and fundamental 
problem in the regulation and control of large scale industry and 
finance. He asked : 

Is their attitude toward Government regulation and control so hostile as to justify 
in their minds such means or any means for defeating laws of Congress and 
administrative regulation? Is the ingenuity of promoters, financiers, and lawyers 
sufficiently fertile to provide such hostility with devices enabling them to get 
around the law and to make themselves to this extent more powerful than 
government itself? ** 

ASSOCIATION OF AMERICAN RAILROADS 7 COOPERATION WITH THE I. C. C. 

Compared with the successful Association of American Railroads' 
campaign for regulation of competitors and with the preceding in- 
stances of business control of Government, the day-to-day contacts with 
the Interstate Commerce. Commission are almost prosaic. 

In administering the laws governing rates and services on common 
carriers, the I. C. C. and the Association of American Railroads main- 
tain close and continuous relations. "Naturally and inevitably," 
writes the association's general counsel, u we are in daily contact with 
the Interstate Commerce Commission, with respect to purely admin- 
istrative matters directly affecting the railroads." 35 

Typical of such matters are car service, safety on the railroads, 
boiler and locomotive inspection, and transportation of explosives. 
As regards car service, associations of both carriers and shippers are 
employed by the I. C. C. Paragraphs 10 and 11 of section I of the 
Interstate Commerce Act make it incumbent on all carriers to estab- 
lish, observe, and enforce just and reasonable rules, regulations, and 
practices with respect to car service. Subject to I. C. C. approval, 
this function is discharged by the Association of American Railroads, 
the individual roads following the directions framed and issued by 
its operations and maintenance department. 36 In enforcing the safety 
laws, too, the Commission works through the association. Although 
the railroads vigorously opposed passage of the Safety Appliance Act 
(1893) , their attitude toward it has subsequently changed. For many 
years its provisions, as well as those relating to automatic train control 
and signals adopted by Congress in a resolution in 1906 and in the 
1920 Transportation Act, have been enforced by the Commission and 
the association working together. In this they have been joined by 
the Master Car Builders' Association and the railway brotherhoods.. 

88 Ibid., p. 18. 

** S. Rept. 25, pt. 4, 76th Cong., 1st sess., p. 16. 
3S In a letter to the author, December 3, 1935. 

38 Until 1934 the car service division of the American Railway Association. See note, 
p. 141. 



CONCENTRATION OF ECONOMIC POWER 149 

The laws requiring periodic boiler and locomotive inspection and those 
dealing with the transportation of explosives are carried out largely 
according to regulations made by the Association of American Rail- 
roads and approved by the Commission. 

The area within which the Commission and private interests find it 
mutually desirable to cooperate includes also the field of rate adjust- 
ment. The Commission has the authority to see that just, reasonable, 
and non-discriminatory rates are maintained, and from time to time 
exercises this authority in formal hearings and decisions on petitions 
filed by the railroads or other groups. But this, is a costly, cumbersome 
way of dealing with the many situations arising. Consequently, the 
Commission attempts to negotiate rates informally through corre- 
spondence and conference with carriers and shippers. To reduce the 
amount of formal rate litigation, it maintains a bureau of informal 
cases and a bureau of traffic. Through the Association of American 
Railroads, the carriers in turn maintain standing rates committees. 
Shippers have the National Industrial Traffic League, national trade 
associations, and local chambers of commerce. Through the use of 
this combination of official agencies and citizen associations informal 
adjustment of rates is facilitated. 

OTHER PRESSURE ON THE I. C. C. 

Pressure on the I. C. C. has come from Congress as well as from the 
railroad industry, shippers, and labor. Even the congressional pres- 
sure, however, originates in occupational and geographic groups out- 
side of Congress, which, because they feel that the Commission's 
formal and informal procedures are inadequate for their purposes, 
feel obliged to approach the problem through the legislature. Profes- 
sional groups spoke through Congress when, at the behest of organiza- 
tions of commercial travelers, it directed the I. C. C. to issue inter- 
changeable mileage books at just and reasonable rates. 37 Various 
groups of farmers spoke through Congress when in 1925 it adopted 
the Hoch-Smith resolution directing the Commission to consider the 
conditions prevailing in different industries in adjusting freight rates 
and specifically putting forth the case for agriculture. 38 

Both sectional and economic groups spoke through members of 
Congress when in 1927 the appointment of a new commissioner and 
reappointment of a sitting commissioner were before the Senate. 
The controversy between Pennsylvania and southern coal mine op- 
erators over Great Lakes cargo coal rates was pending before the 
Commission. In the minds of Pennsylvania and Virginia Senators 
the nominees" fitness for the posts turned in part at least upon their 
place of residence. 

In the decade 1922-32 no less than 37 different proposals were laid 
before Congress by labor unions, business organizations, and farm 
and livestock associations asking for legislation regarding the Com- 
mission ; 10 sought to decrease the Commission's powers, an equal 
number to investigate its organization and personnel, while 17 at- 
tempted to get Congress to direct the Commission's power to certain 

37 Later invalidated by the Supreme Court. 

88 In addition, the American Farm Bureau Federation claims to have secured in 1920 
a reduction in railroad valuation for freight rate making purposes, to have defeated a 
proposal in the same year to raise railroad rates, and to have won Trom the railroads in 
1921 a voluntary reduction in rates on farm products. A. F. B. F. publication? Back of 
This Emblem, pp. 10-11. 



150 CONCENTRATION OF ECONOMIC POWER 

ends. Of the 8 resolutions formally introduced calling for investiga- 
tion, 4 were adopted. 39 

The organized railways and shippers have not regarded such activi- 
ties with favor. "On the whole, the force of both the organized car- 
riers and the organized shippers has been exerted to counteract legis- 
lative interference in rate making and to combat undue influence by 
sectional interests." 40 

RELATIONS WITH LABOR 

The right of railway labor to organize and to bargain collectively 
with management is generally recognized by the Association of Amer- 
ican Railroads, subject to the usual proviso of management that this 
right should not be exercised in such a way as to result in the closed 
shop. 41 

The success of the railway labor unions in organization and col- 
lective bargaining and even in compelling Congress to respond to its 
demands is well known. Their successful campaign for a Federal 
law establishing the 8-hour day is an indication of their influence. 

For many years prior to 1916 labor had been demanding the passage 
of a rigid 8-hour day law. In that year the railroad brotherhoods 
felt that they had an excellent opportunity to force the passage of 
such legislation, demanded an 8-hour working day agreement. When 
this was refused the brotherhoods threatened to strike, then made addi- 
tional demands, but steadfastly refused to submit the 8-hour day 
principle to arbitration. Efforts of management to subject all of 
labor's demands to arbitration brought negotiations to an end. Presi- 
dent Wilson then intervened, requesting conferences with both sides. 
As a result he recommended that the 8-hour day be conceded as a 
right that ought not be arbitrated, but that all the other points in 
dispute should be submitted to investigation and arbitration. The 
railroad presidents refused to agree to the President's recommenda- 
tions, and the brotherhoods issued a strike order. The President 
then submitted to Congress a program for the enactment of an 8-hour 
day law for all operatives of trains engaged in interstate commerce. 

At a conference in Washington representatives of the A. F. of L. 
pledged assistance and cooperation with the brotherhoods. The presi- 
dent of the A. F. of L. appeared with brotherhood officials before the 
Senate committee on August 31 and presented the demands of or- 
ganized labor in connection with the Adamson bill. President Wil- 
son's recommendations in regard to the brotherhoods' 8-hour day 
campaign were incorporated into the Adamson bill and it was passed 
and approved in December 1916. 42 

Another example of the railway brotherhoods' success is the so- 
called Crosser Act providing for" the prompt disposition of disputes 
between carriers and their employees. 

39 E. P. Herring, "Special Interests and the Interstate Commerce Commission," Ameri- 
can Political Science Review, December 1933, pp. 903-906. 

40 E. P. Herring, Public Administration and the Public Interest, McGraw-Hill, New 
York, 1936, p. 204. 

41 "The railroads recognize the right of employees to bargain collectively and, to this 
end, the right of belonging to any organization of their choice. Employees should be 
free from managerial or any other domination in the matter of negotiating contracts 
affecting their service. But the right of organization and freedom in bargaining should 
not be exercised in such a way as to give one type of organization an advantage over 
another." Association of American Railroads, The Railroads : A Statement as to Policies, 
Washington, 1934, p. 13. 

42 «* * * under President Wilson, the Adamson law, for the sole advantage of 
railway labor unions, was passed by the House with delegates of the organizations sitting 
in the gallery and holding stop-watches on Congress." New York Times, April 28, 1935. 



CONCENTRATION OF ECONOMIC POWER 151 

The bill was drafted by Representative Crosser of Ohio, with the 
aid of the railway brotherhoods. Upon introduction it was referred 
to a House Committee where it remained untouched, until the 'Seventy- 
third Congress was drawing to a close. Representatives of the 
brotherhoods called on the President and Members of Congress early 
in June 1934, requesting passage of the bill before adjournment. This 
meant delaying adjournment for at least a week. The brotherhoods 
were successful, adjournment was postponed, and the bill passed the 
House with little opposition. 

In the Senate an effort was made to adjourn before the bill could 
be passed. But friends were willing to keep the Senate in session. 
On June 18 Senator Wheeler said : "The question is whether or not we 
will let the Pennsylvania Railroad — and I shall be able to prove 
definitely that it is the Pennsylvania Railroad that is opposed- to the 
passage of this bill — in the closing hours of this session to block 
legislation which is so badly needed. I will block adjournment until 
the bill is passed." 

Labor and its friends won. The bill passed the Senate and was 
signed by President Roosevelt on June 21, 1934. 43 

In their relations with organized labor and government, the rail- 
roads from time to time use the courts to protect or improve their 
position. Cases in point are the attacks of the Association of Amer- 
ican Railroads on Federal retirement and pension legislation for 
railway employees. Twice within a period of 15 months, in 1934 and 
1935, Congress adopted railroad employees' retirement legislation un- 
der pressure from the railway labor unions and the A. F. of L. On 
both occasions the constitutionality of the laws was challenged by the 
railway managements. In both actions, the instigator, although not 
the plaintiff, was the Association of American Railroads. 

The strategy adopted by the association was to have one of its 
members file a petition for an injunction in the Supreme Court of 
the District of Columbia, whence a decision could be appealed direct 
to the United States Supreme Court. An act of Congress of June 
27, 1934, established a compulsory retirement and pension system for 
all carriers subject to the Interstate Commerce Act. Acting for 134 
class I railroads, 2 express companies, and the Pullman Co., the 
Alton Railroad sued in the District of Columbia Supreme Court, 
asserting the unconstitutionality of this railroad retirement act, and 
praying for an injunction against its enforcement. From an injunc- 
tion an appeal was taken by the Government to the court of appeals. 
Before the hearing occurred on the appeal the petitioners applied to 
the United States Supreme Court for a writ of certiorari. The writ 
was granted, the Court took jurisdiction, and on May 6, 1935, ruled 
that the act was unconstitutional. 44 

Within 4 months after the Supreme Court's decision Congress had 
adopted substitute pension and tax measures, as described above. The 
readiness of Congress to act at the behest of labor was matched by the 
promptness with which the courts again took jurisdiction of the 
dispute at the request of management. At a meeting of the associa- 

«* Congressional Record, 73d Cong., 2d sess., vol. 78, pts. 10 and 11; also interview 
with Edward Keating, editor of Labor, July 24, 1937. 

** New York Times, July 6, 1934, to May 7, 1935. Railroad Retirement Board v. 
Alton, 295 U. S. 330 (1935). 

277780 — 41— No. 26 11 



152 CONCENTRATION OF ECONOMIC POWER 

tion on November 7 "it was decided that the railroads should attack 
in the courts the two bills enacted by Congress, providing for pay- 
ment, at the expense of the railroads, of retirement allowance for 
men who had reached the age of 65," 45 and an announcement of this 
action was made on the following day by J. J. Pelley, association 
president. 46 At this same meeting "the association voted * * * 
to direct the [law] committee to follow the method used in defeating 
the railway pension law enacted more than a year ago — filing a 
petition in the Supreme Court of the District of Columbia, whence a 
decision may be appealed direct to the United States Supreme 
Court." 47 

The suit was filed on January 7, 1936, and on June 26 the District 
of Columbia Supreme Court declared both the 1935 pension law and 
its companion tax measure unconstitutional. During the hearing on 
the petition the court overruled a Government motion to dismiss the 
action; the 135 railroads who brought the suit were joined by other 
railroads, terminals, and companies engaged in interstate commerce; 
and, in presenting its case, attorneys for the Government denied that 
the 1935 acts were subterfuges to avoid inhibitions in the 1935 
Supreme Court ruling against the 1934 Pension Act. Although the 
Railway Labor Executives' Association and officials of the railroad 
brotherhoods stood ready to support the Government should it appeal 
the case to the Supreme Court, the controversy was solved through 
new legislation providing for a voluntary pension plan, worked out by 
the carriers and their employees at President Roosevelt's suggestion. 48 

PUBLIC UTILITIES' ATTEMPT TO SHAPE PUBLIC POLICY 4fl 

While the electric utilities are newcomers in the field of lobbying as 
compared with the organized railroads, their activities during the past 
few years indicate that they have employed all the major devices and 
tactics employed by the railroads to escape effective public regulation. 
Either through their trade association, the Edison Electric Institute, 50 
or through informal groups such as the Committee of Public Utility 
Executives, the electric utilities have engaged in extensive legislative 
lobbying, have resorted to the courts when legislative lobbying failed 
and, in addition, have made use of wide-spread propaganda for their 
general economic philosophy. 

It is unlikely that any pressure group ever engaged in a more com- 
prehensive propaganda campaign than the National Electric Light 
Association campaign during the 1920's. This campaign was carried 
on by a net-work of organizations operating under the Joint Committee 
of National Utility Associations; represented an annual expenditure of 
ever a million dollars; and was deliberately framed to "sell" utility 

45 Letter from R. V. Fletcher, association vice-president and general counsel, to the 
author, April 23, 193G. 

40 The New York Times, November 9, 1935, p. 23. 

47 Ibid., November 23, 1935, p. 25. 

43 Ibid., January 8, p. 15 ; March 6, p. 40 ; May 16, p. 23 ; May 21, p. 39 ; and July 
31, 1936. p. 35. 

40 The efforts by associations and agencies of electric and gas utilities to influence public 
opinion were investigated by the Federal Trade Commission between March 18, 1928, and 
October 3, 1929, pursuant to S. Res. No. 83, 70th Cong., 1st sess. (approved February 15, 
1928). The Commission's Summary Report (Doc. 92, pt. 71 A, 70th Cong., 1st sess.) is the 
source of the information in this section. 

50 The Edison Electric Institute, prior to 1933, operated under the name of the National 
Electric Light Association (ibid., fn., p. 20). 



CONCENTRATION OF ECONOMIC POWER 153 

views to the Nation's population. 51 The scope of the campaign and its 
thoroughness are well described by the Federal Trade Commission in 
these words : "To such an extent has the utility program taken into 
consideration 'every public contact' that no campaign approaching it 
in magnitude has ever been conducted except possibly by governments 
in wartime." 52 There is no doubt that the campaign was inspired and 
carried on by the responsible leaders of the industry. The Federal 
Trade Commission found that the character and objective of such 
propaganda activities were fully recognized by the sponsors and plant 
executives. "In emphasizing that the work was worth while, M. H. 
Aylesworth, then the director of the National Electric Light Associa- 
tion, advised utility executives not to be afraid of the expense * * * 
because the 'public pays.' " 53 

The deliberate shaping of public opinion in its favor was the 
avowed objective of the propaganda campaign. Aims of the indus- 
try in its propaganda were: to keep the electric and gas utilities 
privately owned and operated; to gain public approval of their 
methods and practices; to establish to utilities exclusive right to oc- 
cupy the field of furnishing electricity and gas; to block real public 
regulation and to condemn public ownership and operation. 54 

The methods used in placing these views before the public included 
use of the newspaper press and of the schools. Twenty- four of the 
28 State committees on public utility information were directed by 
widely known and experienced newspaper men. Their efforts were 
spent in getting newspaper good will. 55 In gaining this valuable 
asset a variety of methods were used. They aimed to create news- 
paper good will through advertising; inspired news articles written 
by the director but bearing the signatures of prominent persons were 
inserted; personal contacts with editors were made; newspaper men 
were entertained in various ways; news bulletins and clip sheets were 
prepared and widely distributed; and many speeches were made, 
either by members of the utilities industry or someone paid by the 
utilities to represent their interests. 56 

The success attained through use of these methods is impressive. 
The total annual expenditure for public utility advertising in 1923 
was between twenty-five and thirty million dollars. 57 Utility agree- 
ments were linked to prominent names in many newspapers. Per- 
sonal contacts increased the number of daily papers taking matter 
prepared by the State information bureaus. The evidence showed 

61 The organization through which the propaganda campaign was carried on included : 
the National Electric Li;;ht Association, The American Gas Association, the Joint Com- 
mittee of National Utilities Associations, 28 State committees on public utility informa- 
tion or bureaus of public welfare, and the public relations departments of various holding 
and operating companies. Although tbey were originally interested, the telephone inter- 
ests withdrew from the joint committee and the street railway interests took only a minor 
part. The electric and gas utilities supported the Joint Committee of National Utility 
Associations wlien it was revived in 1027 in the proportion of about 75 to 25 percent, 
respectively. Later the electric industry assumed practically its entire support (ibid, 
p. 20, 21). 

62 Ibid., p. 18. 

63 Ibid., p. 18. 

« Ibid., pp. 8-9. 

K Ibid., p. 9. 

M The major portion of these speeches reflected the viewpoint of the utilities "so that it 
might almost be labeled straight-out propaganda on behalf of the utilities industry, but 
this matter that might be classified as strictly propaganda, and thus barred from the news 
columns of the big dailies, actually did find its way into those papers because, being de- 
livered by a speaker before a civic organization of standing in the community, it became 
news and was printed as such." 

« Ibid., p. GO. 



154 CONCENTRATION OF ECONOMIC POWER 

that many of the news bulletins and clip sheets were used as the basis 
of editorials favorable to the utilities' point of view. 

Even more direct means than these were used to obtain newspaper 
good-will. At one time, in 1928 and 1929, the International Paper 
Co., a subsidiary of the International Pulp & Paper Co., was financing 
10 newspapers, among them the Chicago Daily News, the Albany 
(N. Y.) Knickerbocker Press, the Boston Herald-Traveler, and the 
Brooklyn Daily Eagle. Although the president of International 
Paper, Mr. Archibald Graustein, stated this investment in newspapers 
was wholly a campaign for newsprint, on the basis of net income the 
amount realized from utilities was in excess of that realized from 
paper. 58 

Financial support or subsidy of so-called newspaper news and 
editorial services also helped to forward a program of publicity in 
harmony with the utilities' views. Generally there was no disclosure 
to the public of the financial support and employment of these 
agencies. 59 

Utility cooperation with the schools. 

The utilities' aim in giving attention to educational institutions, as 
stated by the Illinois committee on public utility information, "is to fix 
the trutn about the utilities in the young person's mind before incorrect 
notions become fixed there." 60 The Illinois committee pioneered in 
this field. 61 By 1922, however, the N. E. L. A. had taken up the plan. 
Acting apparently on the proposal of Samuel Insull, who earlier had 
emphasized "the great need of a campaign of education in the colleges 
and other institutions of learning," the national association in Decem- 
ber 1922 appointed a committee on cooperation with educational insti- 
tutions. In accordance with suggestions from this committee and 
benefiting from the success of the Illinois plan, work in educational 
institutions was undertaken by State committees in Indiana, Pennsyl- 
vania, Colorado, Wyoming, New Mexico, Wisconsin, Oregon, and 
other States. 62 

With the schools as with the newspapers, public utility officials 
realized the necessity of creating goodwill. This was done in a 

88 Ibid., pp. 85-88. 

69 The news and editorial services in this list included : E. Hofer & Sons, Portland, Oreg. ; 
Utilities Publication Co. and Public Service Magazine, Chicago, 111. ; Public Utilities Reports, 
Annotated, including advance sheets in Public Utilities Fortnightly ; Darnall's Newspaper 
Service, Florence, Ala. ; National Industrial Conservation Board, Inc., Chicago, 111. ; Dixie 
Magazine, Little Rock, Ark. (ibid., p. 92). 

60 Ibid., p. 141. 

81 Ibid., p. 145. 

62 Ibid., p. 145. 

Mr. George E. Lewis, director of the Rocky Mountain Committee, describes details and 
results obtained in the schools of Colorado, New Mexico, and Wyoming: 

"As contrasted with a few years ago, before we began to direct our attention to this 
great job of building up better public relations, students are being given a friendly under- 
standing of the utility industry. Questions relating to the public-utility business which 
have perplexed them in the past, many of which have been answered solely by those who 
are hostile to the public utilities and corporations in general, have received answers from 
the utilities' side. Based upon these answers and upon lectures, these students will be able 
to form a sound judgment of the utility business, at least a fair and unbiased judgment. 
Their heads are no longer being crammed with municipal government and State-ownership 
the'ories. Where, in some instances, there are professors of socialistic leanings, the teach- 
ings are at least leavened by the lectures and other information provided by the utilities. 

"In the universities the effect of our work will not be so direct or instantaneous. But 
the papers and talks that have been provided for the high-school students and the pupils 
of the upper classes of the grade schools are making their effect immediately apparent. 
Those informed youngsters are taking the utility messages into their homes. Utility sub- 
jects are being made topics for dinner-table discussions among sons and daughters, fathers 
and mothers. The utilities are finding that they have keen, vigorous, and enthusiastic 
champions among the high- and grade-school pupils. Unfair, unreasonable, and thought- 
less criticism directed at the public-utility business often meets with spirited denials and 
informed, intelligent debate on the part of students" (ibid., p. 147). 



CONCENTRATION OP ECONOMIC POWER 155 

variety of ways. Deliberate cultivation of friendly relations witty 
school and college men often did the trick. In other cases, where 
caution was necessary, a roundabout approach was used. In Texas in 
1923, for example, the utilities were "feeling their way into the schools 
with the Constitution." 63 Definite pains were taken to obtain the 
approval of college professors. Referring to teaching as one of the 
"starveling professions" (the others, the church and the press) Dr. 
C. A. Eaton, president in 1924 of the American Educational Associa- 
tion and a General Electric Co. industrial relations manager, advised 
the N. E. L. A. convention "to give a thought to the teachers and when 
their vacation comes pay them a salary to come into your plants and 
into your factories and learn the public-utility business at first hand." 64 
M. H. Aylesworth, then managing director of the N. E. L. A., put it 
this way : "* * * Once in a while it will pay you to take such men, 
getting five or six hundred or a thousand dollars a year, and give him 
a retainer of one or two hundred dollars per year for the privilege of 
letting you study and consult with them. For how in heaven's name 
can we do anything in the schools of this country with the young 
people growing up, if we have not first sold the idea of education to 
the college professor?" 65 

This pointed advice was widely accepted. Professors of journalism 
of well-known universities, directors of cooperative Federal and State 
extension in agriculture and home economics, faculty members from 
outstanding private universities and research institutes cooperated in 
various ways with the State utility information committees. Coop- 
eration was gained in many cases with faculties in institutions of 
higher learning. In many colleges and universities courses of study^ 
were established which appeared to be sponsored by faculty members" 
but which were, in fact, suggested by the utilities. Funds for the 
support of research scholarships were received by many institutions. 
Elementary and college text books were surveyed to determine their 
attitude on the electric and gas utilities. In some instances informa- 
tion given out by the State information committees was utilized in 
correcting the viewpoints of books considered bad or unfair. In other 
cases, new or substitute texts were prepared and introduced into the 
public schools. Educational authorities in certain States were ap- 
proached directly in order to improve the text-book situation. In 
numerous cases, thousands of pamphlets presenting the utility point 
of view were introduced by the State committees into public schools. 06 

These ramified efforts to gain newspaper good-will and capture the 
schools were supplemented by other activities. One was the customer- 
ownership campaign. On the theory that customer-ownership con- 
stituted public ownership, stock-selling drives were staged to enlist 
the individual purchaser's support for the system of private utility 
ownership. Although control rarely accompanied the ownership of 
utilities stock thus purchased, 67 as a good- will device of political value, 
this widespread distribution of utilities stock apparently achieved the 
desired result. For example, rate reductions were widely opposed 
in Virginia because a certain utility had sold much of its stock to the 

« Ibid., p. 153. 
«* Ibid., p. 149. 
45 Ibid., p. 149. 
" Ibid., p. 10. 

m Less than 2 percent of the total shares sold in 1926 carried voting privilege. Ibid., 
p. 11. 



J5g CONCENTRATION OF ECONOMIC POWER 

citizens of that State. 68 Because of their investment in utilities, cer- 
tain Georgia judges were disqualified from sitting on utility company 
cases. In Alabama the whole tone of newspaper opinion toward the 
Alabama Power Co. was changed from opposition to support as a 
result of stock sales to 10,000 residents. The 150,000 owners of Cali- 
fornia utilities were the most important factor in twice defeating a 
State water power program. 69 

The utilities instructed their employees in public speaking, went 
to great lengths to defend the holding company against attack, and 
supported State regulation of public utilities in order to offset a pro- 
gram favoring Government ownership. Municipally owned, as well 
as federally owned, generating plants have been attacked, using 
among other things, such appellations as "Bolshevist," "Red," and 
"Sovietized." 70 It is almost impossible to list the various activities 
undertaken by the electric and gas utilities to impress their views on 
the people of America. "Sky-writing," to quote Mr. George F. Oxley, 
director of publicity of the National Electric Light Association, was 
the only means of publicity that was neglected. 71 

The Utility Lobby. 

While the utilities were carrying on propaganda throughout the 
country, they were simultaneously active in legislative lobbying at 
Washington — a campaign which reached its climax in the 1935 cam- 
paign against passage of the public utility holding company act. 

• In 1926 Senator Norris (Nebraska) introduced a resolution calling 
for an investigation by the Federal Trade Commission of public utility 
practices. The resolution was adopted, and the Federal Trade Com- 
mission submitted its report in 1928. The report was found to be 
inadequate, in that it lacked defmiteness and had not probed deeply 
enough. 

Later in that year Senator Walsh (Montana) introduced another 
resolution, calling for a Senate investigation of public utility financing. 
This resolution was vigorously opposed by the organized utilities. 
In discussing the committee hearings on the resolution Senator Walsh 
said: 

The first group appearing in opposition to the inquiry was the National Elec- 
tric Light Association, composed of 893 electric operating companies, 324 manu- 
facturing companies, 263 associate companies, and 93 foreign companies; the 
American Electric Railway Association, composed of 337 operating companies, 
35 associate companies, 423 manufacturing companies; the American Gas Asso- 
ciation, composed of 469 operating companies, 25 holding companies, 350 manu- 
facturing companies, and 17 associate companies. 

They weie marshaled by Mr. George B. Cortelyou ; and it is well known that 
these great organizations through their representatives assembled here in the 
city of Washington before Congress convened last December set up spacious 
and luxurious quarters here and railed to their aid experts in various lines, 
including experts in securing legislation from Congress and in defeating legis- 
lation before Congress. * * * There was assembled here the most formidable 
lobby ever brought together in this city, * * * representing capital to the 
amount of nearly $10,000,000,000, and representing * * * the companies to 
be investigated. 

******* 

Next we had representatives of investment bankers and investment bankers' 
associations, who told us that they caused investigation into public utility securi- 



«■ Tblfl., p. 12. 

m Ibid., p. 302. 

,0 Ibid., p. 13. 

71 Ibid., pp. 15-16. 



CONCENTRATION OF ECONOMIC POWER 157 

ties to be made and, therefore, there was no necessity for any investigation by 
the * * * Senate or by any governmental authority at all. 

******* 

Then we had the American Manufacturers Association appearing by one James 
A. Emery, the employer and co-worker of the infamous Mulhall, whose villainies 
were exposed by a committee of the Senate in 1913. 73 

Apparently recognizing that the resolution could not be defeated, 
the utilities changed their tactics and sought to have this investigation 
also undertaken by the Federal Trade Commission. 

In the debate on the George amendment to this effect, several Sena- 
tors, especially Senator Glass (Virginia), argued that in view of the 
inadequacy of the previous F. T. C. investigation, there would be no 
point in adopting the resolution as amended. Nevertheless, both the 
resolution and the George amendment were adopted, and the F. T. C. 
undertook the investigation. The ensuing report, however, regardless 
of the expectation of the utilities, was not innocuous. 73 

These efforts to sway Congress were paralleled by efforts to sway 
administrative agencies. The Federal Power Commission's adminis- 
tration of regulatory laws since its establishment in 1920 has been 
marked by obstructionism by the public utilities. 

Utility Pressure on Administrative Agencies. 

The public utility industry came of age in the United States in the 
period between the setting up of a three-man, part-time commission to 
carry out the Power Act of 1920, and the amendment of the act calling 
for a five-man, full-time commission 10 years later. In that decade 
the Commission in administering the law swung twice between the 
two extremes of conciliation and strict regulation. 

At the outset the Commission adopted a deliberately conciliatory 
attitude, and the utilities, through the National Electric Light Asso- 
ciation, quickly grasped the opportunity to express their views. Regu- 
lations governing applications, permits, and licenses were approved 
and promulgated by the Commission only after the submission of 
drafts to N. E. L. A. officials and others, and after conferences between 
the Commission's representatives and N. E. L. A. bankers and engi- 
neers. The advent of a new administration on March 4, 1921, offered 
a unique opportunity to urge the re-opening of the matter. This the 
N. E. L. A. did, and its request was granted. Again, in November of 
that year, also at N. E. L. A. urging, the whole question of accounting 
requirements was opened up for reexamination. 

The question thus opened up remained the subject of controversy for 
many years, and the disagreements growing out of it ultimately caused 
the revamping of the Commission on a full-time basis. How closely 
should the Commission scrutinize the power companies' accounts? 74 
Prior to 1929 the Commission wished to scrutinize them on the basis 
of regulations decided upon after consultation with the industry. 
But, as subsequent disclosures showed, the industry itself was dis- 

72 Congressional Record, 70th Cong., 1st sessr, pp. 2893-2894. In the last paragraph in 
this excerpt Senator Walsh apparently refers to the National Association of Manufacturers 
which, in the years just preceding 1913, opposed through its lobbyists pending legislation 
favored by the American Federation of Labor. (See above, ch. VI, pp. 94-106.) 

73 Congressional Record, 70th Cong., 1st sess., pp. 2942 ff. and 3054. 

74 "The Commission had the task of auditing and preserving the records of the original 
costs of water power projects for two purposes: (1) In order to aid the Commission and 
State regulatory bodies in passing upon the rates charged bv these companies for the 
electricity generated: (2) In order to fix the 'net investment' +v at the Government vonld 
have to pay if it were to take over the property at some future date." Herring, Public 
Administration and the Public Interest, op. cit., p. 147. 



158 CONCENTRATION OF ECONOMIC POWER 

satisfied with the regulations, and sought to obstruct their enforce- 
ment. Not long after the accounting requirements were first settled, 
both the law and the Commission's policy were attacked in Congress 
and in the press. The chief counsel of the Commission gave an inter- 
pretation of the act showing that the regulations were justified, and 
the matter was regarded as settled. 

But the utilities did not give up the fight. At this time they were 
engaged in an ambitious and expensive campaign to turn, public opin- 
ion against effective Federal regulation, which was reflected in the 
utilities' tactics before the Commission. In the vital matter of the 
power companies' accounts the Commission was unable to enforce 
compliance with its regulations. In this matter "great pressure was 
exerted on the Federal Power Commission" which finally "was forced 
to give way to this administrative lobbying." 75 The Commission's 
chief accountant stated at the time that the companies failed to comply 
with requests for information, to answer correspondence, to file state- 
ments, or to produce records ; they were lax in keeping their accounts 
according to the Commission's rules, and some used definitely obstruc- 
tive tactics. 

With the appointment of a new executive secretary in 1929, the pol- 
icy of the Commission was completely reversed. Between March 4 
and the amendment of the act in June 1930, the new secretary pro- 
ceeded on the basis that utility regulation was largely a State matter, 
that the Commission had adequate powers under the act to carry out 
its duties, and that complete data from the companies' accounts were 
not necessary to the effective discharge of these duties. "The new 
secretary was entirely complacent in his acceptance of the limitations 
of the Commission's activities." 76 However, the full-time Commis- 
sion appointed in 1930 disagreed with the view that regulation was 
largely a State matter, and discharged the secretary along with other 
important employees. 

While these examples of public utility propaganda and pressure on 
Congress and the Federal Power Commission illustrate clearly the de- 
sire and ability to influence public policy, they have been surpassed by 
more recent examples. 

Utility Holding Company Act. 

It is well known that the public utility industry fought desperately 
in the summer of 1935 in an unsuccessful effort to defeat the utility 
holding company bill. It lost in the Senate by one vote. The num- 
ber and variety of lobbying methods employed by a specially-consti- 
tuted Committee of Public Utility Executives and by the members 
of the Institute, as well as by individual companies on their own initia- 
tive s were reminiscent of the N. E. L. A. propaganda campaign dur- 
ing the 1920's. A deluge of telegrams sent to Congressmen without 
the knowledge or consent of the signers, newspaper and radio propa- 
ganda, the Washington social lobby, and the employment of "old 
friends" of legislators to "work" on them, are but a few of the means 
which a Senate investigating committee found had been resorted to. 77 

76 Ibid. 

76 Ibid., p 148. 

77 Hearings before a special committee to investigate lobbying activities, 74th Cong., 
1st sess., pursuant to S. Res. 165 and S. Res. 184, pt. 3, passim. This incident is described 
In some detail in Crawford, The Pressure Boys, Messner, New York, 1939. 



CONCENTRATION OF ECONOMIC POWER 159 

The closeness of the Senate vote on the utility holding company bill 
apparently seemed to the industry to justify further opposition in the 
courts. In any event, the Edison Electric Institute announced in 
September 1935 its intention to fight the act in the courts and its reten- 
tion of special counsel for that purpose. 

The statement by the Institute's board of trustees showed clearly 
that the attack on the Holding Company Act was but part of a larger 
campaign against New Deal legislation. John W. Davis, 1924 Demo- 
cratic Presidential candidate, was retained to lead the fight "as it 
relates to the validity and the constitutionality of the Utility Act 
itself." Newton D. Baker, Secretary of War in Woodrow Wilson's 
Cabinet, was engaged to "participate in the conduct of the cases to 
contest the gift and loan of Federal money to induce and enable 
municipalities to compete with private [utility] companies." James 
M. Beck, former United States Solicitor General, and Forney Johns- 
ton, of Birmingham, Ala., were assigned to argue before the Supreme 
Court the constitutionality of the acts under which the Tennessee 
Valley Authority was spending "huge sums of the taxpayer's money in 
its effort to further the doctrine of the abolition of private business for 
profit." Of unusual significance to the observer of the judicial phase 
of the governmental process is the position of the Board as to the way 
the attack on the Utility Holding Company Act would be launched. 
At the time of the announcement "utility executives were uncertain 
* * * how soon the court action would be started or which par- 
ticular section or sections of the law would be chosen to bear the brunt 
of the attack. Until the attorneys had an opportunity to decide which 
company would lend itself most readily as the complainant there would 
be no decision." 7S As it turned out, however, the attack on the act 
was not limited to a single suit but was composed of literally dozens 
of suits filed by as many utility companies. This strategy threatened 
to swamp the courts and to delay unduly the determination of the act's 
constitutionality. Moreover, the Government itself brought suit in 
November against the Electric Bond & Share Co. and 26 affiliated com- 
panies to compel them to register with the Securities and Exchange 
Commission as required by law. By agreement, proceedings were 
stayed in all except the Bond & Share suit, in which the Supreme Court 
ultimately passed upon the Holding Company Act. 79 

The Alabama Power Co. and the Duke Power Co. (North Carolina) 
sued to restrain the Federal Government from making P. W. A. loans 
and grants to municipalities for the construction cf light and power 
plants, 80 while a group of preferred creditors of the Alabama Power 
Co. (of whom, incidentally, Mr. Forney Johnston was one) sued the 
Tennessee Valley Authority and others to set aside a contract that Jiad 
been entered into by the company and the T. V. A. involving the sale 
and exchange of electric power generated at Wilson Dam, and the 
acquisition by the Authority of certain transmission lines from the 
power company. 81 Support in the prosecution of this suit was given 
not only by the Edison Electric Institute but also by the National Coal 

78 From the statement and accompanying news items as reported in the New York Times, 
September 13, 1935, p. 8. 

79 New York Times, December 8, 1935, p. 27, and December 25, 1935, p. 35. The case 
of Electric Bond & Share Co. v. S. E. C. (303 U. S. 419), was decided March 28, 1938. Mr. 
Thomas D. Thatcher, former Solicitor General of the United States, was chief counsel for 
the utilities in this case. 

80 Alabama Power Co. v. Ickes (302 U. S. 464), and Duke Power Co. et al. V. Greenwood 
County et al. (3C2 U. S. 675) (1937)). 

^Aahwander et al. v. T. V. A. et al. (297 U. S. 288 (1935)). 



160 CONCENTRATION OF ECONOMIC POWER 

Association. All of these suits were decided by the Supreme Court 
in favor of the Government and against the Edison Electric Institute's 
members and friends. The suit against the T. V. A. decided only some 
of the many disputed questions which its program has raised. Among 
these is the right of the Government to dispose of electric power gen- 
erated as an incident to the operation of a dam constructed for purposes 
of flood control, navigation, and national defense. The last attempt 
of the utility industry to wreck the T. V. A. in the courts was in the 
so-called 18 Company case, in which the Supreme Court decided 
against the utilities, holding that they lacked the right to contest the 
Federal Government's authority to compete with them. 83 

Activities of Edison Electric Institute. 

To establish the close connection between the Edison Electric Insti- 
tute and the persons who challenged the authority of Congress to 
legislate in the utility field is the main purpose here. But several 
secondary features of the relationship are worthy of mention. The 
Electric Bond <& Share case was not the first in which Mr. Davis 
acted for the institute in a case attacking the Holding Company Act. 
Nor was it the first in which the act was brought before the Supreme 
Court. Rather interesting circumstances surrounded Mr. Davis' as- 
sociation with a litigant in a suit involving the act in the Federal 
district court in Baltimore in 1935-36. 

In corporate reorganization proceedings a minority group of cred- 
itors of the American States Public Service Co., acting through 
Burco, Inc., an investment trust, sought to compel the company to 
register with the Securities and Exchange Commission as provided 
by the Holding Company Act. The company, in turn, sought to have 
the act declared invalid on the ground that it would prevent its reor- 
ganization under the National Bankruptcy Act. Mr. Davis was 
counsel for neither party, but entered the case, apparently, at the sug- 
gestion of the company's attorney, Mr. Piper. Mr. Davis said he 
agreed to take part in the case if Mr. Piper "found him a party in 
interest to represent." Mr. Piper found such a party in Dr. Ferd 
Lautenbach, a creditor of the company. But Dr. Lautenbach did not 
know until the case opened on September 27, 1935, that Mr. Davis was 
to be his counsel. He learned it only then. Moreover, Mr. Davis' ap- 
pearance in the case caused Federal attorneys, appearing for the Gov- 
ernment as a friend of the court, to charge that the Edison Electric 
Institute "was behind the litigation." This Mr. Davis denied. He 
admitted he was counsel for the institute but "denied that the insti- 
tute itself was active in the proceedings." This exchange took place 
on September 27 and 28, 1935, hardly 2 weeks after the announcement 
by the board of the institute that they had retained Mr. Davis to 
fight the Holding Company. Act. 84 

However, the efforts of both parties to the suit, as well as of Mr. 
Davis, to get the Supreme Court to rule on the Holding Company Act 
were unsuccessful. The judge of the district court, in a sweeping 
opinion, declared the act unconstitutional in its entirety. 85 Burco, Inc., 
appealed to the circuit court, which held that the American States 
Public Service Co. was intrastate and ruled the act invalid as regards 

"306U. S. 118 (1938). 

* The New York Times, Sept. 28 and 29, 1935. 

86 Ibid., November 8, p. 1. 



CONCENTRATION OF ECONOMIC POWER \Ql 

the demand for registration. But at the same time the judge re- 
versed the district court's invalidation of the act. Mr. Davis, as 
counsel for Dr. Lautenbach, then joined Burco and the American 
States Public Service Co. in a plea to the Supreme Court to review the 
lower court's decision. The Government opposed a test of the act 
in the Supreme Court. On March 30, 1936, the Court denied the 
application for review. 86 

It must not be assumed that the failure of the electric utility indus- 
try to persuade the courts to accept its view in these cases signifies 
its retirement from the lobbying field. On the contrary, like the 
Investment Bankers' Association of America, it has considerable 
patience and undoubtedly hopes that the future will relax the present 
degree of Federal regulation of holding companies and other utility 
activities. The nomination of a public utility executive by the Re- 
publican National Convention in 1940 was undoubtedly received with 
gratification by the utility industry as a whole. In the meantime the 
industries' resources and the apparent centralization of public rela- 
tions policy in the Committee of Public Utility Executives guarantees 
it the opportunity of maintaining and possibly improving its position 
in the struggle with government. 87 

THE GENERAL WELFARE AND UTILITY LOBBYING 

The large sums spent for propaganda by the railroads and utilities 
under the leadership of their national trade associations and their 
aggressive lobbying before Congress, the administrative agencies, and 
the courts raise sharply the issue as to the place of the general welfare 
in public policy toward utilities. 

The conclusion of the Senate Civil Liberties Committee in regard 
to the National Association of Manufacturers' campaign against the 
N. L. R. B., 88 that direct access to corporate treasuries and the expen- 
diture of sums from them jeopardized the integrity of American 
political institutions, seems to be borne out by the policy of the, electric 
utilities and the railroads in spending corporate funds for which they 
are, in effect, trustees, for the purpose of influencing public opinion 
and the selection of political officeholders. 
t Since 1933 Federal regulation over industrial financing, and par- 
ticularly over public utility and railroad financing, has widened. 
There is little doubt that this extension of Federal power resulted in 
large part from public dissatisfaction with the tactics of the utilities 
and railroads and from a distrust of the willingness and ability of 
utility- and railroad leaders to manage their business in the public 
interest. Only after extensive investigation of railroad and utility 

» Ibid., February 23, p. 1 ; March 17, p. 8, 18 p. 33, 28, p. 10, and 31, p. 9, 1936. 

"An Indication that individual utilities also engaged lobbyists is contained In the 
Chicago Journal of Commerce, May 18, 1939. According to the report, Fred S. Burroughs, 
vice president of the Associated Gas & Electric Co., told the Securities and Exchange 
Commission that his firm retained a man at $5,000 a month to "mix with the ripbt 
people" in Washington, and to advise on the attitude of officials. At the time the S. E. C. 
was investigating the Associated Gas & Electric Co. on charges that it filed a registration 
statement containing allegedly false and misleading statements. Gray's name entered 

J* « /? a £ e wh _ en the company's records disclosed tbat he had received payments totaling 
55.000. There is poetic justice, in connection with the subsequent receivership of _the 
ssociated Gas & Electric Co., in the appointment of ex-Congressman Driscoll as one of 
&o= j ee trustees - Driscoll was the Pennsylvania Congressman who, in the summer of 
1935, discovered that the Associated Gas & Electric Co., in cooperation with the Edison 
Electric Institute, instigated a ehower of telegrams which descended upon Congress opposing 
passage of the Utility Holding Company Act. 
88 See above, ch. VI, pp. 95, 107. 



IQ2 CONCENTRATION OF ECONOMIC POWER 

methods by congressional committees did the public, or Congress 
itself, gain access to the facts. Without these data it would have been 
impossible to get public support for the extension of Federal regula- 
tion as now embodied in law. 

This experience, similar to that of industrial relations and in 
commercial and investment banking, points directly to the need for 
Federal legislation which will enable the Government to discover 
and inform the voters of developments in the lobbying field. The 
failure of the railroads, in the absence of competing forms of trans- 
portation, to provide modern and up-to-date service at reasonable 
rates is well known. Similarly, the failure of the electric utilities to 
extend their service, particularly into the rural areas, before the 
advent of the Rural Electrification Administration, is also well 
known. It would appear that only through a combination of Federal 
regulation, as now provided by law, and an informed public can the 
gams achieved in these sectors of public policy be secured and 
extended. 



CHAPTER X 
SHIPPING AND AIR TRANSPORT 

In the formulation of public policy with respect to merchant ship- 
ping and commercial air transport, one factor predominates which 
is not present in connection with other sectors of economic activity. 
This factor is the wartime value of shipping and of commercial air 
transport. It is the critical consideration in formulating public policy 
in these two fields. 

Potentially, of course, all business is affected with a public interest 
when it comes to national defense. The .present European war makes 
it unnecessary to dwell upon this truth. However, except in time of 
war or crisis, the defense value of business generally figures more im- 
portantly in planning than in the administration and execution of 
policy. This is not true of merchant shipping and commercial air 
transport. To a very large degree their wartime value determines 
national peacetime policy towards them. The same thing is true, in 
only slightly lesser degree, as regards iron and steel, shipbuilding, and 
the chemical industry. These industries, recognizing their strategic 
position, have exploited it to the utmost. Congressional committees, 
particularly the Special Senate Committee to Investigate the Muni- 
tions Industry, have shown the various methods by which they have 
done so. Generally, it appears that the pattern is continuing in the 
1940 national defense crisis. 

Various business and other groups are active in expounding the 
doctrine of the defense value of a merchant marine and in attempting 
to secure a national policy in this field which reflects this philosophy. 
These groups can be divided into two classifications : Those who merely 
expound the doctrine, and the second group with a definite economic 
interest which benefits from the patriotic coloring afforded the philos- 
ophy by the former. 

The Chamber of Commerce of the United States emphasizes the 
defense value of a merchant marine, and argues that public subsidy 
is necessary for the maintenance of such a marine. The Navy League 
is another group active in expounding the value of merchant shipping 
to the Nation's defense forces. Patriotic groups, such as the Daughters 
of the American Revolution, the American Legion, and others, pass 
resolutions endorsing public support of a merchant marine because 
of its' defense value. These latter groups emphasize the patriotic angle, 
hence lend valuable public relations aid to the groups which are active 
because of their economic interest. 

THE NAVY LEAGUE 

In this connection the Navy League is in a category almost by itself 
and warrants a further word. Its importance with respect to shipping 
policy grows out of three things : First, the philosophy it holds; second, 

163 



164 CONCENTRATION OF ECONOMIC POWER 

its relations with naval shipbuilding and the ship-owning and operat- 
ing interests ; and third, the methods which it employs. 

The Navy League of the United States, founded in 1902 and incor- 
porated the following year, subscribes completely to the philosophy 
of history expounded by Mahan that sea power is the decisive factor 
in shaping history; hence, since the United States is "insular," an 
adequate navy is necessary to protect its overseas interests, its lines of 
communication to strategic supplies, and its merchant shipping. Its 
formula of defense and of foreign policy is simple and can be clearly 
stated. According to the Navy League, the United States should pos- 
sess an adequate navy, by that meaning a navy as strong as the strong- 
est ; it should have numerous naval bases, a merchant marine to serve 
as a naval auxiliary and a naval reserve, a naval militia, and a naval 
air force. This formula has been stafeed by the Navy League in the 
following words : 

When the United States has a navy second to none, a merchant fleet carrying 
all our coastwise trade, and at least half our foreign trade in world competition 
and an all-American system of world communications free from foreign stock- 
ownership, management and operators and subject to untrammeled Government 
control in emergency — then only will America exercise its rightful influence on 
world opinion, world trade, and world peace. 1 

Because of this value of a merchant fleet to the Navy, public subsidy 
is justified. The Navy League view is that by itself a fleet is incomplete 
and must have as a reserve a fully manned merchant marine. In addi- 
tion, the merchant marine must be government-subsidized, since costs 
are higher here than abroad. 2 

The cordial relations obtaining between the Navy League and the 
United States Navy Department, the iron and steel industry, and the 
shipbuilding, ship-owning, and operating industries are important 
not so much because of any interlocking directorates, but because all 
these groups share the same philosophy. The Navy League's officers 
and directors are civilians. With the exception of two appointed of- 
ficers, they are elected and serve without pay. Neither active nor re- 
tired naval cfficers (except a few retired officers admitted before re- 
vision of the by-laws) are eligible for membership. Shipbuilders and 
munition-makers and those having an independent financial interest 
in naval construction or the manufacture of munitions are ineligible as 
members or contributors. Shipowning and operating companies, how- 
ever, are not disqualified as contributors. Individuals, even though 
they are officers of shipbuilding and munitions-manufacturing com- 
panies, are eligible for membership. The league has solicited and 
received contributions from the Standard Shipping Co., the Grace 
Lines, the Atlantic and Caribbean, and the Chile Steamship Co. 3 
Charles M. Schwab and Eugene Grace of Bethlehem Steel are found- 
ers as well as life members. The Navy League asserts its freedom 
from "all outside influence whether political, naval or personal" and 
maintains that this "is well known to newspaper editors." 

The Navy League is a publicity organization. The league's rela- 
tions with the Navy Department and the Nation's press are cordial, 

1 The quotations and data in this section are taken from Navy League publications. 

8 "No nation, as history shows, has successfully competed in world markets without 
making that competition a matter of government concern. Lacking Government sub- 
sidies to restore the higher cost differential of American shipbuilding and operation, our 
merchant marine engaged in foreign trade would be swept from the seas by foreign 
competition." Therefore "our merchant shipping depends upon Government support." 

? New York Times, February 11, 1936, reporting special testimony before the Special 
Senate Committee Investigating the Munitions Industry. 



CONCENTRATION OF ECONOMIC POWER 165 

enabling it to magnify the force of its voice many times. The league 
realizes that the Navy and the merchant marine depend upon public 
opinion for support. While the President's views of the Navy and 
merchant marine are important, public opinion is necessary whether 
the President is warm in his support or is neutral. 4 Members of Con- 
gress come mostly from interior and inland States. Hence, in the 
view of the Navy League, they and their constituents need information 
regarding national defense and shipping policies. 5 

Sound public opinion on naval affairs, in the words of the Navy 
League, must rest upon Nation-wide information — dependable, ade- 
quate, and timely. The Navy Department is not in a position to release 
and disseminate such information. When disseminated by such an 
organization as the Navy League, however, it attracts newspapers' 
attention and receives Nation-wide publicity. This is the role in which 
the Navy League casts itself. 6 

In order to give "to the American people through the press, in signed 
statements, accurate and current information and matured comment 
on naval and maritime affairs," the Navy League uses a variety of 
publicity methods. It issues its own publication, Sea Power, which 
resumed publication in 1935 after a lapse of 14 years. From time to 
time it issues tracts and pamphlets. Its officers are active in speech- 
making and public relations work. Through cooperation with the 
Navy Department, the league prepares and distributes its press re- 
leases and its publications on special projects. Such a project was 
the Pathe News reel, Our Navy, released May 26, 1934, and based on 
information and graphs supplied by the Navy League. According 
to the league's executive secretary, the news reel cost it nothing, but 
the film was seen and heard by some 22 million people in more than 
2,500 theaters throughout the country. For publicizing the need for 
a long-time naval construction program, the film won the thanks of 
the Secretary of the Navy. 

BUSINESS INTERESTS AND DEFENSE 

In addition to the patriotic groups who expound the doctrine of 
defense value of merchant shipping and of air transport, there are 
business groups which capitalize on the value of this alliance of patri- 
otism and economics. Among these groups are the American Mer- 
chant Marine Institute (formerly the American Steamship Owners 
Association) , the Air Transportation Association, and various corpora- 
tions, individually and collectively. 

Effective citizen groups organized to counteract business activity in 
these fields are conspicuous by their absence. The only active groups, 

4 "When the President does not favor an adequate navy and merchant marine, Con- 
gress usually shows inertia unless influenced by aroused public opinion. When the 
President does favor strong naval and shipping policies, both he and Congress need 
informed public opinion to assist such policies. Through changing administrations, in- 
formed and sound public opinion is the only available means under our form of govern- 
ment to secure continuity of sound naval arid shipping policy." [Italics in the original.] 

5 "Most Members of Con Tess represent inland States, the majority of whose citizens 
lack the experience and contact with ocean trade shipping and naval protection essential 
to a ready appreciation of their values. Therefore the constituents of most Members of 
Congress need almost constantly to be informed and educated on naval and shipping 
matters." 

* Dependable, adequate, and timely "information, when issued by the Navy Depart- 
ment, is limited by considerations of policy, both diplomatic and political, and of neces- 
sity is largely confined to matters and policies already determined. Such dependable, 
adequate, and tim A ly information, however, issued freelv witv> frank comment by the 
Navy League, a disinterested and non-partisan organization of citizens, wins the interest 
of editors and gets national publicity." 



IQQ CONCENTRATION OF ECONOMIC POWER 

generally speaking, are professional peace groups which concentrate 
more on matters of broad foreign policy than on the economic factors 
in national defense. Some of these peace groups are active in lobby- 
ing, such as the Women's International League for Peace and Freedom, 
the National Council for the Prevention of War, and the League of 
Nations Association. Others confine their activity mostly to educa- 
tional and research efforts. Among these are the Foreign Policy As- 
sociation, the American Peace Society, and the Carnegie Endowment 
for International Peace. 

Occasionally one of these professional peace groups exerts appre- 
ciable force on policy determination. This was the case with the 
1935 Neutrality Act which grew out of the reports and recommenda- 
tions of the Senate Munitions Investigating Committee. Committee 
Chairman Nye (North Dakota) was persuaded to initiate this inves- 
tigation by Miss Dorothy Detzer, lobbyist for the Women's Interna- 
tional League for Peace and Freedom. 8 The National Council for 
the Prevention of War claims to have been responsible for cutting 
the 1929 naval expansion program to a third of the size originally 
planned. 9 

The same group took the initiative in 1928. in putting pressure upon 
Congress to adopt a resolution favoring arbitration of the dispute with 
Mexico, growing out of the passage there of a statute confiscating all 
oil lands held by aliens. 10 

While important on occasion, the staying power, resources, and 
plausibility of program of these peace groups are hardly in the same 
class as those of the business groups with an economic stake in ship- 
ping policy. The peace groups by and large are considered either 
radical or unrealistic; the business groups, on the other hand, are 
generally regarded as "sound." 

PUBLIC SUBSIDIES FOR PRIVATE SHIPPING COMPANIES 

For many years shipping policy has been framed and administered 
in a way highly lucrative for shipping and shipbuilding interests. 

8 Kenneth G. Crawford, The Pressure Boys, Messner, 1939, p. 211. 

9 See also p. 44. 

lu In 19^:6 Mexico passed a statute confiscating all oil lands held by aliens. Since many 
of these lands were owned by American firms, much indignation was aroused in this 
country against Mexico. On January 13, 1927, leading New York newspapers warned the 
American people that if they wanted peace with Mexico they must begin to fight for it. 
The National Council for the Prevention of War was in a position to act without delay 
and raised at once a fund of $12,000. A small committee of well-known men and women 
was quickly formed, who signed and sent a telegram to 1,000 prominent people through- 
out the 48 States asking if they favored arbitration of the dispute with Mexico. A pro- 
posed statement was included in the telegram. 

Of the 1,000 persons, more than 400 replied within 24 hours. The statement with 
their signatures was printed, and this document, together with the warning editorials 
from the New York papers, was mailed to every one of the 13,600 newspapers in the 
United States. 

Next was required a technical statement to prove the issue was arbitrable. This was 
prepared by a professor of international law at Columbia University. Immediately it 
was sent by special delivery air mail to 240 professors of political science, international 
law, and history in the leading educational institutions of the country, asking if they 
approved it. One hundred and one of them assented within 48 hours, and this docu- 
ment, too, with signature's was printed and released to the newspapers. 

On 3 days' notice representatives of 30 peace organizations met in Washington and 
agreed to send as many letters and telegrams as possible to the President and to Mem- 
bers of the Senate, on whom pressure was being exerted by oil interests. 

An appeal was mailed by the Federal Council of Churches of Christ for similar action, 
together with necessary information, to 75,000 ministers. Many thousands of influential 
people were also reached with copies of conciliatory speeches made by Members of the 
United States Senate. Letters to local papers were urged. 

The effect of this intensive campaign was immediate and decisive. Washington corre- 
spondents reported that not in many years in Washington had they seen such an out- 
pouring of public opinion. The Senate voted 79 to in favor of arbitrating the dispute. 

The flare-up of the controversy in 1938 resulted again in intensive propaganda efforts 
by both sides. The newspapers generally took the side of the oil companies, but aroused 
less public indignation than might have been expected from the vigor of the campaign. 



CONCENTRATION OF ECONOMIC POWER 1Q7 

In 1920 Congress directed the Shipping Board to return to private 
ownership and operation the merchant shipping fleet built up during 
the World War. The basis of this transfer, as provided by the law, 
was profitable to the operators. The law provided that such trans- 
fer could be negotiated through managing-operating agreements, 
either on the basis of a lump sum, or of cost of operation plus a, 
percentage of the cost. The Government also was authorized to 
advance to private owners and operators the funds necessary for 
purchase. With the passage in 1928 of additional shipping legisla- 
tion, provision was made for the award of mail contracts. Contracts 
were to be awarded after competitive bids, and the rates varied accord- 
ing to the speed of the vessel. 

A special Senate committee investigating, in 1934 and 1935, the 
conditions surrounding the award of these ocean mail and air mail 
contracts, described the results of these policies. It pointed out that 
the objective of public subsidy was to provide sure and certain trans- 
portation for American products to foreign markets, to make available 
a good fleet of potential naval auxiliaries, and to provide steady enough 
employment to shipyards and labor to permit rapid expansion in case 
of emergency; and concluded that the legislation had failed. The 
fleet actually provided was pitiful, in the committee's opinion, because 
of the enactment of an ill-advised compromise law, flagrant betrayal 
of trust by public officers, and the prostitution of the law by private 
individuals. 11 The merchant fleet created as a result of the legisla- 
tion was not in reality privately owned, inasmuch as the committee 
found that the Government had invested, in loans and mortgages to 
the companies, nearly one and one-half times the stockholders' 
interest. 12 

From 1920 to 1930 the Government negotiated agreements for 
private operation pending the disposition of the Government-owned 
fleet. The Government paid to the operator all voyage expenses and 
a fixed percentage of the gross voyage revenue. In practice the 
managing operator made no effort to keep his expenses down, and in 
fact ofter deliberately increased them. 

In 1930 the cost-plus basis of negotiating operating agreements was 
abandoned in favor of the lump-sum basis. In order to qualify, an 
operator had to show sufficient capital investment to indicate financial 
responsibility, but no investment in fixed assets was necessary; nor 
was much working capital required. An example is the agreement 
with the Lykes Bros.-Ripley Steamship Co. The committee found 
that its profits under this kind of an arrangement were over a million 
dollars between August 15, 1930, and June 30, 1933. In the com- 
pany's opinion, profits under the first year of the original agreement 
were nonexistent. In September 1931 it stated, in its request for an 
increase in the lump sum payment from $7,000 to $14,800 : "A thorough 
analysis of the operations conclusively shows that there will be no 
profit to the operator and very probably an actual loss." Actually 

u S. Rept. 898, Investigation of Air Mail and Ocean Mail Contracts, 74th Cong., 1st 
sess.. pp. 2, 3. 

12 The committee found that most of the 2,000 seagoing vessels belonging to the Gov- 
ernment in 1920, with an original value of $3,000,000,000, had been disposed of. Of 
these, 220 ships, costing originally $516,174,249 and sold for $41,411,665, were in the 
mail contract service. The Shipping Board retained 282 cargo and passenger vessels, of 
which 451 were in operation under managing-operating agreements, and the remainder 
were tied up (ibid., p. 4). 

277780—41 — No. 26 12 



168 CONCENTRATION OF ECONOMIC POWER 

the company had made a profit of $100,000 from August 1930 to Sep- 
tember 1931, but the Shipping Board apparently made no effort to 
verify the facts. 13 

Equally surprising results were obtained under the operation of 
the 1928 Merchant Marine Act authorizing ocean mail contracts. 
This law which was apparently written by the shipping operators 
and shipbuilders themselves, 14 continued and emphasized the policy 
of aiding, upbuilding, and maintaining a privately owned and operated 
American merchant marine. Congress determined that the aid should 
be distributed under a system of competitive bidding, but this pro- 
vision was virtually nullified in the administration of the law. Out of 
43 contracts only 6 were let at less than the maximum rate allowed 
by law. 15 

The investigating committee found that of 43 contracts negotiated 
under the competitive bidding plan, 42 were subject to cancellation 
because they had been let in open defiance of the legal requirement for 
competitive bidding. 16 There was only 1 bidder on each of the 43 
contracts, and in only 1 case out of 46 lettings did any person but the 
one planned on in advance succeed in securing the contract. 17 Eighteen 
of the operators of the 43 mail contract routes had benefited in the 
past from managing-operating agreements and had purchased ships 
at less than their appraised value ; 11 other operators operated wholly 
or in part with ships purchased at less than their appraised value; 
only 7 had neither bought their ships for less than the appraised value 
nor benefited from managing-operator agreements; 5 of these bor- 
rowed from the Government at low rates of interest; and only 2 
received no aid from the Government outside of payments under the 
mail contracts themselves. 18 

The lobbying and propaganda activities of the steamship owners 
and operators was suggested by the testimony of Mr. R. J. Baker, 
secretary-treasurer of the American Steamship Owners Association, 
who said that in his opinion Government aid to shipping was essen- 
tial, as operating costs were too high to enable American operators 
to compete with -foreign competitors. 19 At the time of the investiga- 
tion the Steamship Owners Association did not want legislation 
which would affect the subsidy plan. This is understandable in the 
light of the active part played by the Steamship Owners Association 
in the passage of the 1928 Merchant Marine Act and in its subsequent 
administration. Exhibits before the committee showed that the 
Steamship Owners Association had hoped that certain Senators would 
be on the Senate Committee on Interstate and Foreign Commerce or 
that a certain Senator would be named chairman of the committee. 
Moreover, evidence was introduced showing that the steamship owners 
tried to get a couple of members on the Special Committee Investi- 
gating the Mail Contracts. 20 

Testimony of Thomas R. Shipp, head of a public relations firm, 
showed that he had a contract with the American Steamship Owners 
Association in 1932 to put out propaganda and had also worked for 

» Ibid., p. 6. 

14 Kenneth G. Crawford, The Pressure Boys, op. cit., p. 226. 

16 S. Rept. 898, on cit. p. 7. 
M Ibid., p. 12. 

17 Ibid., p. 10. 

18 Ibid., p. 5. 

» Ibid., p. 155. 
» Ibid., p. 157. 



CONCENTRATION OF ECONOMIC POWER Jgg 

them in 1928. While Mr. Shipp's testimony in response to question- 
ing was not completely unambiguous, there seems to be little doubt 
that the purpose of this propaganda, both in 1928 and 1932, was to 
mold congressional and public opinion in favor of legislation authoriz- 
ing ocean mail contracts to the shipping companies and the continu- 
ation of that legislation without change. 21 In 1930 Mr. H. B. Walker, 
president of the American Steamship Owners Association, proposed 
to the American Farm Bureau Federation that this general farm 
group should be the channel through which information and propa- 
ganda favorable to the ship-mail subsidy program should be dis- 
tributed. In reply to the proposal, Mr. M. S. Winder, Farm Bureau 
Federation secretary ? stated that it would cost some $95,000, at a mini- 
mum, to carry out this propaganda campaign. 22 

Although the Merchant Marine Act of 1936, which was passed by 
Congress following the disclosures of the Black committee, did not 
contain all of the committee's recommendations, it does in certain re- 
spects conform to the committee's conclusions. The committee de- 
cided that the 1928 law was incapable of providing an American 
merchant marine at reasonable cost and ought to be repealed. This 
was done. In addition, the committee decided that Government sub- 
sidies to the merchant marine were necessary, but that they should be 
direct and not camouflaged as in the ocean mail contract system. 
Recognizing the difference in construction and operating costs here 
and abroad, it was recommended that the merchant marine subsidy 
should be divided into two parts — construction and operating. Con- 
gress followed the committee's recommendations as to both the need 
for public aid and the form it should take. The committee concluded, 
further, that merchant ships should continue to be built in private 
yards, but that if suitable terms cannot be secured from private ship- 
yards, it would be advisable for the Government to build its own ships 
in its own yards. "No necessity," Senator Black said, "excuses the 
payment of Government tribute to private monopoly." 23 Congress also 
followed the committee's recommendations that mail contracts under 
the 1928 act should be terminated and a new agency be set up to ad- 
minister the program. The 1936 Merchant Marine Act established the 
United States Maritime Commission, composed of five members 
appointed by the President. 24 

PUBLIC SUBSIDIES FOR COMMERCIAL AIR TRANSPORT 

In fixing public policy regarding commercial air transport, the 
national defense value of the airplant construction and air line operat- 
ing industries has been the paramount consideration. The legitimacy 
of public subsidies was recognized in the 1926 Air Commerce Act. As 
with the merchant marine, the subsidy to the commercial air transport 
companies took the form of mail contracts. The results in both cases 
were not dissimilar. 

The Black committee investigated both the air and ocean mail con- 
tracts. The air mail inquiry, however, was less exhaustive than that 

21 Ibid., pp. 205, 206. 

22 Ibid., p. 459. 

23 Ibid., pp. 38, 39. 

14 Among other things, this act vests in the Maritime Commission the powers of the 
U. S. Shipping Board under the 1916 act, the 1920 Merchant Marine Act, the 1928 Mer- 
chant Marine Act, and the 1933 Intercoastal Shipping Act and amendments thereto. 
Office of Government Reports, U. S. Government Manual, Washington, 1940, pp. 508-509. 



170 CONCENTRATION OF ECONOMIC POWER 

concerning ocean mail, due to the destruction of records subpenaed by 
the committee. 25 Nevertheless, sufficient evidence was adduced to 
show collusion and fraud, with the result that the air mail contracts 
were canceled by the Government and new contracts entered into. The 
new contracts were negotiated under authority given the Postmaster 
General in 1935, according to which competitive bidding was not 
necessary. Public subsidies continue to be granted to the operators 
of commercial air transport lines. 

WHAT PRICE PATRIOTISM 

Where business of vital importance to the national defense is con- 
cerned, the Government and the public are under a permanent handi- 
cap. The experience with public subsidies for the merchant marine 
and air transport industries shows that the administration of a sub- 
sidy system, even in peacetime, is open to grave abuses. In time of 
war or crisis the opportunity for abuse is even greater. Kegardless 
of the gravity of the crisis, business insists on extracting from the 
public through the Government what it calls a "living wage." The 
philosophy of business was summed up in a sentence by Judge Gary, 
of the U. S. Steel Corporation in 1917. "Manufacturers," he said, 
"must have reasonable profits in order to do their duty." 26 

The lengths to which business will go in following this principle 
of extracting a living wage were brought out by the Nye Munitions 
Investigating Committee reports. During and after the Great War 
the munitions makers and the shipbuilders insisted on serving their 
stockholders and the management before serving the Nation. Here 
again the philosophy of business has been well summed up by one of 
its leaders. Chiding Congress for not giving the du Ponts all the 
orders they wanted, an official of his company remarked, "This is our 
country and not the country of Congress." 27 

In view of the defense program of 1940, it is perhaps not out of 
place to recall what happened during the Great War, when business 
was fixing the terms on which it would work for the Government 
and the people. The Government embargo against foreign loans im- 
posed in the early days of the war was first relaxed sufficiently to 
permit the granting of commercial credits, then abandoned altogether, 
largely because of the pressure of J. P. Morgan & Co. The Du Ponts 
claimed to be in business at the request of the Army and Navy, and 
therefore were in a position during the war, practically speaking, to 
write their own ticket. Summarizing the results of its inquiry into 
the shipbuilding industry during the war, the Senate Munitions Com- 
mittee stated : 

* * * the record of the present shipbuilding companies during the war 
wherever examined was close to being disgraceful * * *. They made very 
considerable profits. On Treasury orders they showed up to 90 percent. They 



25 The destruction of these records was carried out by William P. McCracken, Jr., 
Washington lawyer and lobbyist for air line operators. Mr. McCracken was found guilty 
of contempt and served a jail sentence. At the time Mr. McCracken was secretary of 
the American Bar Association. But bis standing both with the bar and with the air line 
operators does not seem to have diminished. He is still lobbying in Washington for the 
air lines (Crawford, op. cit.. pp. 158, 159). 

26 From the testimony bpfore the Special Senate Committee Investigating the Muni- 
tions Industry, quoted in Stephen and Joan Raushenbush, War Madness, National Home 
Library Foundation, 1937, p. 125. Mr. Raushenbush was chief investigator for the Senate 
Munitions Investigating Committee, and War Madness is based upon the hearings and 
the reports of this committee. 

^Ibid., p. 90. 



CONCENTRATION OF ECONOMIC POWER 171 

secured cost-plus contracts and added questionable charges to the costs * * *. 
The committee finds no assurance in the wartime history of these companies to 
lead it to believe that they would suddenly change their spots in the case of 
another war. 28 

Other evidence brought out by the Nye committee showed that lead- 
ing companies in the steel and copper industries refused to fill Gov- 
ernment orders except on what amounted to their own terms. 29 Ac- 
cording to the committee : "The Government is more at the mercy of 
such a strike by capital or management than at the mercy of a strike 
by labor." 80 

It is well known that the revelations brought out by the special 
Senate Munitions Investigating Committee resulted in a widespread 
demand for industrial conscription or its equivalent in wartime. It 
is interesting, however, that, despite the support of the American 
Legion and other World War veterans' groups, Congress has adopted 
no legislation authorizing universal wartime service. A comparison 
of the effectiveness of the veterans' groups in pushing universal war- 
time service legislation and their success with bonus legislation is 
interesting. 

For several years the American Legion refused to go along with 
other veterans' groups in demanding prepayment of the so-called 
bonuses. In 1932, however, it reversed its previous stand and threw 
its weight behind the bonus bill. Inside of 4 years the bonus pre- 
payment bill had become law. On the other hand, the Legion adopted 
the principle of universal service at its Kansas City convention in 1921, 
yet up to 1940 the Federal statute books still carried no universal! 
service legislation, and even in the present emergency no adequate 
legislation has been adopted. 31 

HISTORY REPEATS ITSELF 

In the 1940 national defense crisis, business displayed much the same 
attitude that it had shown 23 years earlier. Business would help the 
Government and the people, but the basis of payment therefor would 

38 Quoted in Rausbenbush, op. cit.,jpp. 40^tl. 

29 Raushenbush, op cit., pp. 124—126. "Many of the big war materials companies im- 
mediately went on strike for more than their usual income. The Munitions Committee 
called it the 'strike of capital.' " 

80 Ibid., pp. 124-125. 

31 Prepayment of the bonus and extensive preference for veterans in Government employ- 
ment are by no means the only evidence of the effectiveness of the veterans' lobby. The 
Legion claims credit for the legislation enacted in 1921 creating the Veterans' Bureau, as 
well as for the so-called consolidation bill of 1930, which brought under the Administrator 
of Veterans' Affairs the Veterans' Bureau, the Pension Bureau, and the soldiers' homes. 
Credit is also claimed for the passage of the 1929 Cruiser Act and for securing the neces- 
sary funds from the Seventy-third Congress "to guarantee a navy for our country which 
will be second to none." The Legion has been very active in increasing the number of 
veterans and their dependents who receive financial benefits from the Federal Government 
(for example, the number increased from 49,450 in 1919 to 435,338 in 1933). Appropria- 
tions made by the second session of the Seventy-second Congress for carrying on Govern- 
ment functions were reduced in every department and agency except the Veterans' Admin- 
istration. Reductions for this agency were averted "only through the tremendous influ- 
ence exerted by the Legion" (Legionnaire Henry L. Stevens before the September 1932 
American Legion convention). Many amendments to the homestead, public land entry, 
immigration, and naturalization laws in favor of veterans and their dependents have been 
effected through Legion efforts. 

In 1924 the House of Representatives established a standing Committee on World War 
Veterans' Legislation. By this action the veterans' lobby, it has been said, "marched right 
into the Capitol," thus displacing the Methodist Episcopal Board of Prohibition, Temper- 
ance, and Public Morals (part of the prohibition lobby) as "the most powerful lobby in 
the history of the country." The veterans have attained this position "chiefly because 
they have been able to wrap themselves hypocritically in the American flag while raiding 
the Treasury" (Edward H. Collins, in the New York Herald-Tribune, February 28, 1938). 
This is an assertion which, while possibly exaggerating the situation, nevertheless must, 
in the light of the success of the Legion and of the other veterans' organizations in getting 
congressional sanction for their desires, be regarded as tolerably close to the truth. 



J72 CONCENTRATION OF ECONOMIC POWER 

have to be fixed before the wheels would begin to turn. Profits, taxes, 
loans, and so forth, appeared more important to business than getting 
guns, tanks, and airplane motors into production. 

For months the Government's desire to get the program moving 
was offset by business' desire to get the terms of cooperation settled to 
their liking. It developed that business did not want to work for the 
country on the basis of a 7 or 8 percent profit limitation written into 
the Vinson-Trammell Naval Expansion Act in 1935, so these provisions 
were repealed. Thus, the whole cost-plus basis of defense contracts, 
which industry liked so well during the last war when it had prac- 
tically a free hand in determining costs, went by the board in 1940 
when the allowable items of costs were determined by the Treasury 
Department. Moreover, when the basis of figuring industry's "living 
wage" was changed from one of limiting profits to one of taxing 
excess profits, industry again exploited its key position. In figuring 
the basis for normal profits above which surtax rates would apply, 
two alternatives were presented. Applying to all business without 
regard to defense operations, normal profits could be figured either on 
the basis of average annual profits over the 4-year period 1935-39, 
or on the basis of a percentage of a corporation's capitalization. The 
choice itself is a concession; but when the latter alternative is so 
clearly open to inflation, it is also playing ball the way business wants 
it played. Tax rates remain important, but applied to excess profits 
in this way, they become less burdensome. Furthermore, in many 
cases industries with defense contracts shied away from the capital 
markets in seeking to finance plant expansion, preferring to secure 
loans from the Reconstruction Finance Corporation and its subsidi- 
aries, loans which can be amortized over a 5-year period. 32 In these 
and other ways, steel, aircraft, motor, and chemical companies created 
the impression in the summer of 1940 that the Nation's rearmament 
program could wait on the fixing of satisfactory financial terms and 
that time, far from being of the essence of success, was of secondary 
importance. In September 1940, Congress was still wrangling with 
business leaders over these terms. 

Farm and labor groups accused business of obstructing the pro- 
gram, but business denied the charge. The American Farm Bureau 
Federation, largest general farm organization, voiced its concern 
over industry's stalling in a letter from Edward A. O'Neal, federa- 
tion president, to the Joint Congressional Committee on Taxation, 
August 8, 1940. John L. Lewis, president of the Congress of Indus- 
trial Organizations, on August 15, expressed similar alarm at the 
"bold sabotage of national defense by representatives of American 
corporative industry." Industry took cognizance of these charges. 
The president of the N. A. M., in a letter of August 18 to congres- 
sional leaders, stated that such accusations were "deliberate or unwit- 
ting misstatements," and denied the charges. 83 Despite this denial, 
the impression remained. Business, it appeared, was running true to 
form. 

Speaking bluntly, the Government and the public are "over a bar- 
rel" when it comes to dealing with business in time of war or .other 
crisis. Business refuses to work, except on terms which it dictates. 

82 Instances are cited in PM, New York daily newspaper, August 9, 1940. 
88 New York Times, August 19, 1940. 



CONCENTRATION OF ECONOMIC POWER J 73. 

It controls the natural resources, the liquid assets, the strategic posi- 
tion in the country's economic structure, and its technical equipment 
and knowledge of processes. The experience of the World War, now 
apparently being repeated, indicates that business will use this con- 
trol only if it is "paid properly." In effect, this is blackmail, not too 
fully disguised. 

The situation which confronted our Government in 1917 when we 
entered the World War, and which confronts it now, constitute the 
dilemma of democratic government. Government depends upon cap- 
italist business for the means of defending its existence. Business 
apparently is not willing to threaten the very foundations of gov- 
ernment in fixing the terms on which it will work. It is in such a 
situation that the question arises: What price patriotism? 



CHAPTER XI 
AGRICULTURE AND DISTRIBUTION 

There are about 7,000,000 individual farm producers x in the Nation, 
and 1,830,717 wholesale and retail distributive outlets. 2 On the other 
hand, there are 170,000 manufacturing establishments. 3 The concen- 
tration of management and control in industry gained by the corpo- 
ration and the devices associated with it, combined with the economies 
of large scale production, has meant that a fraction of the industrial 
producers dominate industry. No comparable degree of concentration 
exists in agriculture or distribution, hence there is less chance than in 
business for the development of a consistent unified group philosqphy. 

As a matter of fact, as a result of their atomistic nature and the 
consequent lack of a unified philosophy, both agriculture and distribu- 
tion have in many cases followed the lead of business in internal policies 
as well as political activity. There are many cases where they did not, 
of course, among them the Granger movement, the fight for parity of 
farm income, the distributors' insistence on resale price maintenance 
laws, etc., but there are also many instances, such as the pressure for 
a high tariff, the opposition to relief appropriations, and hostility to 
the reciprocal trade agreements, etc., where the lead of the business 
community was followed without any clear idea of the contradiction 
of economic interest involved. 

American history, of course, is studded with examples of farm and 
rural disapproval of policy believed to have been made by and in the 
interests of urban manufacturing groups. Early instances, such as 
the revolt of farmers and artisans under Jackson's leadership in the 
early nineteenth century and of agrarian agitation under Populist 
leadership some decades later, have been paralleled in recent years 
by considerable farm resentment against "Wall Street." The attitude 
is typified in an address by Edward A. O'Neal, president of the Amer- 
ican Farm Bureau Federation, in which in 1934 he summarized the 
effects of economic development and public policy upon business, labor, 
and agriculture. 

Aided by high tariffs, copyright laws, patent laws, and enjoying the privileges 
and immunities of charters granted by States, corporations abused States' rights 
and by means of mergers and holding companies they built up giant monopolies 
in our Nation controlling vast industries and millions of employees ; they fixed 
prices and wielded vast political power. Thus, our so-called sovereign States 
created a child more powerful than the State itself and frequently threatened 
our rights under the Constitution. They could boast like Louis XIV who said, "I 
am the state." They laughed at the Sherman anti-ti'ust law and the Federal 
Trade Commission.* 



1 U. S. Bureau of the Census, Census of Agriculture. 1935. 
B U. S. Bureau of the Census, Census of Distribution, 1935. 
a TJ. S. Bureau of the Census. Census of Manufactures, 1935. 

* Annual Report of the Officers of the American Farm Bureau Federation for the 
Sixteenth Year (1934). 

175 



176 CONCENTRATION OF ECONOMIC POWER 

FARM POLITICAL POWER PARTIALLY OFFSETS ECONOMIC HANDICAPS 

The economic handicap of farmers has to some extent been offset 
by their ability to retain representation in Congress out of proportion 
to their numbers. It is well known, of course, that the political repre- 
sentation of predominantly agricultural States is disproportionate to 
their population. Nevada and New York provide the classic illustra- 
tion, as the two are equally represented in the Senate, although Nevada 
has only 91,058 inhabitants, while New York has 12,588,066. B In 
a less degree this disproportion between representation and popula- 
tion is duplicated in the House of Representatives. The tremendous 
economic power of one pressure group, business, therefore, while it has 
not been equaled, has at least to some extent been held in check 
by the preponderance of farm representatives in Congress. During 
the Sixty-sixth and Sixty-seventh Congresses in the early 1920's, 
the so-called "farm bloc," organized under leadership of the newly 
created American Farm Bureau Federation, held the balance of 
power. As a result, "More legislation of benefit to agriculture was 
passed than in all of the sessions of Congress preceding." 6 

President Hoover's signing of the Smoot-Hawley Tariff bill in 1930, 
while it was in line with farm requests at that time, actually worked 
against farm interests in many cases, because its industrial levies 
raised the prices of industrial goods, while its farm duties, although 
high, were generally ineffective in regard to the prices of farm 
products. 

The efforts of organized farmers have been much more successful 
since 1933. In the Agricultural Adjustment Act, with its grant of 
inflationary monetary powers to the President, the Emergency Farm 
Mortgage Act, and dollar-devaluation legislation, the farm organi- 
zations finally reached their goal of writing the Nation's farm policy. 

American Farm Bureau Federation. 

In this success the Farm Bureau Federation played the leading role. 
Grasping the leadership held in the nineteenth century by the National 
Grange and later on, in the Northwest, by the Nonpartisan League, 
the American Farm Bureau Federation in 1921 took the initiative in 
agitating for farm relief, and has held it ever since. 7 

The foundation stone of its philosophy is the idea that American 
farmers are entitled to a living standard as high as that enjoyed by 1 
other groups. This idea is expressed in the slogan "Equality for Ag- 
riculture." According to the Farm Bureau attainment of this goal 
involves several points. First is a commodity dollar, whose purchas- 
ing power would remain constant. The Bureau favored the Golds- 
borough bill to set up a board to regulate the value of money and 
stabilize purchasing power. 8 Second, parity must be attained between 

6 U. S. Bureau of the Census, Census of Population, 1930. 

e American Farm Bureau Federation, Back of This Emblem, p. 13. 

7 The necessity to agriculture of organization in an age of concentrated economic power 
In industry is well stated in the following extract from an editorial in the Bureau Farmer 
(now the Nation's Agriculture), official publication of the American Farm Bureau Federa- 
tion, April 1935. 

"The more strongly American agriculture organizes itself in a national way, and along 
the lines laid down in the platform and policies of the American Farm Bureau Federation, 
the greater will be the results accruing to American agriculture. In an age such as this, 
where all ramifications of industry are represented by organization groups, agriculture also 
must present a unified front, and must focus public attention upon its problems through 
a representative organization, such as the American Farm Bureau Federation." 

•The American Farm Bureau, Federation in 1934, a statement of Bureau policies and 
achievements In that year. 



CONCENTRATION OF ECONOMIC POWER 177 

farm prices and industrial prices and wages. 9 The cost of distribut- 
ing farm products must be reduced, and the inequalities in our tariff 
must be corrected. Moreover, agricultural credit facilities must be 
strengthened and developed and the tax system revised to remove 
the burden now borne by agriculture. We need, in addition, a na- 
tional land policy which will conserve the soil; cultural opportunities 
as between urban and rural areas must be equalized ; and agriculture's 
voice in the affairs of the Nation strengthened. 10 

In striving for the realization of its program, the Farm Bureau acts 
as the national organization of local groups, brings pressure to bear on 
legislators in the determination of Government policy, broadcasts its 
views on both general and particular issues, and unifies State Farm 
Bureau activities. In pushing its national program the A. F. B. F. is 
brought into close contact with Congress, the administrative agencies, 
and the Federal courts. 11 Also, it publishes a monthly magazine, a bi- 
weekly news-letter, publicity releases, and special articles for farm 
journals, produces a monthly radio program, furnishes speech and 
program material, and performs other services of an informational 
nature. 12 Its understanding of its usefulness in unifying State Farm 
Bureau activities is expressed in the following statement : 

A Pacific Coast State might need Federal quarantine legislation ; a group of Mid- 
west States, Federal appropriations for corn-borer eradication ; a few Southern 
States, flood control assistance ; alone, accomplishment in each case impossible ; 
with correlated effort, success on all three. 18 

Only about 5 percent of the Nation's farm population are organized in 
the Farm Bureau Federation. 14 By themselves, of course, this group 
is but a small minority of the farm and rural population. It includes, 
however, many in the most prosperous group of farmers, among them 
nationally known leaders in commercial agriculture. Large cotton 
producers, leaders in the Corn Belt, as well as in the commercial 
production of tobacco and wheat, are numbered among Farm Bureau 
members and officials. 

National Grange. 

Organized agriculture includes, besides the Farm Bureau, the 800,000 
members of the National Grange and the 92,000 members of the Farm- 
ers' Union, plus a number of smaller groups. 15 The Grange is in many 
respects more conservative in its economic viewpoint than the Farm 
Bureau, yet it agrees on the fundamental contention that agriculture 
is at a disadvantage as compared to business and finance. 16 

•The A. A. A. held that parity would be reached generally when agricultural prices bore 
the same ratio as industrial prices to a 1909-14 base. 

10 See resolutions adopted at the 21st A. F. B. F. convention, December 7, 1939, published 
by the American Farm Bureau Federation. 

11 Back of This Emblem, op. cit, states that, "Formally and informally the Farm Bureau 
has advised and counseled with the President of the United States, Secretary of Agriculture, 
the Director of Extension, the agricultural committees of both the Senate and House, and 
with the various Federal boards and commissions in relation to matters of public policy 
affecting agriculture" (p. 13). 

12 American Farm Bureau Federation, The Seventeenth Year of the American Farm Bureau 
Federation, 1935, p. 21. 

18 Back of This Emblem, op. cit., p. 5. 

14 The Farm Bureau office in Washington states that its membership includes 400,000 
heads of families. Figuring 3 people to a family, they regard their membership as about 
1,500.000. 

"> The Grange and the Farmers' Union also figure membership on a family basis. 

16 "The growth of the corporate structure in business and finance has placed unor- 
ganized agriculture at a disadvantage that will increase as time goes on unless corrected 
by business methods that permit the private ownership of farms and homes, the inde- 
pendence of the tiller of the soil, and at the same time combining the productive and 
distributing machinery through the agency of better marketing methods." Louis J. Taber, 
national master, in his address before the 1934 annual meeting. 



178 CONCENTRATION OF ECONOMIC POWER 

The Grange also stands for "an honest dollar," meaning thereby "a 
dollar stable in value and stable in commodity purchasing power." 
It seeks price parity, as does the Farm Bureau. But it has disap- 
proved of continued Federal intervention in agriculture, holding that 
such intervention is justified only in times of emergency, and failed to 
support the Farm Bureau in 1937 and 1938 in its drive for the 1938 
A. A. A. Both favor cooperative marketing; a sound land use pro- 
gram ; taxation on the basis of ability to pay, and not a general sales 
tax; commodity storage on the farm effected through, Federal crop 
loans ; and improvement of rural educational and cultural opportuni- 
ties by the use of the tax power. The Grange is more protectionist 
than the Farm Bureau and has opposed the New Deal's reciprocal trade 
program, while the Farm Bureau, has at least at times, supported it. 1T 

Other Farm. Groups. 

The Farmers' Union is generally considered more radical than eitKer 
the Farm Bureau or the National Grange. Its membership is much 
smaller, standing at 92,000. It, too, bases its program on the effort 
to achieve equality for agriculture, and is, if anything, more con- 
vinced of the domination <af public policy by industrial and financial 
groups. It generally favors Federal legislation fixing prices and 
guaranteeing "cost of production" to farmers, although in 1939 it 
joined with the Farm Bureau and other groups in withholding its 
support of the legislation then offered. 

The Farmers' Union originated in the South, a generation ago, and 
experienced rapid growth there. During the World War it organized 
vigorously in the Winter and Spring Wheat Belts. It is in these 
latter regions that it now has its greatest strength. It strongly op- 
poses the dominant corporate form of business organization, holding 
that only through producers' and consumers' cooperatives can the indi- 
vidual's position be strengthened. Simultaneously, the grip of cor- 
porate control over the Nation's mining and manufacturing must be 
loosened. Because of its strength in the Wheat Belt, and the dispro- 
portionate representation of these States in Congress, the Farmers' 
Union exerts considerable influence in Washington. It engages in 
legislative lobbying, as do the other two general farm organizations, 
publishes its own newspaper, the Farmers' Union Herald, and, like 
the Farm Bureau but with smaller resources, attempts to convince 
the public of the value of its program. 

Besides the Farm Bureau, the Grange, and the Farmers' Union, 
there are many national, regional, and State groups representing 
groups of various commodities. Possibly the strongest is the National 
Cooperative Milk Producers Federation, whose activity in connection 
with the duty on fats and oils has already been mentioned. 18 

There is no exact counterpart of this dairymen's organization in the 
livestock field, although the American National Livestock Association 
represents cattlemen's interests almost as effectively as the Federation 

1T As "spokesmen of rural States," to use the Grange's self-applied title, the National 
Grange has pushed a "positive legislative program" at Washington since 1900, maintaining 
a Washington office for many years. Among other things it claims credit fop the advance- 
ment of the Department of Agriculture to its present status, for rural free delivery, the 
parcel-post system, and the system of postal-savings banks, for the farm-loan system 
established in 1916. the Weather Bureau, and the passage of the original pure food and 
drug law in 1906 (The Grange Blue Book). For the National Grange's part in tbe granger 
legislation of the 1870's, and the establishment of the Interstate Commerce Commission, 
see above, ch. IX, pp. 142-144. 

w See above, ch. VII, p. 115. 



CONCENTRATION OF ECONOMIC POWER 179 

does those of dairymen. It has been particularly active in protecting 
the American livestock industry against importations of fresh and 
chilled meats from foreign countries. 19 American sheepmen are or- 
ganized into the National Wool Growers Association, which, together 
with various regional and State wool growers' groups, has lobbied 
actively for the wool industry. 

Business Dominance in Shaping Farm Policy. 

Despite the success of organized farmers in writing their aims into 
New Deal farm policy, national farm policy has for most of the past 
two decades reflected business rather than farm desires. From 1921 
to 1933 all the farmers' efforts for remedial legislation were thwarted. 
In vetoing the McNary-Haugen bill in 1928, President Coolidge acted 
according to the philosophy of the business community that a national 
farm program of the kind provided therein was not in the Nation's 
interest. Reiterating many of the same objectives voiced in his earlier 
veto of its predecessor, President Coolidge found in the bill an array 
of perils for agriculture : 

Although it purports to provide farm relief by lessening the cares of our greatest 
industry, it not only fails to accomplish that purpose but actually heaps even 
higher its burdens of political control, of distribution costs, and of foreign compe- 
tition.* 

He attacked the bill's price-fixing "fallacy"; the tax character of the 
equalization fee ; the widespread bureaucracy it would necessitate ; its 
encouragement to profiteering and wasteful distribution by middle- 
men ; and its stimulation of overproduction. 

* * * If the measure is enacted, one would be led to wonder how long it would 
be before producers in other lines would clamor for similar "equalizing" sub- 
sidies. The lobbies . of Congress would be filled with emissaries from every 
momentarily distressed industry demanding similar relief from a burdensome 
surplus at the expense of the Treasury. 21 

Instead of the program embodied in the McNary-Haugeii bill, Presi- 
dent Coolidge thought the proper basis for Federal action in behalf 
of agriculture would be to encourage its adequate organization, to assist 
in building up marketing agencies and facilities in the control of the 
farmers themselves. 

I want to see them undertake their oWn management, the marketing of their 
products under such conditions as will enable them to bring about greater sta- 
bility in prices and less waste in marketing, but entirely within unalterable eco- 
nomic laws. Such a program supported by a strong protective tariff on farm 
products is the best method of effecting a permanent cure on existing agricultural 
ills. Such a program is in accordance with the American tradition and the 
American ideal of reliance on and maintenance of private initiative and individual 
responsibility, and the duty of the Government is discharged when it has provided 
conditions under which the individual can achieve success. 22 

These views prevailed until Hoover was moved to call upon Congress, 
in 1929 and 1930, to legislate for agriculture. The result was an in- 
crease in both farm and industrial tariffs, and the establishment of 
the Federal Farm Board., none of which particularly benefited the 
farmers. 23 



19 See ch. V, pp. 60-61. 

30 Congressional Record. 70th Cong., 1st sess., p. 0524. 

a Ibid., p. 0527. 

23 Ibid. The McNary-Hausten bill was an export dumping measure. Its aim was to 
secure world price-plus tariff for the portion of each major crop consumed in the United 
States. Surpluses were to be exported at whatever price could be obtained, loss to be 
paid from a fund secured bv levyine an equalization fee on each commodity. 

* For further discussion see ch. VII; 



IgO CONCENTRATION OF ECONOMIC POWER 

After struggling unsuccessfully for 12 years, organized agriculture 
in 1933 had the satisfaction of seeing its views written into the first 
Agricultural Adjustment Act. The act provided for production con- 
trol, and authorized the President to inflate the currency. The Emer- 
gency Farm Mortgage Act, dollar devaluation, and reduction in the 
farm mortgage interest rate were also adopted. When the Supreme 
Court threw out the A. A. A. organized agriculture again under Farm 
Bureau Federation leadership secured enactment of the 1938 Agricul- 
tural Adjustment Act on the basis of Congress' power to regulate in- 
terstate commerce. The marketing quota provisions of the Act were 
validated in 1939. 24 

The matter of the interest rate on Federal farm mortgages is one in 
which the farm organizations have taken a continuing interest. 
These rates, usually fixed by administrative decision of the Farm 
Credit Administration, were set by law in 1933 at 3y 2 percent for 
land bank loans and 4 percent for Land Bank Commissioner loans. 
In 1937, when the law was due to expire, pressure was brought for 
extension, and both Houses agreed, only to have the bill vetoed by 
the President. His action was in line with the recommendation of 
the Governor of the Farm Credit Administration. 

Congress was immediately urged to override the veto. To quote 
from the official Grange publication : 

Immediately upon the reading of the President's veto message in the House, 
the National Grange, through its Washington representative, sent * * * 
[a] letter to all Members of Congress, suggesting the propriety of overriding the 
veto. 26 

On July 12 the House voted to override the veto, and the Senate 
followed suit. In 1940 the low rates were again extended for a 2-year 
period. 

The success of farm and ranch interests in holding up ratification 
of the Argentine sanitary convention was discussed earlier. (S?e 
pp. 60-61.) This convention is favored in connection with the "good 
neighbor" policy, and also by American meat packers with branches 
in the Argentine. 

Organized farmers have not, however, been uniformly successful 
in Washington, even since 1933. Manufacturing and processing 
interests instituted the suit in which the A. A. A. was declared 
unconstitutional. 2G The continuation of a control program based on 
a processing tax would have loosened the hold of processors and man- 
ufacturers over the farm commodity markets. The business com- 
munity generally opposed the extension of reciprocal trade agree- 
ments both in 1937 and 1939, while the Farm Bureau favored it. 
Since other farm organizations opposed it, however, the extension can- 
not be regarded as a victory for organized agriculture. 

DISTRIBUTION AND LEGISLATION 

The field of distribution, like agriculture, consists of a few very 
large units, two or three large associations, and a large host of small 
units. The food chains, like A. & P. food stores, the mail order 

**Afulford v. Smith (307 U. S. 38, 1939). 

■ The National Grange Monthly, August 1937, p. 7. Also the American Farm Bureau 
Federation Official News Letter, July 20, 1937, p. 3. 
» 17. 8. v. Butler (279 U. S. 1 (1935)). 



CONCENTRATION OF ECONOMIC POWER 181 

houses, and trade associations like the National Association of Retail 
Druggists and the American Retail Federation, are able to wield 
considerable power. 27 

Distributors and the Antitrust Laws. 

One of the earliest fights which engaged the attention of distribu- 
tors centered around the application of the Sherman Act. The inten- 
tion of Congress in enacting this legislation was to forbid combina- 
tions in restraint of trade, but the courts adopted the "rule of reason" 
in interpreting the statutes, which to a large extent invalidated the 
law.' 28 

To meet this situation, Congress in 1914 adopted the Clayton Act, 
which included the detailed strictures on unfair competition reflect- 
ing the principles of Wilsonian democracy. It is generally agreed, 
however, that the enforcement of this act has not been successful in re- 
straining monopoly. 29 

Under the National Industrial Recovery Act of 1933, the antitrust 
laws were suspended, a move which was of benefit to both large and 
small business, but which gave a real impetus to the organization of 
distributors. During the N. R. A., organized trade and industrial 
groups had a greater part in determining and carrying out the laws 
under which they operated than at any time before or since. 30 

The Schechter decision in 1935, invalidating the code section of the 
N. R. A., meant a return to the practice of trying to regulate business 
under the antitrust laws, a policy which has been hampered by the lack 
of sufficient funds. 31 Invalidation, however, did not wipe out the or- 
ganizational movement which had gained strength under the N. R. A. 

The Miller-Tydings and Robinson-Patman resale price maintenance 
laws were passed under pressure from distributor groups, who wanted 
protection from price cutting. The passage of the Miller-Tydings 
Act as a rider to the District of Columbia appropriation bill has been 
described in chapter VII. 

According to one report, 32 the National Association of Retail Drug- 
gists received $25,000 from the Pepsodent Co. for lobbying services. 
(The magazine quoted showed a photograph of a check for $25,000 pur- 
ported to be made out by the Pepsodent Co. to the N. A. R. D.) The 

37 The term "distribution" in this chapter follows the census definition, hence includes 
all retailers, all wholesalers, and all other classes of distributing agencies, such as repair 
and serv.ce establishments for automobiles, etc. Bureau of the Census, Census of Dis- 
tribution, Instructions lor l'reparing Reports, Washington, 1930, p. 1. 

It eliminates from consideration those units who perform a distributive function inci- 
dental to their primary functions ; i. e., a manufacturer who ships his goods out of his 
plant performs a distributive function, but is not here classed as a distributor. 

28 "As the judges have read the Sherman Act, its purpose was not to condemn mere 
size, or even market control. Only power unreasonably acquired or abused was held to 
be proscribed ; and intent to harm competitors or abuse customers and the existence of 
collusive action became the prominent tests of unreasonableness. It proved difficult 
under court interpretation of this law to attack practices which tended to lead to mo- 
nopoly, prior to evidence that substantial market control had actually been acquired." 
Leverett S. Lyop et al., Government and Economic Life, Brookings Institution, Washing- 
ton, 1940, p. 1267. 

29 T. C Blaisdell, Jr., The Federal Trade Commission, Columbia University Press, New 
York, 1932, p 259. 

30 "Under the 'partnership of industry and ftovernment' established by the Recovery 
Act, each industry had the opportunity to formulate its own rules of self government, 
which, upon approval by the President, were exempt from the provisions of the anti- 
trust laws and were binding upon all members of the industry, and, also, the power to 
select the members of an administrative agency from its own ranks to administer such 
rules within the industry." Paul Brissenden and Travis Brown, in Code Authorities 
and Their Part in the Administration of the National Industrial Recovery Act (mimeo- 
graphed), Washington, 1936, pp. 02-63. 

31 Thurman W. Arnold, The Bottlenecks of Business, New York, 1940, pp. ix, 72, 143. 
170-171, 215-216. 

32 Cooperative Builder, December 11, 1937, quoting Consumers' Union. 



Ig2 CONCENTRATION OF ECONOMIC POWER 

association, it seems, was trying to force wholesale news dealers to with- 
draw from circulation certain magazine articles attempting to give 
the facts about the Miller-Tydings retail price-maintenance amend' 
ment which the organized druggists feared to have come to the atten- 
tion of the consumers. 

The American Retail Federation, organized in 1935 almost im- 
mediately attracted the attention of Congress. A special committee 
was appointed to investigate it, and reported that it was a carefully 
conceived organization intended to look like a federation of small 
dealers and small independent merchants over the country, whereas 
it was actually conceived and organized by the chain and department 
store interests. 33 

Louis Kerstein, president of Edw. Filene's Sons Co. of Boston, told 
the committee that the federation had two purposes — (1) to gather 
and disseminate statistics on distribution, and (2-) to lobby among 
Members of Congress. C. O. Sherrill, federation president, refused 
to admit, however, that lobbying was one of its main objectives. Con- 
gressman Cochran snorted, "It is ridiculous to claim that . such a 
salary [Sherrill's salary increased from $40,000 to $50,000 in 3 years] 
would be given a man just to gather statistics." 34 

The Motion Picture Industry. 

The motion picture industry is one in which the producing and 
distributing functions are to a large extent combined ; furthermore, the 
field is dominated by a few large corporations. 33 

The smaller producing companies are compelled to permit "the Big 
Eight" to distribute their films in order to have them shown at the 
larger theaters. In addition to this control, the movie industry exer- 
cises other controls in the form of block booking and blind selling. 
The producers sell their films in blocks to the independent exhibitor. 
In order to obtain the outstanding films the exhibitor must buy several 
other films which are often inferior. The independent exhibitors 
claim that they are often compelled to take the entire year's output 
of three or four of the "Big Eight" distributors in order to get the 
pictures they really want. 36 The exhibitor usually has the privilege 
of rejecting 10 'percent, and he is not compelled to show all the films 
he agrees to buy, although he is required to pay for them. Contracts 
are made before the films are produced, and the exhibitor frequently 
signs without seeing a synopsis of the films; hence it is beyond his 
power to exercise his own choice in the type of films he will show. 

Since 1928 independent exhibitors have been seeking congressional 
aid in solving their problem. The Neely-Pettengill bill introduced 
in 1936 forbade distributors to lease films in blocks of two or more, 
provided that synopses of all films were to be furnished, and set a fine 
of not more than $5,000 for any deviation from the facts. 37 

33 Congressional Record, 74th Cong., 1st sess., p. 8104. 

34 Ibid., p. 8106. Mr. Cochran also said : "Evidence adduced during this and other in- 
vestigations * * * showing it is becoming a practice for certain well-organized and 
powerful groups representing vast aggregations of capital to use methods of undue Lntlu- 
ence and propaganda sometimes bordering upon, if not including, deceit to block, oppose, 
and hinder the consideration of proposals for legislation leads and impels this committee 
to recommend immediate passage of legislation requiring the registration of all lobbyists 
for the purpose of protecting, the public interest" (p. 8104). 

36 These corporations, generally referred to as "the Big Eight," are Warner Bros:, Uni- 
versal, Columbia, Metro-Goldwyn-Mayer, Twentieth Century Fox, United Artists, and Radio- 
Keith-Orpheum. These companies are the largest producers in Hollywood ; they- operate 
about 2,500 movie theaters in the largest cities in the country ; and, by various devices, 
it is charged, they control the other conceirib wLlch produce and distribute films. 

38 New York Times, April 6, 1939. 

87 Ibid., July 24, 1938. 



CONCENTRATION OF ECONOMIC POWElt lg3 

A similar bill easily passed the Senate in 1938, and was referred 
to the House Interstate Commerce Committee, of which Representa- 
tive Lea (California) was chairman. 88 Chairman Lea said: "I just 
don't see how we can do anything about the bill this session. I should 
not like to report it out without hearing and I cannot see where we 
can find time to have any at this late date.'' 39 Thus the bill was not 
acted upon by the House. 

The Hays organization (the Motion Picture Producers and Dis- 
tributors of America) brought powerful pressure against the bill. 40 
It did not reach the floor of the House in 1938, and in July 1939 it 
again passed the Senate, only to be again held up in the House. 41 Hear- 
ings were held in the spring of 1940 by the House Interstate Com- 
merce Committee but no action was taken. 

Many organizations, such as the League of Women Voters, parent- 
teacher organizations, and many religious and civic groups supported 
the bill, along with the Allied States Association of Motion Picture 
Exhibitors. Familiar arguments were raised on both sides. It was held 
that if communities had the right to choose their entertainment, pro- 
ducers would be forced to make better pictures. 42 On the other side, 
the presidents and sales managers of the various producing com- 
panies, along with several movie stars, appeared before the Senate 
and House Committees and charged that the bill violated the prin- 
ciple of free speech and opinion, 43 and that it would mean raising the 
price of movies 15 or 20 cents. 44 Representative Brown said he re- 
ceived letters from child stars, such as Shirley Temple and Mickey 
Rooney, discussing the moral and economic factors involved in the 
Neely bill. 45 

Monopoly and antitrust laws, however, are only one phase of the 
activities of distributors. To the extent that the United States Cham- 
ber of Commerce is composed of associations of small businessmen, 
they may be regarded as responsible for the establishment of the De- 
partment of Commerce, and its rapid growth in the 1920's. 

Food and Dm,g Legislation. 

Food and drug legislation has also been of continuing interest to 
distributors. At various times they have found it convenient to com- 
bine with other business groups and agriculture in opposition to pro- 
posed legislation. The original Food and Drug Act of 1906 was 
amended several times, but no fundamental revision of it was attempted 
until the Copeland bill was introduced in 1933. So successful was the 
opposition that 5 years elapsed Ibefore the bill was passed and then it 
had taken on a highly modified form. 

Section 701 of the bill provided for judicial review of administrative 
regulations, a provision illustrative of the growing trend in Federal 
legislation to impose strict procedural requirements on regulatory 
agencies in the exercise of their rule-making powers. In expressing 
his views on the wisdom of including this authority to review adminis- 
trative regulations, former Secretary of Agriculture Wallace said that, 



*» Ibid., May 18, 1938. 

so Business Week. June 25. 1938, p. 20. 

•w K. G. Crawford, The Pressure Bovs. Messner, New York, 1939, pp. 95-98. 

« New York Times, June 12. 1938, p. 26. 

« Ibid., September 8. 1939, p. 29. Business Week, January 22, 1938, pp. 22-23. 

4S Ibid., May 31, 1940. 

* 4 New York Times, May 25, 1940. 

« Ibid. 

277780 — 41— No. 26— r-r-13 



2g4 CONCENTRATION OF ECONOMIC POWER 

if the provision "remains in the bill, its effect will be to hamstring 
its administration so as to amount to a practical nullification of the 
substantial provisions." 46 

Behind the zeal for judicial review was the controversial matter of 
spray residue on apples. "The burden of protecting American consti- 
tutional liberties from * * * encroachment" was assumed by the 
International Apple Association. 47 If judicial judgment could be sub- 
stituted for scientific findings and one adverse decision in any one of 
the 80 district courts of the United States could prevent the enforce- 
ment of a regulation throughout the Nation, the apple growers had 
little to fear from an administrative ruling limiting spray residue. In 
the final analysis, "apples outweighed arguments." 48 In this case, 
the desire of business interests to circumscribe the rule-making author- 
ity of the Department of Agriculture was reinforced by the desire of 
cne branch of commercial agriculture to be free from a regulation 
embodying a scientifically determined limitation. 49 

A statement made by a representative of consumer interests shows 
the advantages of judicial review to the drug industry. 

The business interests, with high-priced lawyers and with their excellent lob- 
bies, are well able to protect themselves. I think in this bill they are putting an 
added measure of protection not for the consumer but for business. And you 
are inviting them to go to the courts and seek to restrain the enforcement of 
this act. M 

One of the chief factors involved in this legislation was the very 
general interest of Congress in the effects of the Food, Drug, and 
Cosmetic Act. 51 Units of the industries affected are spread all over 
the country rather than being massed in a few large centers. Hence 
almost every legislator has in his district some interest, aside from 
consumers, affected by the legislation. The Vick Chemical Co., of 
North Carolina, and the Lambert Pharmacal Co., of St. Louis, were 
represented in the crusading zeal of Senators Bailey (North Carolina) 
and Clark (Missouri) to combat bureaucracy. In the minority report 
their signatures appear under the statement that the — 

Legislation should be directed * * * to preventing adulteration, * * * 
(etc.,) and not to regulatory control of the food, drug, and cosmetic industries. 
The bill is directed to the latter and, accordingly, authorizes inordinate bureau- 
cratic control. 52 

Another important factor was the little publicity given to the legis- 
lation in the press. Newspapers had apparently been led to believe 
that it was a menace to advertising. 53 However, the, pressure brought 
to bear by consumer organizations, women's associations, etc., did much 
to retain in the legislation provisions of real benefit to the consumer. 54 

* 6 David F. Cavers, "The Food, Drug, and Cosmetic Act of 1938," Law and Contemporary 
Problems, vol. 6, 1939, Duke University Press, Durham, p. 21. 

47 Ibid., p. 15. 

iS Ibid., p. 21. 

40 The hope that legislators would see fit to accede was tersely expressed bv Business 
Week, February 22, 1935. In referring to the Senator in charge of the hearings it said, 
"He is a high-pressure parliamentarian and can rush hearings through in 2 days. In- 
dustry representatives believe that he will be able to choke off propaganda ' of the 
consumer agitation type which was one thing they feared about the hearings." 

50 Hearings before a subcommittee of the Senate Committee on Interstate Commerce on 
S. 5, March 2, 1935, p. 343. 

61 Cavers, op. cit., passim. 

m S. Rppt. 361, 74th Cong., 1st sess., pt. 2, p. 3. 

53 Cavers, op. cit., p. 3. 

"The following organizations worked together in support of the bill, joining forces 
through the Women's Joint Congressional Committee: The American Association of Univer- 
sity Women, Women's National Homeopathic Medical Fraternity. National Council of Jew- 
ish Women, National Consumers League, National Congress of Parents and Teachers Na- 
tional Board of the Y. W. C. A., Girls Friendly Society of U. S. A., Council of Women for 



CONCENTRATION OF ECONOMIC POWER jg5 

Business pressure was brought to bear during consideration of the 
Food and Drug Act to maintain the value of advertising to business, 
without regard to the consumer's interest. 

At the hearings on the measure it was pointed out that the amend- 
ment on the control of advertising would in no way affect various 
famous advertisements. Referring to two well-known advertisements, 
it was pointed out that their wording could not be attacked as "repre- 
sentation * * * not sustained by demonstrable, scientific facts 
* * * but the inference was directly contrary to substantial medi- 
cal opinion." 5B 

"No advertiser would have cause to fear more than an order to 
stop falsifying unless either his commodity were intrinsically dan- 
gerous or the Government could succeed in the difficult task of proving 
intent to defraud." 56 

The question of control of advertising was further complicated by 
department rivalries. 

Commissioner Ewin L. Davis, of the Federal Trade Commission, 
submitted amendments which would require false advertising to be 
brought under the jurisdiction of the Federal Trade Commission. In- 
dustry at first favored this suggestion but switched to approval of 
jurisdiction by the Food and Drug Administration jurisdiction, only 
to be swung back under leadership of the Proprietary Association. 57 

Thus, despite losses on some fronts, business has been able to influ- 
ence Government policy markedly. Of a kind are the efforts of the 
meat packing industry in 1916 and 1919 to sidetrack congressional 
attention from the Federal Trade Commission's "scathing indictment" 
of the industry ; 58 the success of the processors of corn products in 
causing the Secretary of Agriculture to revise an F. D. A. ruling re- 
quiring that the use of corn instead of beet sugar be so indicated on 
the label ; 59 the success of the agriculture-business lobby in holding up 
the passage of the Food, Drug, and Cosmetic Act of 1938, because of 
proposed labeling requirements; the success of the American News- 
paper Publishers Association in obtaining wording of the 1938 amend- 
Home Missions, American Nurses Association, American Medical Women's Association, 
American Home Economics Association, American Dietetic Association. National Women's 
Trade Union League, National League of Women Voters. L. G. Baldwin and F. Kirlin, 
"Consumers Appraise the Food, Drug, and Cosmetics Act," Law and Contemporary Prob- 
lems, Duke University Law School, Durham, 1939, vol. 6, p. 144. 

66 Hearings before a subcommittee of the Senate Committee on Interstate Commerce on 
S. 5, March 2, 1935 (testimony of Arthur Kallett, of Consumers Research), pp. 67-69. 

M Cavers, op. cit., p. 19. 

87 Cavers, op. cit., p. 12 ff. 

68 T. C. Blaisdell, Jr., Federal Trade Commission, Columbia University Press, New York, 
1932, pp. 186-187. 

BJ Some years ago the rules of the Food and Drug Administration governing the label- 
ins of products in which corn sugar is used as a substitute for beet or cane sugar caused 
such a storm among the corn products refiners that the pure food officials were com- 
pelled by t v e Secretary of Agriculture to revise the regulations. 

The officials had ruled that when corn sugar (dextrose) was used as a substitute for 
sugar in jams, preserves, and jellies, the manufacturer must state this fact on the label. 
To this ruling issued under the authority of the Food and. Drugs Act, the corn products 
refiners objected strenuously. They failed in their plea to Congress to enact a law 
tolerating the use of corn sugar without a declaration on the label. They then sought 
a reversal by the superior officer of the food and drug officials, the Secretary of Agri- 
culture. 

Here they were successful. In December 1930 he decided that the policy of the Food 
and Dru<r Administration as expressed in the ruling in dispute had been too strict, and 
that from that time on dextrose might be substituted for cane sugar without its use 
being mentioned. "TMs reversal in policy not only made the consumer unwittingly eat 
a sugar substitute, but it made the Secretary's subordinates eat their own words" ('Her- 
ring. Public Administration and the Public Interest, p. 238). In reaching this decision, 
the Secretary overruled the scientists in the Food and Drug Administration, whose stand 
had been supported by the canners, the beekeepers, and by spokesmen for consumers. An 
appeal to President Hoover to set aside the Secretary's decision was to no avail. The 
desires of the corn products refiners prevailed. 



186 CONCENTRATION OF ECONOMIC POWER 

ment to the Federal Trade Commission Act exempting them from any 
liability in cases of misrepresentation. 60 

UNEQUAL BARGAINING POWER OF AGRICULTURE AND DISTRIBUTION 

Public policy with respect to agriculture and distribution is impor- 
tant to all classes of the population, and particularly to farmers and 
consumers. Various factors operating in connection with the ordi- 
nary family-sized American farm make it impossible for the indi- 
vidual producer, without government help, to cooperate with other 
farmers in matters of production control, price adjustment, etc. Simi- 
larly, the individual consumer acting by himself is of little conse- 
quence in fixing the terms and conditions of his purchases. Farmers 
have, with the aid of political power, gone some distance in equaliz- 
ing the pressure brought upon government by business. Thus far con- 
sumers as such have made no comparable progress. 

In influencing public policy in the fields of agriculture and of dis- 
tribution, pressure groups utilize the resources and techniques char- 
acteristic of their activities in other fields. In these fields, as in others, 
the superior resources of business place it in a strategic position, and it 
is difficult for farmers, consumers, and even small distributors to im- 
print their own desires on public policy. 

Here, as in other segments of public policy, the electorate needs the 
facts, if it is not to be unduly influenced by the superior show of 
strength from business. 

80 "Publisher representatives succeeded in bringing about a complete exemption of 
newspapers and advertising, agencies from liability for advertising of the type proscribed 
by the bill. Not only are they not subject to prosecution, provided they disclose the 
source of the copy, but also mechanical operations are taken into consideration, and 
press runs will not be interfered with when serious delay might result." (Editor and 
Publisher, July 17, 1937, p. 7.) 



CHAPTER XII 
THE NEED— TO RELAX BUSINESS CONTROL 

Democracy in America is on the defensive. In the preceding pages, 
it has been shown that pressure groups as now operating usually fail 
to promote the general welfare. This is due less to their differing con- 
ceptions of the general welfare than to the gra,fting of pressure groups 
to a geographical system of representation, in conjunction with busi- 
ness control of resources, including technology, which results in a fatal 
inequality of bargaining power. 

In essence, the New Deal has tried to equalize the bargaining power 
of business, farmers, and labor vis-a-vis government. Even after 8 
years, an adequate method for doing so has not been worked out, 
although some progress has perhaps been made. Senator O'Mahoney 
(Wyoming) has clearly stated that "organized business has no 
right * * * to control the Government." 1 If disposed to reply, 
business might answer that, either by squatter's right or by right of 
prescription, it was already controlling the Government. The political 
and governmental aspect of the problem of concentrated economic 
power calls for the development of procedures to at least attenuate 
such preemptive rights. Such a discovery would go far to meet one 
of our basic needs — to make technology the ally of American democracy 
and not just the ally of business. 

Proposals for the development of such procedures can be divided 
into two groups. Those in the first group assume that a legislature 
elected wholly on a territorial basis is no longer adequate to its task, but 
should be supplemented by an advisory council. Proposals in the 
second group start from the premise that the problem of representation 
is subordinate to a number of others. Among them are how to improve 
Federal administration; how to strengthen planning; how to extend 
Federal research; and, finally, how to bring into the open the lobbying 
activities of pressure groups. 

ADVISORY COUNCILS 

Among the earliest proposals for supplementing geographical repre- 
sentation by an occupationally constituted group was that of Senator 
R. M. La Follette (Wisconsin) for a national economic council. In a 
bill introduced in 1931, 2 he proposed the establishment of a council 
of 15 members appointed by the President, with the advice and consent 
of the Senate, for staggered terms of 4 years. The President's nomina- 
tions were to be made from lists submitted by groups of associations 
and organizations representing the industrial, financial, agricultural, 
transportation, and labor interests of the United States. Not more 
than 3 persons were to be named from each list. The council was to 

1 Congressional Record, 76th Cong., 3d sess., p. 6398. 

2 S. 6215, 71st Cong., 3d sess* introduced February 21, 1931. 

187 



188 CONCENTRATION OF ECONOMIC POWER 

have 4 main duties — to keep itself advised regarding general economic 
and business conditions; to consider problems affecting the Nation's 
economic situation ; to try to formulate proposals looking to solutions 
of these problems ; and to make an annual report to the President and 
recommendations to Congress. In carrying out these duties it was 
to have had the services of a paid secretary and staff and the authority 
to subpena witnesses in its search for information. 

In 1935 Senator Bulkley (Ohio) took the initiative in a further ex- 
ploration of the wisdom of establishing a council advisory to Con- 
gress on national problems. The general outline of the idea emerged 
in a statement by Senator Bulkley before a meeting of 65 members of 
an advisory committee to a sub-committee of the Senate Committee 
on Manufactures. 3 

The council was tentatively envisaged as having about nine 
full-time members charged with the consideration of every problem 
affecting the National Government. It was to be completely advisory, 
without administrative or executive authority. The council, Senator 
Bulkley said, must be composed of men having and retaining the high- 
est respect and confidence of the whole country. It would be repre- 
sentative of the country at large, and not of any particular group, 
section, political party, or religious faith. An independent status was 
contemplated, to permit the council to select and concentrate its 
attention on the most important current problem. 

Neither the La Follette nor the Bulkley proposal generated much 
support. The former was never reported out of committee, and a reso- 
lution to appropriate additional funds for he latter was overwhelm- 
ingly defeated in the House. Both actions evidence the unwilling- 
ness of Congress to depart from traditional patterns. The proposals 
indicate clearly the feeling of the sponsors, at least, that Congress 
needs the advice of an occupationally constituted group when dealing 
with national and economic problems, but it is equally clear that Con- 
gress as a whole does not share such a feeling. There are many rea- 
sons for this, besides the obvious one that in a democracy new sug- 
gestions rarely enlist majority support overnight. 

In the years that elapsed between the rather summary dismissal of 
the La Follette proposal and the motion of support given Bulkley's 
suggestion by the advisory committee of the Senate sub-committee, 
planning seemed to have come into somewhat better repute, at least 
among leaders of business, labor, and agriculture. The chaos exist- 
ing at the bottom of the depression, the banking crisis of 1933, the 
recovery measures of the New Deal, all were contributing factors. 
Also, the idea of an official body representing business, labor, and agri- 
culture for joint discussion of national problems and for planning had 
been advanced by the American Farm Bureau Federation and had 
received indirect support from industrial and labor groups as well 
as from Secretary of Agriculture Wallace. 4 

Bulkley's statement of the need for an economic council won the 
approval of the advisory committee. He pointed out, among other 

8 Pursuant to S. Res. 114, 74th Cong., 1st sess., to investigate the desirability of estab- 
lishing a National Economic Council. In the sub-committee's consideration of the pro- 
posal the adjective "economic" was eliminated from the proposed title "because the 
economic cannot be separated from other subjects which affect the welfare of the Nation." 

4 This idea has been pushed by the National Farm Institute, an annual forum and dis- 
cussion meeting sponsored by the agricultural committee of the Des Moines Chamber of 
Commerce. 



CONCENTRATION OF ECONOMIC POWER 189 

things, that the Cabinet was no longer able to advise the President 
on all subjects, as it used to do; that there was need for a continuous 
consideration of national problems independent of the welfare of 
any particular party, and impossible of attainment by a group 
dependent upon votes for office; that the President was unable to 
master all the various aspects of the problems confronting him; 
that Congress was pushed and hauled about by pressure groups ; and 
that a part-time council would inevitably be inadequate. 5 

Among the 47 leaders of business, agriculture, labor, and the pro- 
fessions who listened to Bulkley, Henry C. Taylor, president of the 
Farm Foundation and former chief of the Federal Bureau of Agri- 
cultural Economics, pointed out most clearly the dangers to the gen- 
eral welfare of the present hybrid system of representation. In 
his opinion, most thinking behind present policies is limited, group 
thinking. To the extent that the groups are in conflict, and govern- 
ment comes to the aid of each, confusion is the result. "Groupistic 
thinking and groupistic action cancels * * * the optimum wel- 
fare of the country." In the proposed council Dr. Taylor saw a 
means of developing unified comprehensive thinking, the kind of 
group thinking that might develop a clear, practical, and realistic 
national policy. 6 

The approval of the advisory committee apparently carried little 
weight with Congress, for it refused the request for additional funds 
to carry on the inquiry initiated by Senator Bulkley. 7 Even though 
it was a legislative body accustomed to thinking of the national 
welfare as a composite of the welfares of separate pressure groups, 
it apparently failed to see in either of the bills a means of reconciling 
these pressures. 

In 1933 President Hoover's Research Committee on Social Trends 
suggested the possibility of a national advisory council to consider 
basic social problems of the Nation. 8 Among the indispensable pre- 
requisites to a "closer coordination and more effective integration of 
the swiftly changing elements in American social life" the committee 
listed a "willingness and determination to undertake important inte- 
gral changes in the reorganization of social life, including the eco- 
nomic ana the political orders, rather than the pursuance of a policy 
of drift." 9 The failure of the La Follette and Bulkley proposals 
in Congress over an 8-year period indicates that such a willingness 
and determination is still in the future. 

6 On this point Senator Bulkley's observations are of particular interest. "Big execu- 
tives," he said, "are willing to give their whole time to their own business and realize the 
seriousness of the effort required. Yet they frequently come to Washington and presume 
that by spending 2 or 3 days or a week they can master the problems which confront the 
Government, although these problems are much more complex and difficult than those that 
confront them in their own business. They think they can give advice on those problems 
that will be of value to those responsible for carrying on the Federal Government, and 
if the advice is disregarded they become resentful." 

•Among other significant observations were those of J. A. Leighton, Ohio State Uni- 
versity, who envisaged the council as a possible safeguard. against a totalitarian state: 
Will Durant, who saw in the council the realization of his dream of a corporative council 
within our democratic framework ; Dr. Harold Urey, Columbia chemist and Nobel prize 
winner, who saw the members of such a council as sort of national occupational repre- 
sentatives-at-large ; Professor Westerfield, of Yale, who wanted the council to explore 
and advise only, not to plan ; and J. J. Pelley, president of the Association of American 
Railroads, who wanted to know how the council would get results. 

r The Business Planning and Advisory Council, set up in the Department of Commerce 
in 19351 following the Supreme Court's invalidation of the National Industrial Recovery 
Act, can hardly be regarded as a substitute or counterpart for a national council as 
envisaged by either La Follette or Bulkley. 

8 Recent Social Trends. in the United States, McGraw-Hill. New York, 1933, p. lxxxiii. 

9 Ibid., p. lxxi. The committee found no assurance that dictatorships could be averted 
without "a more impressive integration of social skills and fusing of social purposes than is 
revealed by recent trends." Ibid., p. lxxiv. 



190 CONCENTRATION OF ECONOMIC POWER 

STRENGTHEN PLANNING 

Both of these men were working toward a device for government 
planning. The national economic council contemplated by Senator 
La Follette would have been an advisory council to Congress, and 
would undoubtedly have introduced an element of planning into the 
legislative process. In contrast with this, Senator Bulkley proposed 
an independent council, with no administrative or executive au- 
thority. Some other believers in government planning conceive it as a 
staff function of the Executive. 

The present status of the National Resources Planning Board in 
the Executive Offices of the President follows the recommendation 
of the President's Committee on Administrative Management, re- 
porting in 1937. 

R. G. Tugwell conceives of a fourth type of planning agency, with 
an independent status, free from both the executive and legislative 
branches, having more than a merely advisory power but less than 
ihe authority to execute. Both the planning function and direction 
are inherent in Tugwell's scheme, which he terms the "directive/' 10 

According to Tugwell, what is. needed in our present difficulty is 
some governmental agency which can bring about an integration 
of all forces of society. "The articulation of the whole is the 
emergent need of society," and the planning arts are "the only 
available resource in the crisis." 

The establishment of such an agency involves an answer to the 
question, "How can the federal Government plan?" Tugwell argues 
that it must provide itself with what he calls the directive. This 
directive is based on a conjunction of all forces, governmental and 
nongovernmental, in the carrying out of a long-time program for 
the benefit of the Nation as a whole. 

The function of the directive is a generalizing purpose, the cap- 
stone of a "directional system," making "of industrial society a con- 
tinuum in which causes and effects are clearly related and in which 
penalties are traced directly to violations." As to the composition 
of the directive, Tugwell makes no express statement beyond this r 
that "this new agency would need to be severely hedged about with 
limitations on qualification, the persons chosen would need to be 
given longer-term appointments than any other except judicial 
officials." 

The powers of the directive must be. inferred from several general 
statements. It would be "under the discipline of fact," with a capi- 
tal budget (as distinct from a current expenditure budget) ulti- 
mately entrusted to it. It would have the power to find the facts 
and act dli the basis of them, and the scope of such action would 
include, for instance, the power to suggest the substitution of public 
for private ownership and operation. The directive's procedure 
would utilize the expert preparation of factual material, public 
hearings, agreed findings, careful drafting of legislation, and legis- 
lative ratification. Besides being independent of the executive, it 
would also be independent of the legislative branch. That is, proj- 
ects referred to the legislative by the directive could be overridden 
only by a two-thirds, or at least more than a simple majority vote. 

10 See R. G. Tugwell, "The Fourth Power," Planning and Civic Comment, April-June, 
L999, pt. 2. 



CONCENTRATION OF ECONOMIC POWER 19J 

The judiciary should have no power of definition or of review of its 
findings. 

While the President's powers, according to Tugwell, should be 
strengthened, even this would not meet the planning need. Both a 
strengthened Executive and a directive are essential parts of the 
Federal mechanism envisaged by Tugwell to meet the present ineffec- 
tiveness of public policy when opposed by a concentration of private 
economic power. "The growth of conflict in those areas which are 
outside formal government, but which affect government in its most 
vital relationships, together with that unresolved conflict within 
government between the President and the Senate, are again emascu- 
lating the national administration at a time when technique has made 
industrial functions irrevocably national; and they threaten, for all 
our present prestige, to bring us again into disrepute abroad." u 

This conception of a Federal directive is far broader than any of 
the preceding proposals. The idea of a directive goes beyond the 
idea of planning, and would probably, therefore, receive even slighter 
consideration than the various planning proposals already offered. 
Its definitive contribution is precisely the idea, however, that at some 
point in connection with any plan arises the question, "Planning for 
what?" The incorporation of the directive into the Federal admin- 
istrative mechanism would not meet other pressing problems of our 
democracy, but it seems likely that such an agency would be in a 
better position to give continuous, connected, and serious thought lo 
the problems of government than any agency now existing. 

IMPROVE GOVERNMENT ADMINISTRATION 

Many proposals have been advanced, and quite a number put into 
effect, for the improvement of government administration. College 
and university courses have been established ; efforts have been made 
to stimulate public interest in better government ; such organizations 
as the Council of Mayors, the various State leagues of municipalities, 
and the Council of State Governments have been set up ; the Federal 
Government has undergone extensive reorganization : and a number 
of steps have been taken to simplify and standardize government 
procedure. These changes have generally been made in recognition 
of the need for more adequate methods of dealing with the problems 
of an increasingly complex society. 

The very complexity of the problem, however, makes it vital to 
examine carefully all such proposals to be sure that they will really 
facilitate, and not obstruct, the processes of administration. 

In this connection the Walter-Logan bill is of interest. 12 Briefly, it 
provides for judicial review of the findings and regulations of ad- 
ministrative agencies. The bill has the unqualified support of the 
American Bar Association and the United States Chamber of Com- 
merce, among others. According to the, chamber, the Walter-Logan 
bill is urgently needed to curb the dangerous exercise of legislative 
power by administrative authority. 

As stated in the title, the Walter-Logan bill is a bill to provide for 
the more expeditious settlement of disputes with the United States, 

n Ibid.,_p. 20. 

12 S. 915, H. R. 4236, 76th Cong., 1st sess. This bill is temporarily dead, since the House, 
in a vote on December 18, 1940, failed to pass it over the President's veto. It will 
undoubtedly, however, come up again for consideration. 



192 CONCENTRATION OF ECONOMIC POWER 

and for other purposes. It provides for publication of administra- 
tive rules and regulations of administrative agencies. Within each 
agency there would be a board to hear grievances in connection with 
any decision of the agency. The bill provides an opportunity for 
judicial review of regulations and decisions made thereunder, and the 
courts would be authorized to set aside the regulation if it is un- 
constitutional, if it conflicts with the statute, if it is beyond the 
powers granted by the statute, or for failure to publish. The courts 
could set aside intra-agency decisions if they are based on erroneous 
findings of fact, not supported by evidence, if the decision is not 
supported by the findings, if the petitioner is not treated fairly, if 
the decision is not within the authority of the agency, and if the 
decision is unconstitutional or otherwise contrary to law. 

Col. O. T. McGuire in hearings before a subcommittee of the House 
Committee on the Judiciary, said : 

Our bill proposes that the individual shall be protected, without hamstring- 
ing administration within the law, by requiring public notice, and public hear- 
ing if requested, before regulations are issued, by requiring the regulations 
to be issued, and by authorizing judicial review of regulations to see whether 
they are within the terms of the Constitution and statutes. 18 

According to the late Senator Logan (Kentucky) co-sponsor of 
the bill, it is designed to meet a situation which he described as "ad- 
ministrative absolutism." The ideas embodied in the bill, according 
to Senator Logan, have been before the Senate Judiciary Committee 
in one form or another for over 10 years. Apparently the develop- 
ment which disturbed Senator Logan is the multiplication within 
that period of Federal administrative agencies having the power to 
issue rules and regulations with the force of law, Senator Logan 
referred particularly to the practices of the National Labor Rela- 
tions Board, saying : 

If a hundred reputable witnesses testify one way and one man, who, perhaps, 
is not so reputable testifies the other way, and the National Labor Relations 
Board decides for the 1 against the 100, the courts can grant no relief at all. 
It is of that condition that I am complaining, not only in the N. L. R. B., but 
in every other agency of Government. There is being developed, it appears, an 
idea at least of administrative absolutism." 

The special committee on administrative law of the American 
Bar Association shares Senator Logan's view. In reporting to the 
1938 annual meeting of the American Bar Association, this committee 
complained that Government administrative agencies had a tendency 
to decide without hearings, on the basis of secret reports or of pre- 
formed opinion; to act rather than decide; to disregard jurisdictional 
limits; to do what will get by, to adopt an arbitrary rule for con- 
venience ; to handle routine perfunctorily ; to act through deputies ; 
and to mix the judicial and administrative functions. These con- 
clusions are based on illustrations from English, State, and local 
practice. 16 "The American bar bill," Colonel McGuire says, "presents 
the eternal conflict between two different theories of government — one, 

» Hearings before a sub-committee of the House Judiciary Committee on Administrative 
Law Procedure, H. R. 4236, 6198, 6324, 76th Cong., 1st sess., p. 14. 

™ "Congressional Record, 76th Cong., 1st sess., p. 7075. For the finding of the Senate 
Civil Liberties Committee on the obstruction of the National Association of Manufacturers 
to the enforcement of the National Labor Relations Act by the National Labor Relations 
Board, see ch. VI, pp. 94-106. 

"See also F. F. Blachly and M. E. Oatman, Federal Regulatory Action and Control, 
Brookings Institution, Washington, 1940, p. 14 ff. 



CONCENTRATION OF ECONOMIC POWER 193 

the American theory of a tripartite government, each part a check upon 
the other two and none overbalancing the others ; the other, the parlia- 
mentary theory of government, in which the Executive, for the time 
being, is the dominating force and which could but result in this 
country in forcing the acceptance of the Roman theory in which the 
Executive becomes supreme — a reversion to the primitive type of 
government resulting in the condition obtaining in Germany, Italy, 
and Russia today." 16 

The Walter-Logan bill has attracted support from the American 
Bar Association, naturally, and from many of its affiliated State and 
local subsidiary associations. 17 Also, it was reported by the Senate 
Committee on the Judiciary that "a number of business organiza- 
tions have approved the bill and it is understood to be acceptable 
to a large labor organization." 19 On the other hand, the bill has 
been opposed or at least questioned by most of the Federal adminis- 
trative agencies, who have urged that the matter is too important 
for action without a report and recommendations from the Attorney 
General's committee on administrative procedure. Assistant Gen- 
eral Counsel Bernard, of the Treasury Department, pointed out 
before the Senate Judiciary Committee that the bill would require 
a hearing before old rules were amended or repealed; it would 
require the issuance of rules under statutes whether or not it was nec- 
sary; and since the petition of an aggrieved person is enough to 
cause review of rules, all rules would be open for continuous review. 
Robert M. Cooper, Special Assistant to the Attorney General, stated : 
"It is hardly reasonable to assume that a judiciary, completely uns- 
trained in the problems of administration, is more capable or more 
likely to reach proper results than experienced administrators se- 
lected primarily for their specialized knowledge, technical compe- 
tence, and thorough familiarity with the intricacies of modern 
governmental policies." 19 All these arguments were advanced in the 
President's veto message. 

Jb urther doubts as to the wisdom of this approach to the problem 
have been voiced by competent observers outside the Government. 
Blachly and Oatman, 20 for instance, find many constitutional and 
practical difficulties inherent in judicial control and in the intra- 
agency review boards. They ask, "Is there administrative absolutism 
as is alleged?" and conclude that the fears of the American Bar 
Association are largely unjustified. They regard the judicial formula 
of the Walter-Logan bill as fundamentally wrong because it is based 
on the moribund idea that law cannot prevail or justice be done 
except through the courts. 21 

There can be little doubt that Federal administrative procedure 
stands in need of improvement. This is not surprising in the light 
of the great multiplication of administrative agencies in recent 
years, brought about primarily by the expansion of Federal authority 
into areas of complex economic activities. It is doubtful, however, 
whether the solution lies along the line of the Walter-Logan bill. 
Its basic principle of judicial review is likely, if past experience is 

16 Hearings on Administrative Law Procedure, op. cit., p. 33. 

17 For the process by which such decision as to policy are reached, see note on p. 40. 

18 Congressional Record, 76th Cong., 2d sess., p. 9395. 

w Administrative Justice and the Rules of Discretion, Yale Law Journal, February 
1938. 

20 Op. cit. 

» Ibid., pp. 227-230. 



194 CONCENTRATION OF ECONOMIC POWER 

a guide, to play into the hands of powerful pressure groups. By 
utilizing nothing more than injunction procedure in equitj T , the 
National Association of Manufacturers was able for years to obstruct 
enforcement of the Labor Relations Act. The extent of obstruction- 
ism possible in a situation where interminable delays can be secured 
through questioning the authority of an agency to issue a regula- 
tion or tjie form in which it is issued, as well as by appealing to the 
courts, is almost impossible to imagine. It would seem that the 
Walter-Logan bill is far less likely to expedite than to delay the 
disputes with the United States. 22 

BRING LOBBIES INTO THE OPEN 

Without doubt there is need to improve Federal administrative pro- 
cedure, and the strengthening of planning within the Federal Govern- 
ment would aid it in meeting current problems. Yet a democracy 
cannot operate successfully unless the electorate is informed of the 
problems at issue, and the interests of the various parties to the de- 
bate. Information concerning these interests is the general goal of 
lobby registration proposals. 

Such proposals involve at least two aspects. The first is the se- 
curing, and periodic publication, of data on lobbyists — names, spon- 
sors, and principal sources of funds, receipts and disbursements, 
purposes of expenditures, especially for public relations services, ad- 
vertising, radio, etc. Secondly, it should be recognized that the Fed- 
eral Government has a .responsibility to see that the electorate is 
informed on public problems. This can be done either by requiring 
private radio chains, as a condition of retaining their licenses and 
as a public service, to publicize the activities of lobbyists in Wash- 
ington and elsewhere; or, failing this, by establishing a Government- 
owned and operated radio broadcasting station for the dissemination, 
among other thingSj of such information. 

The need for registration of lobbyists and adequate machinery for 
publicity grows out of the obscurity in which lobbies operate to affect 
public policy, and the extent to which such pressure groups distort 
the right of petition. Only when Congress exercises its investigating 
power does the public begin to have access to the facts about legisla- 
tive lobbying. Newspapers, periodicals, and journals of opinion have 
from time to time published information about lobbying activities in- 
dicating their ubiquity and significance, and these fugitive indications 
are amplified by scholarly monographs, semipopular diagnoses, and 
journalistic treatments of the lobbying system. However, it is only 
when a congressional committee, with its power to subpena witnesses 
and take evidence under oath, probes beneath the surface of the gov- 
ernmental process that the public is permitted to view that process in 
the raw. Such investigations, even though they are made infre- 
quently, are invaluable. They show the extreme lengths to which 
lobbies will resort in their efforts to shape and control public policy. 
Between congressional investigations one can only guess at the ac- 
tivities of lobbyists, which, for the most part, are forever undisclosed. 

22 The literature on this controversy of judicial versus administrative supremacy is very 
large. A considerable part of it is cited in one connection or another in Colonel McGuire's 
speech before the Ohio Bar Association, reprinted in the House Judiciary Committee Hear- 
ing, cited, pp. 14-34. See also Phillips Bradley, "Administration — The Fourth Power in 
Modern Government," The Social Studies, vol. XXVII, No. 5, May 1936, pp. 320-327. 



CONCENTRATION OF ECONOMIC POWER 195 

A Federal lobby registration law, setting up a special agency to 
classify, organize, and disseminate the material filed with registra- 
tion, having access to either the private radio chains or a publicly 
owned and operated station, would begin to provide information vital 
to the operation of the democratic process. 

There is now no Federal legislation regulating lobbies. Many such 
bills have been introduced into Congress, yet only a few have even 
made substantial headway. The outstanding ones are the House bill 
introduced as a result of the 1913 Mulhall investigation, Senator Cara- 
way's bill introduced in 1927, and Senator Black's 1936 proposal. 
Each of these bills followed disclosures by congressional investigating 
committees of flagrant perversion of the right of petition by one or 
more lobbying groups. Thus the 1913 bill was proposed as a means 
of offsetting the lobbying activities of the National Association of 
Manufacturers, disclosed in investigation of that year. 23 The late 
Senator Caraway's bill came shortly after the Federal Trade Com- 
mission's disclosures of the propaganda and lobbying activities of the 
National Electric Light Association. Senator Black's bill in 1936 
resulted from disclosures made by his committee, of unprecedented 
pressure efforts resorted to by the electric utilities, under the leader- 
ship of the Edison Electric Institute, to defeat the public utilities 
holding company bill, as well as further disclosures of pressure both 
on Congress and on the administrative agencies of the Government 
by air transport operators, shipowners, operators, and others in con- 
nection with air and ocean mail contracts. Senator Black's bill passed 
the Senate but was rejected in the House. 24 

Lobby registration is intended, among other things, to disclose 
the identity of lobbyists and their employers, to reveal the legisla- 
tion in. which they are interested, prohibit certain people from 
acting as lobbyists, reveal the money spent by lobbyists, eliminate 
bribery, forbid the payment of fees contingent upon the passage 
or defeat of particular bills, and impose penalties for violation. 25 

The Georgia Constitution of 1877 declared lobbying a crime, and 
Massachusetts and Wisconsin adopted lobby registration laws in 
1890 and 1899. Sixteen States have passed laws requiring lobbyists 
to register and furnish financial statements. Six others require 
registration but no financial statements, and the rest have no lobby 
registration laws at all. 

Experience under these laws has varied from success to almost 
complete failure. According to one competent observer, "The Wis- 
consin statute is reported as satisfactory in securing the publicity 
intended." 26 In Ohio and New York only a minority of the lobby- 
ists ever actually registered. The New York law charges no specific 
agency with enforcement, so, although violation is a misdemeanor 
and penalties are provided, the law is flagrantly violated. From 
1908 to 1935 an annual average of only 134 registered. 27 Most lobby 
laws are unenforced, 28 partly because lobby laws generally contain 
"no satisfactory definition of what constitutes legitimate lobbying." ™ 

23 A summary statement of these lobbying activities is contained above, in ch. I. 

24 Congressional Record, 74th Cong., 2d sess., pp. 4104-4105, 5551. 

25 Harvey Walker, Law Making in the United States, Ronald, New York, 1934, 
pp. 294-295. 

29 Ibid., p. 295. 

27 Belle Zeller, Pressure Politics in New York, Prentice-Hall, New York, pp. 253-256. 

™ Walker, op. cit, p. 295. 

"Zeller, op. cit., p. 257. 



196 CONCENTRATION OF ECONOMIC POWER 

While these lobby registration laws are generally ineffective, they 
are occasionally used as threats to frighten lobbyists, or by persons 
in strategic positions for retaliation. Thus, an effort was made in 
1920 in New York to prosecute the Anti-Saloon League. The 
attempt was, however, abortive. A legislator may also use the laws 
to threaten an unregistered lobbyist. 

But the laws apply only to paid lobbyists, and legislators are half- 
hearted in' their opposition to lobby practices. Most State legisla- 
tors receive very low pay for their services, and it would not be 
surprising if some of them found it difficult to maintain a hostile 
air to friendly lobbyists. 30 

Experience shows that a lobby registration law is of little value 
unless a specific agency is charged with the administration of the 
law. Such an agency must, in addition, have adequate enforcement 
powers, and be adequately staffed and financed. 

It is quite probable that registration and publicizing of lobbyists 
and their activities will not wholly meet the problem confronting 
us. However, the adoption of such a law would probably throw 
more light on the relationship between political activity and the 
concentration of economic power than any other proposal likeJy of 
adoption. The purpose is not to deny citizens their constitutional 
right of petition, but rather to throw enough light on the govern- 
mental process to allow citizens to vote intelligently. 

America is trying to adapt an eighteenth century political system 
to a twentieth century economic system. To undertake this adapta- 
tion successfully there is a pressing need, as the President's Com- 
mittee on Recent Social Trends said in 1933, of a "willingness and 
determination to undertake the important integral changes * * * 
in the economic and political order." There is needed in the polit- 
ical and governmental fields an imagination and resourcefulness in 
carrying out this adaptation comparable to the genius of business- 
men in adapting the corporate structure to their needs. Whether 
American society will repay this kind of social inventiveness and 
whether it will give to originators in the field of public administra- 
tion and politics the place of prestige they deserve is a question which 
only the future can answer. At a time when democracy, both in its 
philosophical and in its governmental aspects, is under withering, 
possibly fatal fire, only social and political genius of a high order 
will be equal to the task. In the Federal Constitution of 1787 the 
founding fathers broke with tradition and set up a new and untried 
form of government. Today's crisis, both in its internal and 
external aspects, demands no less ingenuity and no less fortitude 
than belonged to the founding fathers. 

80 Ibid. See also K. G. Crawford, The Pressure Boys, Messner, 1939, ch. II. 



APPENDIX 



Following is a list of national organizations with permanent rep- 
resentatives in Washington. The list is based on that compiled by 
E. P. Herring in 1929, 1 brought down to date by the deletion of 
organizations no longer existent, or no longer represented in Wash- 
ington, and the addition of organizations which have appeared since 
his list was compiled. 

It should be remembered, of course, that there are numerous or- 
ganizations which do not appear in this list, and which nevertheless 
carry on intensive lobbying campaigns. The Edison Electric Insti- 
tute, for instance, has no official Washington representative, nor has 
the American Petroleum Institute. Many labor organizations, like- 
wise, are represented at the capital only by virtue of their affiliation 
with the American Federation of Labor or the Congress of Industrial 
Organizations. 



Air Line Pilots Association. 

Air Reserve Association of the United 
States of America. 

Amalgamated Wage-Hour Bureau. 

American Academy of Accountancy. 

American Action. 

American Association for the Advance- 
ment of Science. 

American Association for Economic 
Freedom. 

American Association of Independent 
Small Business. 

American Association of Junior Col- 
leges. 

American Association of Motor Vehicle 
Administrator . 

American Association of Museums. 

American Association of Nurserymen. 

American Association of Personal Fi- 
nance Companies. 

American Association of School Ad- 
ministrators. 

American Association of State Highway 
Officials. 

American Association for the Tuber- 
culous. 

American Association of 
Professors. 

American Association of 
Women. 

American Automobile Association. 

American Bankers Association. 

American Bar Association. 

American Bottlers of Carbonated Bev- 
erages. 

American Box Shook Export Asso- 
ciation. 



University 
University 



American Chemical Society. 

American Civil Liberties Union. 

American Coal Distributors Association. 

American Coalition of Patriotic Civic 
and Fraternal Societies. 

American Commission for Non-Partici- 
pation in Japanese Aggression. 

American Council on Education. 

American Council of Learned Societies. 

American Council on Public Affairs. 

American Dental Trade Association. 

American Drug Manufacturers' Asso- 
ciation. 

American Engineering Council. 

American Farm Bureau Federation. 

American Federation of Arts. 

American Federation of Government 
Employees. 

American Federation of Housing Au- 
thorities. 

American Federation of Investors. 

American Federation of Labor. 

American Federation of Organizations 
for the Hard of Hearing. 

American Forest Products Industries. 

American Forestry Association. 

American Foundation for Homeopathy. 

American Friends of Spanish Democ- 
racy. 

American Gas Association. 

American Genetic Association. 

American Golf Association. 

American Good Government Society. 

American Guides Association. 

American Historical Association. 

American Home Economics Association. 

American Horticultural Society. 



1 E. P. Herring, Group Representation in Congress, Brookings Institution, Washington. 
1929, pp. 276-283. 

197 



198 



CONCENTRATION OF ECONOMIC POWER 



American 
American 
American 
American 

bution. 
American 
American 

ciation. 
American 
American 
American 



Hotel Association. 
Institute of Architects. 
Institute of Cooperation. 
Institute of Food Distri- 

Legion. 

Manganese Producers Asso- 

Merchant Marine Institute. 
Mining Congress. 
Motor Carriers' Tariff Bu- 



reau. 

American Municipal Association. 

American Nature Association. 

American Patent Law Association. 

American Peace Mobilization. 

American Peace Society. 

American Pharmaceutical Association. 

American Planning and Civic Associa- 
tion. 

American Potash Institute. 

American Power Boat Association. 

American Public Welfare Association. 

American Publishers Conference. 

American Red Cross. 

American Remount Association. 

American Retail Federation. 

American Road Builders' Association. 

American Short Line Railroad Associa- 
tion. 

American Society of International Law. 

American Society of Planning Officials. 

American Statistical Association. 

American Sugar Cane League. 

American Taxpayers Association. 

American Theatre Society. 

American Trade Association Executives. 

American Transit Association. 

American Type Culture Collection. 

American Veneer Package Association. 

American Veterans Association. 

American Vindicators. 

American Vocational Association. 

American War Mothers. 

American Wild Life Institute. 

American Wood Preservers Association. 

American Youth Commission. 

America's Wage Earners' Protective 
Conference. 

Anti-Saloon League of America. 

Army Ordnance Association. 

Asphalt Block Industry. 

Asphalt Institute. 

Associated Civil Employees. 

Associated General Contractors of 
America. 

Association of American Producers of 
Domestic Inedible Fats. 

Association of American Railroads. 

Association of American Soap & Gly- 
.cerine Products. 

Association of Appraisal Executives. 

Association of Bank Note Companies. 

Association of Casualty and Surety 
Executives. 

Association of Federal Architects. 

Association of Interstate Commerce 
Commission Practitioners. 



Association of Land Grant Colleges and 
Universities. 

Association for the Prevention of 
Tuberculosis. 

Association of Quality Ice Cream 
Manufacturers. 

Association for the Study of Negro Life 
"and History. 

Association of Sugar Producers of 
Puerto Rico. 

Automobile Manufacturers Association. 

Birth Control Federation of America. 

Board of Temperance of the Methodist 
Church. 

Bundles for Britain. 

Bureau of Catholic Indian Missions. 

Bureau of Information of the South- 
eastern Railways. 

Bureau of National Affairs. 

Bureau of Railway Economics. 

Bureau of Raw Materials for American 
Vegetable Oils and Fats Industries. 

Bureau of Rehabilitation. 

Catholic Action. 

Catholic Association for International 
Peace. 

Catholic Children's Bureau. 

Catholic Conference in Family Life. 

Catholic Rural Life Conference. 

Central Committee on Lumber Stand- 
ards. 

Central Housing Committee. 

Chamber of Commerce of the United 
States. 

Chartered Institute of American In- 
ventors. 

Coal Exporters Association of the 
United States. 

Code Authority for the Cooking and 
Heating Appliance Manufacturing 
Industry. 

Commission on Mental Health. 

Commission on Teacher Education. 

Committee to Defend America by Aid- 
ing the Allies. 

Committee for Repeal of the National 
Labor Relations Act. 

Committee on Social Security. 

Committee of Utility Executives. 

Congress of Industrial Organizations. 

Congressional Districts Modification 
League. 

Construction League of the United 
States. 

Cooperative Study of Secondary School 
Standards. 

Cotton Textile Institute. 

Council of American Industry. 

Council of Church Boards of Education. 

Council of Jewish Women. 

Council of Social Agencies. 

Council of State Governments. 

Credit Men's Association. 

Dairy Industry Committee. 

Daughters of the American Revolution. 

Daughters of Union Veterans of the 
Civil War. 

Distilled Spirits Institute. 



CONCENTRATION OF ECONOMIC POWER 



199 



Douglas Fir Plywood Association. 

Educational Policies Commission. 

Fleet Reserve Association. 

Furniture Institute of America. 

General Federation of Women's Clubs. 

General Welfare Federation of America. 

Glazed Brick and Tile Institute. 

Granite Industry. 

Hardwood Block Flooring Institute. 

Health Security Administration. 

Highway Education Board. 

Highway Users Conference. 

Independent Movers and Warehouse- 
men's Association. 

Independent Petroleum Association. 

Indian Rights Association. 

Industrial Bankers National Associa- 
tion. 

Institute of American Meat Packers. 

Institute of Cooking and Heating Ap- 
pliance Manufacturers. 

Institute of Electrical Contractors. 

Institute of Margarine Manufacturers. 

Institute of Social Arts. 

Intercollegiate Association for Study 
of the Alcohol Problem. 

International Accountants Society. 

International Association of Asbestos 
Workers. 

International Association of Fire 
Fighters. 

International Association of Ice Cream 
Manufacturers. 

International Association of Machinists. 

International Association of Marble 
Polishers and Helpers. 

International Brotherhood of Book- 
binders. 

International Brotherhood of Eleotrical 
Workers. 

International Brotherhood of Teamsters, 
Chauffeurs and Helpers Union. 

International Chamber of Commerce. 

International Geneva Association. 

International Hod Carriers, Building 
and Common Laborers Union of 
America. 

International Printing Pressmen and 
Assistants Union of North America. 

International Reform Federation. 

International Union of Operating En- 
gineers. 

Investment Bankers Conference. 

Irregular Common Carrier Association 
of America. 

Italian World War Veterans. 

Labor's Non-Partisan League. 

Machinery and Allied Products Insti- 
tute. 

Make Europe Pay War Debts Com- 
mittee. 

Manufacturing Chemists Association of 
the United States. 

Merchants and Manufacturers Asso- 
ciation. 

Mirror Manufacturers Association. 

National Academy of Sciences. 
277780 — 41- 



National Accountants Institute. 

National Aeronautic Association. 

National Alliance of Postal Employees. 

National Americanism Foundation. 

National Anti-Steel-Trap League. 

National Association for the Advance- 
ment of Colored People. 

National Association of Broadcasters. 

National Association of Building Own- 
ers and Managers. 

National Association of Certified Public 
Accountants. 

National Association of Commercial 
Organization Secretaries. 

National Association of Credit Men. 

National Association of Deans of 
Women. 

National Association of Filling Stations. 

National Association of Food Chains. 

National Association of Hot House 
Vegetable Growers. 

National Association of Housing Offi- 
cials. 

National Association of Industrial In- 
surance Agents. 

National Association of Insurance 
Agents. 

National Association of Letter Carriers. 

National Association of Manufacturers. 

National Association of Marble Pro- 
ducers. 

National Association of Margarine 
Manufacturers. 

National Association of Master 
Plumbers. 

National Association of Motor Bus 
Operators. 

National Association of Mutual Insur- 
ance Agents. 

National Association of Post Office 
Mechanics. 

National Association of Railroad and 
Utilities Commissioners. 

National Association of Regional Broad- 
cast Stations. 

National Association of Regulars. 

National Association of Reprocessed 
Lubricant Manufacturers. 

National Association of Retail Drug- 
gists. 

National Association of Retired Fed- 
eral Employees. 

National Association of Securities 
Dealers. 

National Association of Special De- 
livery Messengers. 

National Aviation Day Association. 

National Business Bureau. 

National Canners Association. 

National Catholic Welfare Conference. 

National Civic League. 

National Coal Association. 

National Committee for Revision of the 
Comstock Law. 

National Committee to Uphold Con- 
stitutional Government. 



200 



CONCENTRATION OF ECONOMIC POWER 



National Conference of Business Paper 
Editors. 

National Conference of Catholic Char- 
ities. 

National Conference of Christians and 
Jews. 

National Conference of Church-Related 
Colleges. 

National Conference on State Parks. 

National Cooperative Council. 

National Cooperative Milk Producers' 
Federation. 

National Council on Business Mail. 

National Council of Catholic Men. 

National Council of Catholic Women. 

National Council of Farmer Coopera- 
tives. 

National Council of Jewish Women. 

National Council for Mothers and 
Babies. 

National Council for Prevention of War. 

National Council of Private Motor 
Truck Owners. 

National Council to Aid Agricultural 
Workers. 

National Craft Training Center. 

National Crushed Stone Association. 

National Door Manufacturers' Asso- 
ciation. 

National Economic and Social Planning 
Association. 

National Editorial Association Legis- 
lative Committee. 

National Education Association. 

National Executive Committee of Hous- 
ing Authorities. 

National Farmers Union Legislative 
Committee. 

National Federation for Constitutional 
Liberties. 

National Federation of Federal Em- 
ployees. 

National Federation of Post Office 
Clerks. 

National Federation of Post Office 
Motor Vehicle Employees. 

National Fertilizer Association. 

National Grange. 

National Gulf Atlantic Ship Canal As- 
sociation. 

National Highway Users Conference. 

National Independent Broadcasters. 

National Industrial Council. 

National Industrial Sand Association. 

National Industrial Stores Association. 

National Industrial Traffic League. 

National Institute of Manufacturers 
and Distributors. 

National Institute of Oil Seed Products. 

National Institute of Public Affairs. 

National Labeling Conference. 

National Lawyers Guild. 

National League of Commission Mer- 
chants of the United States. 

National League of District Post- 
masters. 

National League of Wholesale Fresh 
Fruit and Vegetable Distributors. 



National League of Women Voters. 

National Lime Association. 

National Lumber Manufacturers Asso- 
ciation. 

National Maritime Union. 

National Negro Conference. 

National Oil Marketers Association. 

National Old Age Pension Association. 

National Paint, Varnish, and Lacquer 
Association. 

National Parks Association. 

National Patriotic Council. 

National Paving Brick Association. 

National Petroleum Association. 

National Retail Drygoods Association. 

National Retail Lumber Dealers Asso- 
ciation. 

National Rifle Association of America. 

National Rivers and Harbors Congress. 

National Rural Letter Carriers Asso- 
ciation. 

National Safety Movement. 

National Slag Association. 

National Society of the Colonial Dames 
of America. 

National Society for the Humane Regu- 
lation of Vivisection. 

National Society of Professional En- 
gineers. 

National Society of the United States 
Daughters of 1812. 

National Star Route Mail Carriers 
Association. 

National Student Federation of America. 

National Student Forum on the Paris 
Pact. 

National Tax Council. 

National Vaccine and Antitoxin In- 
stitute. 

National Wildlife Federation. 

National Woman's Christian Temper- 
ance Union. 

National Woman's Party. 

National Women's Trade Union League 
of America. 

National Wooden Box Association. 

Navy League of the United States. 

Official Classification Territory Lines 
Motor Carrier Committee. 

Pan American Highway Confederation. 

Pan-American Student Chain. 

Pan-American Union. 

Pattern Makers League of North 
America. 

Peanut Butter Manufacturers Asso- 
ciation. 

People's Lobby. 

People's Mandate Committee. 

Philippine Sugar Association. 

Plumb-Plan League. 

Portland Cement Association. 

Progressive Education Association. 

Proprietary Association. 

Public Administration Clearing House. 

Public Affairs Committee. 

Railroad Owners Association. 

Railway Labor Executives Association. 

Railway Mail Association. 



CONCENTRATION OF ECONOMIC POWER 



201 



Reserve Officers' Association. 

Retailers National Council. 

Society of American Foresters. 

Society of the Cincinnati. 

Society of the Cincinnati. 

Society for the Prevention of Cruelty 
to Animals. 

Society of Woman Geographers. 

Southern Education Foundation. 

Southern Pine Association. 

Sugar Producers Association of Puerto 
Rico. 

Surety Association of America. 

Terra Cotta Manufacturers Association. 

Textile Foundation. 

Tile and Mantel Contractors Associa- 
tion of America. 

Tobacco Trades Council Allied. 

Townsend National Recovery Plan. 

Trade Mark Records Bureau. 

Trade Research Council. 

Union Now Association. 

United Association of Journeyman 
Plumbers and Steam Fitters. 

United Federal Workers of America. 

United Mine Workers of America. 



United National Association of Post 
Office Clerks. 

United Office and Professional Workers 
of America. 

United Shoe Workers of America. 

United Spanish War Veterans. 

United States Beet Sugar Association. 

United States Cane Sugar Refiners As- 
sociation. 

United States Cavalry Association. 

United States Chamber of Commerce. 

United States Coast Artillery Associ- 
ation. 

United States Conference of Mayors. 

United States Flag Association. 

United States Independent Telephone 
Association. 

United States Infantry Association. 

United States Junior Chamber of Com- 
merce. 

United States Wholesale Grocers Asso- 
ciation. 

United Textile Workers of America. 

United War Veterans. 

Western Pine Association. 



INDEX 



ADAIR, D. See Hamilton, W. H. Page 

ADAMSON ACT 150 

ADMINISTRATION : 

Approaches to, complexity of 71-72 

Policy making and 65 

ADMINISTRATIVE DEPARTMENTS, pressures on 70-73 

ADMINISTRATIVE LAW PROCEDURE : Hearings on 192, 193, 194 

ADMINISTRATIVE MANAGEMENT, PRESIDENT'S COMMITTEE ON, 

cited 190 

ADVERTISING and the Food, Drug and Cosmetic Act 184-18") 

ADVISORY COUNCILS, GOVERNMENTAL. 187-189 

AGRICULTURAL ADJUSTMENT ACT : 

Passage and provisions of 176, 17§, ISO 

Use of tax in 58 

AGRICULTURE. -See Farm, Farmers. 

AIRMAN, D. : Lobbyist— 1936 Model, cited 52 

AIR COMMERCE ACT 169 

AIR MAIL AND OCEAN MAIL CONTRACTS: Investigation of (Senate), 

cited 167-170 

AIR TRANSPORT : Investigation of mail-contract subsidies for 169-170 

AIR TRANSPORTATION ASSOCIATION: 

Classified, among pressure groups : 15 

Defense, national, and 165 

ALABAMA: Utilities' power in 156 

ALABAMA POWER CO. v. ICKES, cited 159 

ALDRICH, WINTHROP W., quoted 120, 127 

ALEXANDER, C. K. : Tariffs on Pork and Mutton, cited 110 n. 

ALLEGHANY CORPORATION 146-148 

ALTON RAILROAD. See Railroad Retirement Board v. Alton. 

AMERICAN . See also specific names of organizations, etc. 

AMERICAN COLUMN AND LUMBER CO. ET AL. v. U. S., cited 77 

AMERICAN LINSEED OIL CO., U. S., v., cited 77 

AMERICAN PLAN OPEN SHOP CONFERENCE 95 

AMERICAN STATES PUBLIC SERVICE CO 160 

AMLIE, THOMAS R. : Protest against appointment to I. C. C. of 62 

ANDERSON, H. DEWEY: 

Popular Government in California, cited 16 

Taxation, Recovery, and Defense, cited 34 n., 58, 119, 121 

ANTI-INJUNCTION ACT. See Norris-LaGuardia Act. 
ANTI-SALOON LEAGUE : 

Disagreement with Roosevelt 68 

Lobbying activities 62-63 n., 65 

New York lobby law, attacked by use of 196 

Program of, created public problems 43 

ANTITRUST LEGISLATION : 

Distributors and 181-182 

Exemption of labor from operation of 84, 86 n. 

APPALACHIAN COALS, INC., ET AL., v. U. S., cited 77 

APPLE ASSOCIATION, INTERNATIONAL 184 

APPROPRIATION BILLS : Opportunity for lobbies to influence policy___ 58-59 
ARGENTINE SANITARY CONVENTION : Opposition of farm groups to_ 60, 180 

ARMSTRONG REPORT: To New York Legislature 137 

ARNOLD, THURMAN W. : The Bottlenecks of Business, cited 181 

ASHWANDER ET AL., v. T. V. A., cited 159 

ASSOCIATION . See specific name of organization. 

203 



204 INDEX 

Page 

ATLANTIC AND PACIFIC TEA CO 180 

AUTOMOBILE ASSOCIATION, AMERICAN 48 

AYLESWORTH, M. H., cited ~ 153,155 

BAILEY, JOSIAH W., Senator, cited 184 

BAKER, R. J., cited 168 

BALDWIN, L. G. AND F. KD3LIN : Consumers Appraise the Food, Drug, 

and Cosmetic Act, cited 184 n. 

BALDWIN LOCOMOTIVE WORKS 120 

BANKERS ASSOCIATION, AMERICAN : 

Activities, program, pressures 125-131 

Business and 82 n., 128 

Classified among pressure groups 15 

Charters, stand on issuing of 129 

Credit, stand on 125-127 

Expenditures, stand on Government 129 

Influence in the 1920's 67 

Institute of Banking, American : use of 131 

Leading business association 82 n. 

Lobby of 131 

Money, stand on 126, 128 

Officers and directors of 82 n. 

Political control in banking, stand on 125-128 

Postal Savings System, stand on 128 

Propaganda of 129-131 

Publications, cited 125, 130 

Public policy and 43, 125 ff. 

Tax administration, assistance in 72 

Taxes : 

Stand on 128-129 

On undistributed profits, attack on 119 

Veterans' bonus legislation, opposition to 78 

BANKING (see also Credit; Money; and Names of banking pressure 

groups) 125-136, 137-139 

Industry, a satellite to 15, 125 

Insurance and 136-137 

Pressure groups of ■ 15 

Regulation of, opposition by National Association of Manufacturers 

to 94 n., 139 

BANKING ACT (1935) : 

Bankers Association, American, stand on 125-127 

Causes of 133 

Chamber of Commerce, attitude on 35 

BANKING AND CURRENCY COMMITTEE (Senate) : Hearings before 

subcommittee of (1935), cited 126-127 

BANKING, INSTITUTE OF AMERICAN. See under Bankers Associa- 
tion, American. 
BAR ASSOCIATION, AMERICAN : 

Activities, policies, organization, publications 37-40 

Business outlook of 15, 37, 81 

Classified, among pressure groups 15 

Lobbying activities of 49, 81, 191-193 

BARDO, C. L 101, 103 

BARKLEY: "Dear Alben" letter 64 

BEARD, CHARLES A.: An Economic Interpretation of the Constitution 

of the United States, cited 53 n. 

BEARD, CHARLES AND MARY : Rise of American Civilization, cited— 9, 87 

BENTLEY, A. F. : The Process of Government, cited 57 

BERLE, A. A., AND G. C. MEANS: Modern Corporation and Private 

Property, cited 6 

BERNARD, LAWRENCE J., cited 193 

BESSE, ARTHUR, quoted 116 

BLACHLY, F- F., AND M. E. OATMAN, Federal Regulatory Action and 

Control, cited T 192, 193 

BLACK, HUGO L., Senator 61-62, 169, 195 

BLAISDELL, T. C, JR., The Federal Trade Commission, cited_ 18,59n., 181, 185 
BLOCS IN CONGRESS 49-50 



INDEX 205 

BONUS, VETERANS': Page 

Judicial testing of , 78-79 

Lobbies for and against 57, 78 

BRADLEY, PHILLIPS, Administration— The Fourth Power in Modern 

Government, cited 194 n. 

BREWERS ASSOCIATION, UNITED STATES, stamina of 62-63 n. 

BRISSENDEN, PAUL, AND TRAVIS BROWN; Code Authorities and 
Their Part in the Administration of the National Industrial Recovery 
Act, cited , 181 n. 

BROTHERHOOD OF RAILROAD TRAINMEN. See Railroad Brother- 
hoods. 

BROWN, TRAVIS. See Brissenden, Paul. 

BUCK, S. J. ; The Granger Movement, cited 142-143 

BUDGET : 

Balanced . 121-122,129 

"Compensatory" 122 

Focus of group pressures 65-66 

BULKLEY, ROBERT J., Senator: Proposal for national advisory 
council 188-189 

BURCO, INC 160 

BUSINESS (see also Pressure groups, Trade associations, and names 
of business pressure groups) : 

Constitution, drafting of, and 9, 53 u., 109 

Defense, national and pressures of 163, 165-173 

Denned 3 

Directors of associations of 82 n. 

Expenditures, control of government 121-124 

Farm program, domination of 179-180 

Fusion of power and will , 1, 3, 175 

Government, control of 2-3,187 

Influence on government indirect : 2 

Objectives of 5, 29-37 

Pressure groups of : 

Classified 14-15 

Important 82 n. 

Strength of, in struggle for power 1, 16-24, 71-72, 107, 187 

Tax laws, control of ^ 58,109-121 

BUSINESS PLANNING AND ADVISORY COUNCIL (Department of 

Commerce) 107, 189 n. 

BUSINESS WEEK, cited 184 

BUTTER ET AL., RECEIVERS OF HOOSAC MILLS CORP. v. U. S., 

cited 78,180 

CALIFORNIA : 

Farm labor in 105-106 

Utilities' pressure in 156 

CARAWAY, HATTIE W., Senator 195 

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 166 

CARTER v. CARTER COAL CO., cited 74 

CATHOLIC WELFARE CONFERENCE, NATIONAL, program of, creates 

public questions 43 

CATTLE RAISERS' ASSOCIATION, TEXAS AND SOUTHWESTERN— 60 

CAVERS, DAVID F. : The Food, Drug, ond Cosmetic Act. cited 184,185 

CEMENT MANUFACTURERS PROTECTIVE ASSOCIATION v. U. S., 
cited _ 77 

CENSUS, BUREAU OF THE, publications, cited 175, 181 n. 

CHAMBER OF COMMERCE. See Commerce, Chamber of. 

CHASE NATIONAL BANK 120 

CHEMICAL SOCIETY, AMERICAN: Lobbying against poison-gas treaty- 59-60 

CHICAGO : 

Employers' associations 99, 100 

Journal of Commerce, cited 161 n. 

Union League Club of 100 

CHILD LABOR COMMITTEE, NATIONAL: Lobby for Children's Bu- 
reau 72—73 n. 

CHILDREN'S BUREAU (Department of Labor) ^ 72 

CHURCHES OF CHRIST, FEDERAL COUNCIL OF 166 n. 



206 INDEX 

Page 
CITIZENS' INDUSTRIAL ASSOCIATION OF AMERICA (see also In- 
dustrial Defense, Council of; Industrial Council, National) : organized 

by National Association of Manufacturers 83 

CIVIL LIBERTIES COMMITTEE. See Education and Labor, Senate 

Committee on. 
CIVIL LIBERTIES UNION, AMERICAN: Classified, among pressure 

groups 4 

CIVIL SERVICE REFORM LEAGUE, NATIONAL: Classified, among 

pressure groups 3 

CLAPPER. RAYMOND, cited 61-62 

CLARK, BENNETT CHAMP, Senator 184 

CLAYTON ACT 86 n., 181 

CLEVELAND, ASSOCIATED INDUSTRIES OF 81,95,103 

COAL ASSOCIATION, NATIONAL: 

Classified, among pressure groups 14 

Cooperative marketing scheme and Government suit 77 

Excise tax on imports, pressure for 114-115 

Program of, creates public problems 43 

Tennessee Vallev Authority, attack on 159-160 

COCHRAN. JOHN J., Representative cited 182 

COLORADO, utilities, use of schools of 154 n. 

COLORED PEOPLE, NATIONAL ASSOCIATION FOR THE ADVANCE- 
MENT OF : Classified, among pressure groups 4 

COMER, J. P. : Legislative functions of national admisintrative author- 
ities, cited : 73 n. 

COMMERCE, UNITED STATES CHAMBER OF : 

Activities, organization, and publications 25-37,43 

Classified, among pressure groups 14 

Defense, national, stand on merchant marine and — 163 

Industrial Recovery Act and 96 

Influence in the 1920's 67 

Leading business association 82 n. 

Lobbying activities of 30. 49, 81, 183, 191 

Merchant marine, stand on 163 

Officers and directors of 82 n. 

Slogans of „ , 51 

Taxes : 

Corporation income; stand on 117 

Undistributed profits: attack on 119 

Veterans' bonus legislation, opposition to 78 

COMMITTEE, . See specific name of group. 

CONCENTRATION OF POWER. See Business ; Pressure groups. 
CONFERENCE OF MAYORS. See Mayors, Conference of. 

CONGRESS OF INDUSTRIAL ORGANIZATIONS. See Industrial Organiza- 
tions, Congress of. 

CONGRESS, United States, group-pressure methods in 57-62 

CONSTITUTION, UNITED STATES, business interests in drafting 

of 9. 53 n., 109 

CONSUMERS GOODS INDUSTRIES COMMITTEE : Brief filed in Sugar 

Institute case 77 

CONSUMERS : 

Interests, ineffectiveness of 112-114, 121 

Pressure groups of 15 

Ta^es : See Taxes, excise, and Taxes, sales. 
CONSUMERS. LEAGUE, NATIONAL : 

Classified, among pressure groups 15 

Lobby for Food, Drug, and Cosmetic Act 184 n. 

Women's and Children's Bureaus, support for 72-73 n. 

CONSUMERS' UNION, cited 181 n. 

COOLIDGE, CALVIN, President, quoted 179 

COOPERATIVE BUILDER, cited 181 

COOPERATIVE COUNCIL, AMERICAN, classified, among pressure 

groups 15 

COOPER, ROBERT M., quoted 193 

COPELAND BILL 183-186 



INDEX 207 

Page 

COPPER INSTITUTE, classified among pressure groups 14 

CORN SUGAR, lobby for 185 

CORPORATION : 

Concentration of control through 6, 13, 175 

Taxes: Sec Taxes, income; Taxes, undistributed profits. 

CORTELYOU, GEORGE B 156 

COTTON GROWERS' EXCHANGE, American 113 

COTTON MANUFACTURERS, NATIONAL ASSOCIATION OF : Support 

in A. A. A. test case : 79 

COTTON TEXTILE INSTITUTE : Briefs filed in Appalachian Coals and 

Sugar Institute cases 77 

COUNCIL OF (FOR) See specific name of organization. 

COURTS : 

Labor and 86 n., 150-152 

Pressure groups' use of, to determine policy 73-79, 150-152 

COUZENS, JAMES, Senator, quoted 127 

COWDRICK, E. S 107 

CRAWFORD, KENNETH G., The Pressure Boys, cited 22,52, 

158, 166, 167, 170, 183, 196 n. 
CREDIT (see also Banking) ; 

Bankers' stand on : 125-127 

Farm demand for extension of 177, 178, 180 

Government extension of 139 

CROSSER ACT 150-151 

CUSTOMS. See Tariffs. 

DAIRY FARMERS : Discount with New Deal 115-116 

DAUGHTERS OF THE AMERICAN REVOLUTION: 

Classified, among pressure groups 3 

Defense, national, and 163 

Foreign policy, influence on 44-45 

Merchant marine and = 163 

Proceedings of Forty-third Congress, cited 53 

DAVIS, EWIN L., cited 185 

DAVIS, JOHN W 77, 159, 160 

DEFENSE, NATIONAL: 
Business : 

Exploitation of 163, 165-173 

Philosophy and 170-173 

Chamber of Commerce attitude on 37,163 

Pressure groups and subsidies for 163-173 

DES MOINES CHAMBER OF COMMERCE 188 n. 

DETZER, DOROTHY 166 

DICKINSON, J., Democratic Realities and Democratic Dogma, cited- 45 n., 56 n. 

DIETETIC ASSOCIATION, AMERICAN 184 n. 

DISTRIBUTION 180-186 

Farm demand for reduction in cost of : 177 

DRISCOLL, DENIS J., Representative 161 n. 

DUKE POWER CO. ET Ah. V. GREENWOOD COUNTY ET AL., cited 159 

DU PONTS 170 

DURANT, WILL 189 n. 

ECONOMIC EQUALITY, LEAGUE FOR 78 

ECONOMY LEAGUE, NATIONAL, opposition to veterans' bonus legisla- 
tion 78 

EDISON ELECTRIC INSTITUTE (see aim National Electric Light Asso- 
ciation) : ^ 

Banke*s and — 138 

Black, Senator, investigation of 195 

Classified, among pressure groups 14 

Leading business association ^ 82 n. 

Life, length of 141 

Officers and directors of 82 n. 

'Public Utility Holding Company Act, attacks on 158-162 

Regulation, campaign against 77, 158-162 

Roosevelt, disagreement with 68 

EDITOR AND PUBLISHER, quoted 186 u- 



208 INDEX 

EDUCATION (see also names of pressure groups for) : Page 

Bankers and 130-131 

Pressure groups of , 43, 59 

Public utilities' use of institutions of 154-155 

Slogans of 52 

EDUCATION AND LABOR, COMMITTEE ON (Senate) : 

Hearings before, cited 100 

Report on National Association of Manufacturers, cited 17, 

20-21, 26, 81, 82 n., 83, 84, 95-105, 161 

Subcommittee of, Hearings before, cited 85,94,97-104,107 

EDUCATION ASSOCIATION, NATIONAL, program of, creates public 

problems 43 

EIGHTEEN (18) COMPANY case, cited 160 

ELECTIONS: relations of pressure groups to '. 54-55,66-67 

ELECTRIC BOND & SHARE CO. v. S. E. C, cited 159 

ELECTRIC LIGHT ASSOCIATION, NATIONAL {see also Edison Elec- 
tric Institute) : 

Classified, among pressure groups 14 

Federal Trade Commission report on 153, 195 

Ownership, campaigns for consumer 155-156 

Press, use of 153-154 

Propaganda campaign, of 25, 152-156 

Regulation, attacks on 152-158 

Republicans, agreement with regime of 67 

Schools, use of - 154-155 

ELECTRIC POWER INDUSTRY, propaganda campaigns of 21, 25, 152-162 

ELECTRIC RAILWAY ASSOCIATION, AMERICAN 156 

ELLIS, LIPPERT S., The Tariff on Sugar, cited 110 n. 

EMERGENCY FARM MORTGAGE ACT 176,180 

EMERY, JAMES A 84, 97, 98, 100, 118, 157 

EMPLOYEES. See Labor; Industrial relations. 

EMPLOYERS (see also Industrial relations; and names of employer 
pressure groups) : 

Pressure groups of 14, 81-85 

EXCESS PROFITS TAX and business pressure 172 

EXCISES. See Taxes. 
EXPENDITURES, GOVERNMENT : 

Bankers Association, stand on 129 

Business influence on 121-124 

"Compensatory" 122 

Defense, and business 123 

FAIR LABOR STANDARDS ACT, opposition of Chamber of Commerce 

to -: 29 

FAIR TRADE ACT 58, 181-182 

FAIR TRADE LEAGUE 49 

FARM BLOC in Congress , 49, 176 

FARM BOARD, FEDERAL 114, 179 

FARM BUREAU FEDERATION, AMERICAN: 

Activities, policies, organization 176-177 

Agricultural Adjustment Act and 78, 178, 180 

Classified, among pressure groups ; 3, 15 

Democrats, preference for 67 

Farm bloc founded by 49, 176 

Lobbying activities of 50-51, 58, 60, 65, 113, 115, 123, 180 

Planning and discussion council, proposal for governmental 188 

Program of, creates public problems 43 

Publications of, cited 176-177 

Ship-mail subsidies, proposal for propaganda for 169 

Slogan of 176 

FARM CREDIT ADMINISTRATION : 

Chamber of Commerce attitude on 36 

Farm interest rates and . . 180 



INDEX 209 

Page 

FARMERS (see also names of farm pressure groups) 175-180,186 

Bankers' publications for . . 130 

Business domination of program for 179-180 

Credit demands of. See Credit. 
Dairy : 

discontent with New Deal 115-116 

Oleomargarine taxes and , 113, 121 

Farm Board obtained by lobby in 1929 tariff revision 114 

Food, Drug, and Cosmetic Act, lobby against provisions of 184, 185 

Oleomargarine lobby ^ 113, 121 

"Parity" and the tariff 111, 112 

Pressure groups of 3-4, 15 

Aid of Roosevelt to 67-69 

Sympathy of Government for , 17 

Tariff agitation 111, 112-113 

Tariff propaganda of business accepted by 110 

FARMERS' EDUCATIONAL AND COOPERATIVE UNION : 

Activities, program, organization 178 

Classified, among pressure groups— 3, 15 

Lobbying activity of 113 

FARMERS' UNION. See Farmers' Educational and Cooperative Union. 

FARM INSTITUTE, NATIONAL 188 n. 

FARM LABOR, relations with employers 105-106 

FARM MORTGAGE ACT. See Emergency Farm Mortgage Act. 

FARM PROBLEM, Chamber of Commerce attitude on 36 

FARM PROGRAM, business domination of 179-180 

FEDERAL COUNCIL OF CHURCHES OF CHRIST 166 n. 

FEDERAL EMPLOYEES, NATIONAL FEDERATION OF, lobbying 

activities of 48, 72 n. 

FEDERAL FARM BOARD. See Farm Board, Federal. 

FEDERAL LAND BANKS, Chamber of Commerce attitude on 36 

FEDERAL POWER COMMISSION : 

Chamber of Commerce attitude on ; 36 

Utilities' fight against regulation by 157-158 

FEDERAL RESERVE BOARD 126-127 

FEDERAL TRADE COMMISSION: 

"Big Business," failure to control 17-18 

Chamber of Commerce suggestions for 31 

Electric power industry, report on propaganda of 21, 152-156 

Meat-packing industry, report on, and attack by 58-59 

FEDERATION OF INVESTORS, AMERICAN 138 

FINANCE. See Banking. 

FLETCHER, R. V., cited 146,152 

FLORIDA, life insurance lobby in 136-137 

FOOD AND DRUG ACT (see also Copeland bill) 183 

FOREIGN POLICY (see also Treaties: Defense, National), controllers of- 44-45 

FOREIGN POLICY ASSOCIATION 166 

FOREIGN TRADE COUNCIL, NATIONAL 60-61 

FRAZIER LEMKE ACT : 

Lobby against 137 

Test case of , 77 

FURUSETH, ANDREW 64 

GALLUP POLL 46 n. 

GARY, ELBERT H., JUDGE, quoted 170 

GAS AND ELECTRIC CO., ASSOCIATED _i 161 

GAS ASSOCIATION, AMERICAN 153 

GENERAL ELECTRIC CO 107,120 

GENERAL WELFARE. See Welfare, general. 
GEORGIA. 

Life insurance lobby in 136 

Lobbying declared crime in 1877 Constitution of__ 195 

Utility pressure in 156 

GIRLS FRIENDLY SOCIETY OF U. S. A 184 n. 



210 



INDEX 



GOMPERS, SAMUEL: p age 

Seventy Years of Life and Labor, cited 04 

Tactics with Federation of Labor 87 

GOODYEAR TIRE & RUBBER CO 107 

GOSNELL, H. F. See Merriam, C. E. 

GOVERNMENT (see also Administration; Defense; Expenditures, Gov : 
ernment; Lobbies; Pressure groups; Taxes): 

Contacts with pressure groups, points of 57-79 

Continuity, lack of 2, 16-18 

Organization and power, lack of . 1-2, 16-24 

Philosophy, lack of consistent 2 

Representation in 1-3, 187-190 

GRANGE, NATIONAL: 

Activities, policies, organization 177-178 

Activities to initiate utility regulation 76, 142-144 

Blue Book, cited 143-144, 178 

Classified, among pressure groups 3, 15 

Lobbying activities of 60, 113, 115, 123, 142-144, 180 

Public policy and 43, 142-144 

Utilities and 142-144 

GRANGER COURT CASES 142-143 

GRAUSTEIN, ARCHIBALD, cited—, 154 

GREEN, WILLIAM, President, American Federation of 

Labor 61, 89 n., 90, 91 105 

GRUNDY, JOSEPH, quoted 112 n. 

GUARANTY TRUST CO 119 

GUFFEY COAL ACT 58 

HALL, EDWARD B., cited v 133 

HAMILTON, W. H, AND D. ADAIR : The Power to Govern, cited 74, 75, 76 

HAND, LEARNED : Is There a Common Will? cited 46 n. 

HARDWOOD MANUFACTURERS ASSOCIATION, AMERICAN 77 

HARVESTER CO., INTERNATIONAL 107 

HAWLEY-SMOOT TARIFF 112-115, 176 

HAYS, ORGANIZATION 183 

HECHT, R. S., cited 125 n. 

HELM, WILLIAM P., cited 119 

HENNING, A. S., cited 65 

HERRING, E. P. : 

Group Representation Before Congress, cited 47, 

48 n., 49 n., 50 n., 53, 54 n., 55 n., 197 
Public Administration and the Public interest, cited— 72, 127, 128, 150, 157 

Special Interests and the Interstate Commerce Commission, cited 150 

HOCH-SMITH RESOLUTION 149 

HOLCOMBE, A. N. : The Political Parties of Today, cited 66 

HOME ECONOMIC ASSOCIATION, AMERICAN 184 n. 

HOME MISSIONS, COUNCIL OF WOMEN FOR 184 n. 

HOOK, CHARLES R 97,99 

HOOSAC MILLS case. See Butler, et al. 

HOUSTON, G. II r. 120 

HUMANITARIAN AND CIVIC PRESSURE GROUPS 4 

ILLINOIS: the Grange and public-utility regulation 142-143 

IMPORTERS AND TRADERS, NATIONAL COUNCIL OF AMERICAN— 114 

IMPORT EXCISES. See Excises, import. 

INCOME TAXES. See Taxes. 

INDEPENDENT PETROLEUM PRODUCERS, ASSOCIATION. See Petroleum 

Producers Association, Independent. 
INDUSTRIAL CONFERENCE BOARD, NATIONAL: Organized by Na- 
tional Association of Manufacturers 85 

INDUSTRIAL COUNCIL, NATIONAL (see also Citizens' Industrial Asso- 
ciation of America; industrial Defense, National Council of) : 

Activities of 81, 82, 85-86 

Classified, among pressure groups . 14 

Industrial Truth, The, cited 101 

Labor Relations Act, campaign against 99-105 

Manufacturers, agency of National Association of 14,81,82 

Length of life 16,85 

New Deal and labor, campaign against 95-105 



INDEX 211 

Page 
INDUSTRIAL DEFENSE, NATIONAL COUNCIL OF (see also Citizens' 
Industrial Association of America and Industrial Council, National) : 

Activities of 83-85 

Congressional investigation of 20,84-85 

Length of life 83-85 

Manufacturers, agency of National Association of 20 

INDUSTRIAL ORGANIZATION, COMMITTEE FOR (see also Industrial 

Organizations, Congress of) 88 

INDUSTRIAL ORGANIZATIONS, CONGRESS OF : 

Activities, organization, objectives of ^_ 88-91 

Classified, among pressure groups 4, 15 

Labor's Non-Partisan League 92 

Political influences of 66 

Public problems, creation of 42 

INDUSTRIAL RECOVERY ACT, NATIONAL: 

Labor provisions of 88,89,93 

Opposition to, by National Association of Manufacturers 98-99 

Public Works Title attacked by Edison Electric Institute 77 

Sherman Act suspension by, and distributors , 181 

INDUSTRIAL RELATIONS (see also Labor, Employers, and names of 

trade associations and labor organizations) 81-107 

Chamber of Commerce, stand on 32-34 

National Association of Manufacturers, policies in 81-107 

INDUSTRIAL TRAFFIC LEAGUE. NATIONAL 149 

INDUSTRIES OF CLEVELAND, ASSOCIATED 81, 95, 103 

INDUSTRY (see also Manufacturers; Trade associations; Business; etc.). 

INDUSTRY, COUNCIL OF AMERICAN 95 

INEQUALITY ; as a source of legislation 71-72 

INJUNCTIONS. See Labor Relations Board ; Norris-LaGuardia Act. 
INSTITUTE OF AMERICAN MEAT PACKERS. See Meat Packers, In- 
stitute of American. 
INSTITUTE OF PUBLIC OPINION, AMERICAN. See Public Opinion, 
American Institute of. 

INSULL, SAMUEL, quoted 154 

INSURANCE . . 136-137 

INTERNATIONAL . See specific name of organization or 

company. 

INTERSTATE COMMERCE ACT 143 

INTERSTATE COMMERCE COMMISSION: 

Chamber of Commerce, suggestions on 36 

Cooperation with Association of American Railroads 73, 148-149 

Powers of 145, 147 

Pressures on, from legislature 149-150 

Public interest and 141-142 

Studies of 144 n., 145 

INTERSTATE COMMERCE, COMMITTEE ON (Senate): 

Hearings on Food and Drug Act, cited 184-185 

Hearings on railroad reorganization, cited 146 

INVESTMENT BANKERS ASSOCIATION: 

Activities, policies, and methods of pressure 131-136 

Business outlook of 132 

Classified, among pressure groups : 15 

Investment Bankers Conference and 132, 134, 135 

Membership ofi 132 

Publications of. cited 132, 134 

Public policy and 43, 131-136 

Public utilities and 156-157 

Securities Act and 132, 133-134 

Tax on undistributed profits, stand on 119 

"Wall Street" group 69 

INVESTMENT BANKERS CONFERENCE. &..V under Investment Bank- 
ers Association. 

INVESTORS, AMERICAN FEDERATION OF 138 

IOWA: The Grange and public utility regulation : 142 

IRON AND STEEL INSTITUTE, American : 

Classified, among pressure groups 14 

Lobbying activities of : ■ 97, 105 



212 INDEX 

Page 
JEWISH WOMEN, NATIONAL COUNCIL OF 184 n. 

JOINT COMMITTEE OF NATIONAL UTILITY ASSOCIATIONS.- 152, 153 n. 
JONES, JESSE, quoted 146 

JOURNALISM. See Press; Education. 

JUDICIAL REVIEW. See Courts. 

JUDICIARY COMMITTEE (House) : Hearings of Subcommittee on Ad- 
ministrative Law Procedure, cited 192, 193, 194 

JUDICIARY, COMMITTEE ON THE (Senate) : Hearings, cited 84 

JUSTICE DEPARTMENT, ANTITRUST DIVISION: Attack on appro- 
priations for 59 

KANSAS CITY BOARD OF TRADE : Railroad pressure on 147 

KANSAS CITY STAR, quoted 102 

KEEP AMERICA OUT OF WAR COMMITTEE : Classified, among pres- 
sure groups 4 

KEMPER, W. T., quoted 147 

KERSTEIN, LOUIS, cited 182 

KIRBY, JOHN, quoted 84 n. 

KIRLIN, F. See Baldwin, L. G. 

KNIGHTS OF LABOR 87 

KREPS, T. J., testimony of, before Temporary National Economic Com- 
mittee 22-23 

LABOR (see also Labor, American Federation of: Industrial Organiza- 
tions, Congress of ; Railroad brotherhoods ; Education and Labor, Senate 
Committee on ; Manufacturers, National Association of ; Commerce, 
Chamber of; Industrial relations) : 

Chamber of Commerce policies on 32-34 

Farm 105-106 

Lobbying activities of 91-93 

Manufacturers, National Association of, attack on unions__17, 81-86, 92-107 

Presidents and — 68-69 

Pressure groups of 4, 15, 86-91 

Slogan of 51, 93 

LABOR, AMERICAN FEDERATION OF : 

Activities, polocies, and development of ■— 86-92 

"American standard of living" and 93 

Business development, attitude on questions of 86-87 

Classified, among pressure groups 4, 15 

Industrial unions and 1 88-91 

Industrial Recovery Act and 96 n. 

Influence of 86 n. 

Labor Relations Act and 102, 105 

Lobbving activities 42, 61, 64, 72 n., 86 n. 

Pattern of 42, 61, 64, 72 n., 86 u. 

Manufacturers, National Association of, opposes growth of power of__ 85 

Nonpartisan Declarations, Half Century Political Policy, cited 92 

Public ownership of railroads supported by 144 

Railroad brotherhoods, cooperation with . 150-151 

Report of Proceedings, cited , 88, 89 

'Tariff, lack of pressure on 112 

LABOR BOARD, NATIONAL 97 

LABOR RELATIONS ACT, NATIONAL : 

Amendments to, proposed 105-106 

Business opposition to 21, 29, 32-34, 81, 99-107 

Manufacturers, campaign of National Association of 99-107 

Produces demand for industrial democracy 93 

Upheld by Supreme Court 104 

LABOR RELATIONS BOARD, NATIONAL : 

Attack on appropriations for 59 

Criticism of: 

by employers' associations 104 

by Senator Logan 192 

Injunctions, experience with 104, 194 

Investigation of, Congressional 105 

National Association of Manufacturers' attack on 100 

Powerless at first 100 

Set up in 1934-35 _ 99 

Wagner bill to broaden powers of 100-101 



INDEX 



213 



Pag« 

LABORS NONPARTISAN LEAGUE 92 

LABOR PARTY, AMERICAN __ 91 n 

LABOR STATISTICS, BUREAU OF: 

Characteristics of Company Unions, cited 107 

LA FOLLETTE CIVIL LIBERTIES COMMITTEE. (See Education and 

Labor, Committee on.) 
LA FOLLETTE, ROBERT M., Senator : proposal for Government advisory 

council 187-188 

LA FOLLETTE SEAMEN'S ACT _ 64 

LAMBERT PHARMACAL CO 184 

LAND GRANT COLLEGE ASSOCIATION 59 

LAWYERS (see also Bar Association, American) : 

Business lobby, aid to 9-10, 15 

Constitution, drafting of 53 n. 

LEA, CLARENCE F., Representative, quoted 183 

LEAGUE FOR ECONOMIC EQUALITY 78 

LEAGUE OF NATIONS ASSOCIATION 166 

LEAGUE OF WOMEN VOTERS, NATIONAL. See Women Voters, Na- 
tional League of. 
LEGION, AMERICAN : 

Classified, among pressure groups 3 

Conscription, universal, and 120, 171 

Defense, national, and 163 

Foreign policy, influence on 44-45 

Lobbying, activities of 47-48, 60, 171 

Merchant marine and 163 

Public problems created by 43-44 

Wealth, program for conscription of 120, 171 

LETGHTON J. A 189 n. 

LEWIS, GEORGE E., quoted 154 

LEWIS, JOHN L. : 

A. F. of L. criticized by 89-90 

C. I. O. organized by 88 

Defense and : Charges of industry's sabotage 172 

Labor Relations Act and : criticizes amendments 105 

LIFE INSURANCE. See Insurance. 

LIFE INSURANCE PRESIDENTS, ASSOCIATION OF: 

Activities, policies, methods of 136-137 

C'assified, among pressure groups 14 

Frazier-Lemke Act : 

Court test of 77, 137 

Lobby against 137 

Lobby of 137 

LININGER, F. F., Dairy Products Under the Agricultural Adjustment 

Act, cited— 116 

LINSEED OIL CO . AMERICAN. See American Linseed Oil Co., V. S. v. 
LIVESTOCK GROWERS ASSOCIATION, AMERICAN NATIONAL: 

Classified, among pressure groups 15 

Lobbying activities of 60, 113, 178-179 

LIVESTOCK MARKETING ASSOCIATION, NATIONAL 60 

LIVESTOCK SANITARY ASSOCIATION, UNITED STATES 60 

LOANS. See Credit. 

LOBBIES (see also Pressure groups) : 

"Old" and "new" types 48n 

Pattern of 49-53 

Registration and other methods of controlling: 194-196 

LOGAN, E. B., Lobbying, cited 55 

LOGAN, M. M., Senator, quoted 192 

LOG-ROLLING and the tariff 116 

LONG, HUEY, Senator 115 

LONG, WILLIAM FREW 95, 103 

LUDLOW RESOLUTION 46 n. 



214 



INDEX 



LUMBER MANUFACTURERS' ASSOCIATION, NATIONAL: Page 

Briefs filed in Appalachian Coals and Sugar Institute cases 77 

Classified, among pressure groups 15 

Interest in internal revenue regulations.- 72 

Occupational representation, support for 2-3 

Program of, creates public problems 43 

Tariff revision of 1929 113-114, 115 

LUND, ROBERT L 96-97, 103, 105 

LYKES BROS.-RIPLEY STEAMSHIP CO 167-168 

LYON, LEVERETT S., et al. : Government and Economic Life, cited 181 

McBAIN, HOWARD L. : 

Does a Minority Rule America ? cited 41 

The Issue : Court or Congress, cited 75 

Mccracken, william p., jr non. 

McGUIRE, COL. O. T, quoted . 192-193 

McNARY-HAUGEN BILL 112, 179 

MADISON, JAMES, The Federalist, cited 72 

MAGILL, DR. HUGH S., cited 138 

MAIL CONTRACTS, investigation of 167-170 

MANLY, BASIL 61 

MANUFACTURERS ASSOCIATION, PENNSYLVANIA. See Pennsylvania 
Manufacturers Association. 

MANUFACTURERS, NATIONAL ASSOCIATION OF (see also Education 
and Labor, Senate Committee on) : 

"American system" and : See Slogans of. 

Business influence, main channel of . 81 

Classified,* among pressure groups 14 

Congressional investigations of - 20-21, 84-85 

Declaration of Principles Relating to the Conduct of American Industry 

(1939), quoted 93-94 

Defense program and 172 

Industrial Council, National : organization and use of 14. 20, 81, 95-105 

Influence in the 1920's 67 

Influence in 1940 crisis , 44 

Labor platform of 83 n., 94 

Labor policies of 17, 81-86, 92-107 

Labor Relations Act, campaign against 99-107, 194 

Life, length of 16 

Members of 82 n., 95, 104 

New Deal and labor, campaign against 94-107 

Npws release, cited 98,100 

Officers and directors of 82 n. 

organization of 16, 82 

Platform of American Industry, cited 76 n., 82, 101 n. 

Proceedings, cited 84-85 

Public utility investigation and 157 

Slogans of 9, 42-43, 51, 93 

Taxes : 

Corporation income: stand on 117 

Income: pressure on 118-119 

Undistributed profits: attack on 119-120 

Veterans' bonus legislation, opposition to 78 

"Wall Street" group , 69 

MAPLE FLOORING MANUFACTURERS ASSOCIATION v. U. S., cited— 77 

MARITIME COMMISSION, UNITED STATES 169 

MARKETING. See Distribution. 

MASSACHUSETTS, lobby registration law in 195 

MAYORS, CONFERENCE OF : Basis of pressure on President 67 

MEANS, G. C. See Berle, A. A. 

MEAT PACKERS, INSTITUTE OF AMERICAN : 

Government pressure on, counter attack to divert 58-59, 185 

Public problems created by_ T , 43 

MEDICAL WOMEN'S ASSOCIATION, AMERICAN 184 n. 

MERCHANT MARINE ACT 168-169 

MERCHANT MARINE INSTITUTE, AMERICAN : 

Classified, among pressure groups 14-15 

Defense, national, exploitation of 165 



INDEX 215 

Page 
MERRIAM. C. E., AND GOSNELL, H. F. : The American Party System, 

cited 42, 55 

METAL TRADES ASSOCIATION, NATIONAL : 

Affiliated with Citizens Industrial Association 83 

Campaign against labor bills , 98-102 

Employer organization 81 

Mimeographed letters to members, cited 98-99 

MEXICO: Oil-land confiscation and pressure groups 166 

MIDAMERICAN CO 146 

MILITARY SURGEONS, ASSOCIATION OF : Opposition to Geneva proto- 
col against poison-gas use 60 

MILK PRODUCERS FEDERATION, NATIONAL COOPERATIVE 113, 178 

MILLER-TYDINGS ACT. See Fair Trade Act. 

MINNESOTA : The Grange and public-utility regulation 142 

MISSOURI, railroads and 147-148 

MISSOURI-PACIFIC RAILROAD 146-148 

MONEY (see also Credit) : 

Bankers' stand on 126, 128 

Farmers' stand on 176,178 

MORGAN, J. P., & Co 170 

MOTION-PICTURE INDUSTRY 182-183 

MULFORD v. SMITH, cited 180 

MULHALL INVESTIGATION 157, 195 

MUNICIPAL OWNERSHIP LEAGUE, lobbying activities of 62 

MUNITIONS INDUSTRY, SPECIAL SENATE COMMITTEE TO IN- 
VESTIGATE 163, 166 

Cited 164,170-171 

MUNN v. ILLINOIS, cited 143 

NAG EL, CHARLES, Secretary of Commerce and Labor, aid in organizing 

Chamber of Commerce 25 

NATIONAL . See specific names of organizations, acts, etc. 

NATION'S BUSINESS (periodical), organ of Chamber of Commerce__ 26, 27, 28 

NAVAL EXPANSION ACT (1935) 172 

NAVY DEPARTMENT: Cooperation with Navy League ^ 165 

NAVY LEAGUE : 

Activities, policies, and organization 163-165 

Classified, among pressure groups 3 

Influence on foreign policy 44-45 

NEELY-PETTENGILL BILL 182 

NEW DEAL : 

Dairy farmers' discontent with 115-116 

Equalizing bargaining power of groups 187 

Expenditure program of 121-123 

National Association of Manufacturers' struggle against 94-107 

Tax policies of 119-121 

NEW MEXICO : Public utilities use of schools of 154 n. 

NEWSPAPERS. See Press. 

NEWSPAPER PUBLISHERS' ASSOCIATION, AMERICAN : 

Business attitude of 15. 81-82 

Classified, among pressure groups 15 

Food, Drug, and Cosmetic Act, lobby in 185-186 

Program of, creates public problems 43 

NEW YORK (see also Special Conference Committee of New York) : 

Insurance lobby, report on (1906) 137 

Lobby law, experience with 195-196 

NEW YORK BOARD OF TRADE : Attack on undistributed-profits tax 119 

NONPARTISAN LEAGUE (agricultural) 176 

NONPARTISAN LEAGUE, LABOR'S 92 

NORRIS. GEORGE, Senator 256 

NORRIS-LaGUARDIA ACT 86 n.. 97 

NURSES ASSOCIATION, AMERICAN 184 n. 

NYE, GERALD P., Senator 166,170 

OATMAN, M. E. See Blacklv, F. F. 
OCCUPATIONAL REPRESENTATION : 

Lumber Manufacturers Association support for 2-3 

Plans for 187-189 

277780— 41— No. 26 15 



216 INDEX 

Page 

OHIO: Lobby law experience 195 

OLEOMARGARINE. See Taxes, oil. 

OMAHONEY, JOSEPH C, Senator, quoted ., 187 

O'NEAL, EDWARD A., cited 172,175 

OPEN SHOP CONFERENCE, AMERICAN PLAN. See American Plan 
Open Shop Conference. 

OXLEY, GEORGE F., quoted ^ 15G 

PADELFORD, N. J A The Veterans' Bonus and the Constitution, cited 79 

PAPER CO., INTERNATIONAL 154 

PARENT-TEACHERS' ASSOCIATIONS 183, 184 n. 

PARKER, JOHN H., Judge, protest against appointment to Supreme 

Court of 61 

PARTIES, POLITICAL: 

Decline of, with growth of pressure groups 54-55 

Pressure groups and, in elections 54-55,66-67,91-92 

PATRIOTIC-ORGANIZATION PRESSURE GROUPS (see also names of 
various organizations) : 

Names of 3 

Pressure from 52-53 

PATRIOTISM AND BUSINESS 163, 165, 170-173 

PATRONS OF HUSBANDRY. See Grange. 

PEACE SOCIETY, AMERICAN: 

Educational rather than lobbying organization 166 

Foreign policy, influence on , 44 4 5 

PELLEY, J. J 1 189 n. 

PENNSYLVANIA MANUFACTURERS' ASSOCIATION, contribution to 

Coolidge campaign fund by 112n 

PENNSYLVANIA RAILROAD 151 

PEOPLE'S LEGISLATIVE SERVICE, lobbying activities of 61 

PEPSODENT CO 181 

PETROLEUM INSTITUTE, AMERICAN: 

Classified, among pressure groups 14 

Program of, creates public problems 43 

Tariff revision of 1929, inactive in 113-114 

PETROLEUM PRODUCERS ASSOCIATION, INDEPENDENT : lobbying 

activities of 48, 113 

POWER : 

Contestants for 1-5, 13-24,148 

Control and, distinguished 1 

Control of, methods of 5-6 

Methods of controlling 5-6 

Struggle for, characteristics of 6-10 

POWER ACT 157 

POLITICAL PARTIES. See Parties, political. 

POLLS OF PUBLIC OPINION, possibility of use of 46 

PRESIDENT'S COMMITTEE ON ADMINISTRATIVE MANAGEMENT, 

cited 190 

PRESIDENT'S RESEARCH COMMITTEE ON SOCIAL TRENDS, cited— 87 n., 

189, 196 

PRESIDENT, UNITED STATES, pressure on 63-70 

PRESS (see also Newspaper Publishers' Association) : 

Amlie, opposition to appointment of = 62 

Bankers' use of , 130 

Business, asset to, in struggle for control 9,15 

Business outlook of 6,9 

Railroad pressure on _ 147 

Slogan * of 51 

Utilities' use of 353-154 

PRESSURE GROUPS (see also Lobbies) : 

Activities, metnods, and power of _ 13-24,41-79 

Congress, methods in 57-62 

Cooperation an offset to questionable effects on Government 73 

Elections and. See Elections. 

List of organizations with representatives in Washington 197-201 

Names of various 3-4,14-15,197-201 



INDEX 



217 



PRESSURE GROUPS— Continued. Page 

Place of, in American political life 41-56,66-67 

Programs to meet threat of 10, 187-196 

Struggle for power, one of contestants in 13-14 

Types of _ 3_4, 14-15 

PREVENTION OF WAR, NATIONAL COUNCIL FOR THE. (See War, 
National Council for the Prevention of.) 

PROHIBITION AMENDMENT, ASSOCIATION AGAINST THE: 

Lobbying activities 62-63 n. 

Program of, created public problem , 44 

Roosevelt, agreement with 68 

PROPERTY TAXES. See Taxes. 

PROPRIETARY ASSOCIATION 185 

PROTECTIONISM. See Tariffs. 

PUBLIC : 

Ignorance of social legislation . 41 

Legislation always supported in name of 52,57-58 

Passiveness of 5 

PUBLIC CONTRACTS ACT, opposition of Chamber of Commerce to 29 

PUBLIC OPINION: 

Creation of, by pressure groups 45-47 

Inertia of 4-5, 46 n., 63-64 

Power of 4, 46 n. 

PUBLIC OPINION, AMERICAN INSTITUTE OF 46 

PUBLIC UTILITIES {see also Railroads, Electric power industry, Edison 

Electric Institute) 141-162 

Bankers and 138-139, 146-148 

Chamber of Commerce policy on 36 

PUBLIC UTILITY EXECUTIVES, COMMITTEE OF 152,161 

PUBLIC UTILITY HOLDING COMPANY ACT : 

Causes of 133, 161-162 

Edison Electric Institute, attack on 77, 138, 158-161 

RADFORD v. JOINT STOCK LAND BANK, cited 137 

RAILROAD ASSOCIATIONS, STATE 146 

RAILROAD RETIREMENT BOARD v. ALTON, cited 77, 151 

RAILROADS 141-152 

Banker control of 146-148 

Labor and 150-152 

RAILROADS, ASSOCIATION OF AMERICAN: 

Activities, policies and organization 141-152 

Amlie, opposition to appointment to I. C. C. of i 62 

Banking and ■__ 138-139 

Classified, among pressure groups 14 

Fuel Power Educational Foundation organized by '. 145 

Interstate Commerce Commission, cooperation with 73, 148-149 

Labor Relations Act and 105 

Labor, relations with 150 

Officers and directors of 82 n. 

Organization of 141 n., 144 

Program of, create public problems 43 

Publications of, cited — : 144 

Public regulation and 145 

Railroad Security Owners Association organized by 145 

Retirement legislation, attacked in court by 79, 151-152 

Subsidiary organizations of ~~ 145 

Tax on undistributed profits, attack on 119 

Transportation Association organized by 145 

RAILROAD BROTHERHOODS: 

American Federation of Labor, difference with 91 

Classified, among pressure groups 4, 15 

Interstate Commerce Commission, cooperation with 148 

Lobbying activities 62, 115 

Public ownership of railroads supported by 144 

Railroads, power in struggle with 150-152 

RAILROAD LABOR EXECUTIVES' ASSOCIATION 105,152 

RAUSHENBUSH, STEPHEN AND JOAN: 

War Madness, cited 170-171 



218 INDEX 

Page 

RECENT SOCIAL TRENDS, Report of President's Committee, cited 87 n., 

189, 196 
RECIPROCAL TRADE AGREEMENTS, Chamber of Commerce attitude 

on 37 

RECOVERY ADMINISTRATION, NATIONAL, codes of: 

Example of Government-pressure-group cooperation 73 

Suggested by Chamber of Commerce 69 

REFORM PRESSURE GROUPS 3 

RELIEF. See Unemployment relief. 

RENNE, R. R., The Tariff on Dairy Products, cited 110 n. 

REPRESENTATION : 

Forms of . 1 

Geographical basis of: 

Choice of, reasons for 53-54 

Invisibility of struggle for power promoted by 7 

Parties and pressure groups a supplement for 53 

Purposiveness of government lost through 1-2 

Unsatisfactory today 54. 187 

Interests a basis for 54 

Occupational, supported 2-3 

RESEARCH, GOVERNMENTAL : 

Aid to business 23 

Need for _ 10-11 

RESOURCES COMMITTEE, NATIONAL: 

Science Committee, cited : 23 

Structure of the American Economy, cited 15, 18, 19, 21, 82 d„ 93, 125 

RESOURCES, NATURAL: Chamber of Commerce policies on 36 

RESOURCES PLANNING BOARD, NATIONAL (see also Resources 

Committee, National) -j. 190 

RETAIL DRUGGISTS, NATIONAL ASSOCIATION OF 181 

RETAIL DRY GOODS ASSOCIATION, NATIONAL: assistance in in- 
come-tax administration 72 

RETAIL FEDERATION, AMERICAN 15, 181-182 

RITCHIE, ALBERT C, Governor, cited 37,38 

ROBINSON PATMAN ACT 32, 181 

ROOSEVELT, FRANKLIN D., President, quoted 48 

ROSEN, S. McKEE : Political Process, cited 46 n., 112 n. 

SAFETY APPLIANCE ACT 148 

ST. LOUIS CHAMBER OF COMMERCE : railroad pressure on 147 

SARGENT, F. W., quoted 145 

SAYRE, HOMER D. : 

Campaign against Labor Disputes Bill 98-99 

Reorganization of National Industrial Council 95 

SCHATTSCHNEIDER, E. E., Politics, Pressures, and the Tariff, cited— 71,113 
SCHOOLS. See Education. 

SCHULTZ, T. W n Tariffs on Barley, Oats, and Corn, cited 110 n. 

SEAMEN'S ACT, LA FOLLETTE 64, 86 n. 

SEAMEN'S UNION, INTERNATIONAL 64, 86 n. 

SECURITIES ACT 132, 133 

SECURITIES AND EXCHANGE ACT 132,133 

SECURITIES AND EXCHANGE COMMISSION: 

Attack on appropriations for 59 

Investment Bankers' Association and 134, 135 

Report on Legal Reserve Life Insurance Companies, cited 136-137 

Selected Statistics on Securities and on Exchange Markets, cited 132 

SELVAGE, JAMES P., cited 102 

SHERMAN ANTITRUST ACT: 

Distributors and 181-182 

Labor and 84, 86 n. 

SHERRILL, C. O 182 

SHIPPING 163-169 

SHIPPING BOARD 167-169 

SHIPP, THOMAS R 168-169 

SHORTHORN BREEDERS' ASSOCIATION, AMERICAN 60 

SILK ASSOCIATION 113 

SILK DEFENSE COMMITTEE 113 



INDEX 



219 



Page 
SILVER PURCHASE ACT : Chamber of Commerce advocacy of repeal of__ 35 

SMITH INVESTIGATING COMMITTEE (House of Representatives) 105 

Report on .Labor Relations Aet 33 106 

SMOOT-HAWLEY TARIFF 112-115, 176 

SOCIAL LEGISLATION : Public acceptance of _ ___ 41-42 

SOCIAL SECURITY ACT : 

Chamber of Commerce attitude on $z 

Use of tax in 58 

SPECIAL CONFERENCE COMMITTEE OF NEW YORK : 

Employers organization 81 

Labor Relations Act and 106-107 

Members of , 106 

SPROUT, H. H., Pressure Groups and Foreign Policies, cited 128 n. 

STANDARD OIL CO. OF NEW JERSEY 107 

STATE DEPARTMENT: Cooperation with bankers 127-128 

STATE FARM BUREAUS 177 

STATE LEGISLATURES, resolutions of, to Congress 61 

STATE RAILROAD ASSOCIATIONS 146 

STATES : 

Business, weakness in control of 6, 14, 175 

Farmers strengthened by representation on basis of 176 

Incapable of dealing with many modern problems 42 

Insurance lobbies and 136-137, 139 

Lobby registration laws in_ 195 

Manufacturers, National Association of, declares labor relations a 

problem for , 100 

Utilities and 142, 154-155 

STEAMSHIP OWNERS ASSOCIATION, AMERICAN (see also Merchant 

Marine Institute, American) 168-169 

STINCHFIELD, FREDERICK H, cited 38 n., 39 

STOCK GROWERS' ASSOCIATION, WESTERN SLOPE 60 

SUGAR INSTITUTE, INC., ET AL., v, U. 8.. cited 77 

SUPREME COURT (see also Courts; and name of cases and subjects 
adjudicated) : 

American Bar Association's opposition reorganization of 37-40, 49 

Chamber of Commerce opposition to threats to independence of 32, 37 

National Association of Manufacturers and 94 

SWINE RECORDS, NATIONAL ASSOCIATION OF 60 

SWOPE, GERARD 107 

TABER, LOUIS J., quoted 177 n. 

TAFT, WILLIAM H., President, aid in organizing Chamber of Com- 
merce. __ 25 

TARIFF COMMISSION 112 

TARIFF LEAGUE, AMERICAN : 

Republicans, preference for_ 67-68 

Tariff of 1929, an effective lobby on 113 

TARIFFS 109-117 

Chamber of Commerce attitude on 37 

Civil War and 111 

Excise taxes and 114-115 

Farm acceptance of propaganda for : 110 

Farm organizations' stand on 177, 178 

Flexible 112 

Log-rolling and 116 

"Scientific" '. 111-112 

War of 1812 and 110 

Wool 111, 113 

TAUSSIG, F. W. : Tariff History of the United States, cited 111, 112 

TAX APPEALS, BOARD OF : Chamber of Commerce support for . 35 

TAXES _, 109, 117-121 

Corporation 117, 120 

Defense , ' 120 

Excess profits 120-121 

Excise .= _ 117, 119, 121 

Excises on imports a substitute for tariffs 114-115 



220 INDEX 

TAXES— Continued. Page 

Farm organizations' stand on , 177, 178 

Income : 

And business pressure 117-118 

Corporation 117 

Publicity of returns, pressure against _: 120 

New Deal and ; 119-120 

State 118 

Oil and oleomargarine 113, 115, 121 

Policies of Government influenced by lobbying on 58 

Profits, on undistributed 119-120 

Property, failure of , 118 

Sales 1 120,121 

State, business pressure on '. 118 

Undistributed profits tax .__ 119-120 

TAYLOR, HENRY C, cited 189 

TEAGLE, WALTER 107 

TECHNOLOGY : 

Ally of business 10, 13, 22-24 

Equalizing power of groups a means to make an ally of democracy 187 

Government research, need for _ 10-11 

TENANTS' AND SHARECROPPERS' UNION : Classified, among pressure 

groups , .4 

TEMPORARY NATIONAL ECONOMIC COMMITTEE : 

Chamber of Commerce suggestions for i 31 

Hearings, cited 77, 120, 136-137 

TENNESSEE VALLEY AUTHORITY: Court cases on 159 

TENNESSEE VALLEY AUTHORITY ACT : Attached by Edison Electric 

Institute 1 77 

TEXAS: Utilities' use of schools of j. 155 

TEXAS AND SOUTHWESTERN CATTLE RAISERS' ASSOCIATION. 
See Cattle Raisers' Association. 

THOMAS, C. S. : My Adventures With the Sugar Lobby, cited 52 

THOMPSON, GUY A., cited 33 

TOY MANUFACTURERS' ASSOCIATION: Consultation of revenue ad- 
ministration with 72 

TRADE ASSOCIATIONS : 

Advocated as business control instrument 30 n., 43 

Court cases instigated by (see also specific names of various associa- 
tions) 77 

Influence on legislation (see also specific names of various associa- 
tions) 47 

Names of 2-3, 14-15 

TRANSPORTATION : 

Chambers of Commerce policies on , 35-36 

Pressure groups of 14-15 

TRANSPORTATION ACTS—, 145, 148 

TREATY RATIFICATION : Blocking of, an opportunity for policy-making- 59-61 

TUGWELL, R. G. : The Fourth Power, cited 190-191 

UNEMPLOYED, pressure of 123 

UNEMPLOYMENT RELIEF 123, 129 

UNION LEAGUE CLUB OF CHICAGO - 100 

UNIONS. See Labor. 

UNITED STATES . See specific name of organization, depart- 
ment, or agency. For court cases to which U. S. is a party, see name 
of other party. 
UNIVERSITY WOMEN, AMERICAN ASSOCIATION OF : 

Classified, among pressure groups 4, 15 

Lobbying activities of-1 184 

UREY, DR. HAROLD - 189 n. 

UTILITIES, PUBLIC. See Public utilities. 

UTILITY ASSOCIATIONS, JOINT COMMITTEE OF NATIONAL 152, 153 n. 

VAN SWERINGEN INTERESTS 146-147 

VETERANS- See Legion, American ; Veterans of Foreign Wars. 



INDEX 221 

VETERANS OF FOREIGN WARS: Pa ^ 

Classified, among pressure groups 3 

Foreign policy, influence on ^^o 

Lobbying activities of 48 

VICK CHEMICAL CO «» 

VINSON-TRAMMELL NAVAL EXPANSION ACT (1935) 172 

VIRGINIA : Utilities' campaign successful in 155-156 

WAGES AND HOURS ACT : Chamber of Commerce opposition to 32 

WAGE EARNERS PROTECTIVE CONFERENCE 115 

WAGNER ACT. See Labor Relations Act, National. 

WAGNER, ROBERT F., Senator ' 97,98,100 

WALD, LILLIAN D. : Originator of Children's Bureau 72-73 n. 

WALKER, HARVEY : Law Making in the United States, cited 195 

WALKER, H. B 169 

WALLACE, HENRY A., Secretary, quoted 184 

"WALL STREET": . 

Farmers and ^JP 

Presidents and 69 

WALSH, DAVID I., Senator 156 

WALSH-HEALEY ACT. See Public Contracts Act. 
WALTER-LOGAN BILL: 

Chamber of Commerce approval of 30,191 

Provisions of 191-194 

WALTER, LUTHER D 62 

WAR, NATIONAL COUNCIL FOR THE PREVENTION OF : 

Classified, among pressure groups 4 

Foreign policy, influence on — 44-45 

Lobbying activities of 166 

WAR, NATIONAL WOMEN'S CONFERENCE ON THE CAUSE AND 

CURE OF 6 

WARREN CHARLES : Protest against appointment of, as Attorney Gen 



eral 



61 



WAYS AND MEANS COMMITTEE: Hearings before, cited 115.116 

WEINBERG, SIDNEY J., quoted 135 

WEIR, ERNEST T 97,100 

WEIRTON STEEL CO. : Fight against National Labor Board 97 

WEISENBURGER, WALTER B., letters, quoted 99, 101-102 

WELFARE, GENERAL: 

As a basis for appeal 68-70 

Public utilities and 161-162 

WESTERFIELD, PROF. RAY 189 n. 

WESTERN SLOPE STOCK GROWERS' ASSOCIATION. See Stock Grow- 
ers' Association. 

WHEELER, BURTON K., Senator, cited 146, 148, 151 

WHITE, L. D. : Public Administration, cited 73 

WHITSITT, VINCENT P., quoted 77 

WINDER, M. S i69 

WINDOW GLASS MANUFACTURERS' ASSOCIATION: Brief filed in 

Sugar Institute case 77 

WIRT, FRANKLIN H 4 

WISCONSIN: 

Grange and public-utility regulation 142 

Lobbv registration law in ■■ 19o 

WOLL, MATTHEW lljj 

WOLMAN LEO: The Growth of American Trade Unions, cited 83 

WOMEN FOR HOME MISSIONS, COUNCIL OF 184 n. 

WOMEN'S BUREAU (Dept. of Labor) 72 

WOMEN'S CHRISTIAN TEMPERANCE UNION: 

Classified, among pressure groups 3 

Program of, created public problems 43 

WOMEN'S CONFERENCE ON THE CAUSE AND CURE OF WAR, 

NATIONAL 6° 

WOMEN'S INTERNATIONAL LEAGUE FOR PEACE AND FREEDOM : 

Classified, among pressure groups 4 

Lobbying activities of J 4 9, 166 

Small influence in 1940 crisis 44 



222 INDEX 

Page 
WOMEN'S JOINT CONGRESSIONAL COMMITTEE 184 

WOMEN'S NATIONAL HOMEOPATHIC MEDICAL FRATERNITY 184 n. 

WOMEN'S SUFFRAGE ASSOCIATION, NATIONAL AMERICAN: Lob- 
bying activities of 62-63 n. 

WOMEN'S TRADE UNION LEAGUE, NATIONAL: 

Lobby for Food, Drug, and Cosmetic Act 184 n. 

Women's Bureau, support for 71 n. 

WOMEN VOTERS, NATIONAL LEAGUE OF : 

Classified, among pressure groups 3, 15 

Food, Drug, and Cosmetic Act, lobby for 184 n. 

Foreign policy, influence on 44-45 

Motion pictures and - <.-, 183 

Nonpartisanship of 67 

Program of, creates public problems 43 

Tariff of 1929, inactive in 113 

Women's Bureau, support for 72 n. 

WOOD, ORRIN G., quoted 133-134 

WOOL GROWERS' ASSOCIATION', NATIONAL : Lobbying activities of- 60, 179 
WOOL MANUFACTURERS, NATIONAL ASSOCIATION OF: 

Lobbying activities of 78, 111, 116 

Program of, creates public problems 43 

Trade Agreement Act, threat of court test of 78 

WORKERS' ALLIANCE: Contacting of voters 66 

WORK PROJECTS ADMINISTRATION: Chamber of Commerce oppo- 
sition to 35 

WYOMING : Utilities use of schools of 154 n. 

YOUNG, OWEN D __ _ 120 

YOUNG WOMEN'S CHRISTIAN ASSOCIATION : 

Lobby for Food, Drug, and Cosmetic Act 184 n. 

Women's Bureau, support for ^ 72 n 

YOUTH ADMINISTRATION, NATIONAL: Attack on appropriations for. 59 

YOUTH CONGRESS, AMERICAN : Contacting of voters 66 

ZELLER, BELLE: Pressure Politics in New York, cited 195,196 

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